Limitation of liability clauses in solicitors’ engagement letters since Convergnt, Gordeno and Siem.

A Limitation of Liability cap in a solicitor’s engagement letter can be an important risk-management tool, but it should not be treated as a standard administrative provision, as recent cases such as  Convrgnt Value Engineering v Kennedys Dubai LLP [2026] EWHC 1754, Gordeno v Irwin Mitchell [2026] 4 WLR 49 and Siem v Womble Bond Dickinson [2026] EWHC 1168 confirm..

What is a limitation of liability clause?

A limitation clause restricts the amount or extent of liability that a solicitor may have to a client. The most common formulation imposes an aggregate financial cap – for example, limiting liability arising from the provision of the firm’s services to a particular sum or to a specified multiple of its fees. Many firms adopt a standard approach. A fixed cap is applied across all matters, often at the level of the firm’s compulsory professional indemnity insurance cover. The difficulty is that a standard cap may not always be the most defensible position. Where the client is a consumer, the Consumer Rights Act 2015 adds a further layer of scrutiny. A standard-form liability cap must be fair, transparent and sufficiently prominent, and any term that creates a significant imbalance to the consumer’s detriment may not be binding. In practice, this means that consumer retainers require particular care: the cap should be clearly signposted, explained in plain English and drawn specifically to the client’s attention, rather than left to sit unnoticed within standard terms.

Case law update

The recent cases of Convrgnt and Gordeno confirmed that transparency and openness are also required in relation to liability caps. Gordeno also considered whether the limitation clause was consistent with the SRA’s guidance on adequate insurance levels. The guidance not only prevents any cap below the SRA’s minimum insurance level but also reflects the Code of Conduct requirements that solicitors must not take unfair advantage of clients and must give clients information in a way they can understand.

In Siem, the Court observed that experienced business people will realise that retainers are likely to contain limitation of liability clauses which may be re-negotiated. In Convrgnt the Court balanced the client’s sophistication with the fact there had been no separate negotiation. This seems to suggest that an experienced client can be expected to have some knowledge of limitation of liability clauses but that is not enough to automatically consider them enforceable

In Convergnt, the High Court held that UCTA did not apply because, despite the choice of English law, the retainer was overwhelmingly connected with Dubai rather than England or Wales. However, the court indicated, obiter, that, had UCTA applied, the £3 million aggregate liability cap would have failed the reasonableness test. The judge placed weight on the disparity between the cap and the firm’s substantially higher professional indemnity cover, the scale of the anticipated recovery and the absence of any convincing explanation for how the figure had been selected. The case is therefore a useful warning against treating the compulsory insurance limit as an automatic or universal cap without matter-specific justification. It also underlines the importance of keeping proper records of the agreed terms and the justification for the same from the firm’s internal risk assessments, at the start of the retainer, rather than having to reconstruct the position years later.

Best practice

The safest approach is transparency and proportionality. A firm should identify clearly what is being limited, the financial amount of the cap, the claims to which it applies and any excluded categories of loss. The clause should sit alongside a clearly defined scope of the retainer. The level of the cap also matters. A £10 million cap in a £20 million transaction may be viewed very differently from a £250,000 cap in circumstances where the foreseeable loss could be many millions. The firm’s available insurance and the client’s ability to obtain alternative protection are relevant considerations. The commercial context is therefore critical. A sophisticated corporate client represented by its own lawyers, negotiating a bespoke engagement letter, presents a very different case from an individual consumer presented with a standard-form term on a take-it-or-leave-it basis.

A defensible cap should be the result of a short, matter-specific assessment rather than a purely mechanical default. The firm should start by identifying the realistic worst-case exposure if the advice is wrong, incomplete or delayed. That assessment should take account of the value of the transaction or dispute, the nature of the client’s reliance on the advice, whether third parties may be affected, and whether the potential loss is likely to exceed the fees by a substantial margin.

The firm should then consider whether the proposed cap bears a rational relationship to that exposure, the firm’s available insurance and the commercial context of the retainer. A cap set at the compulsory minimum level may be appropriate for some matters, but it should not be selected automatically. Where the firm carries significantly higher cover, or where the foreseeable loss is much greater than the proposed cap, the file should record why the lower figure is nevertheless considered fair and reasonable.

In practical terms, firms may wish to adopt a tiered model: a default cap for lower-risk work, enhanced review for higher-value or higher-risk instructions, and partner or risk-team approval where the proposed cap is materially below the foreseeable exposure or available insurance. This allows consistency across the firm while still requiring fee earners to turn their minds to the particular client, retainer and risk profile. The rationale for the chosen cap is then recorded on the file.

What to consider

Factors to consider when setting or reviewing the cap include:

• the value of the transaction;
• the foreseeable maximum loss;
• the nature of the work;
• the sophistication of the client;
• the availability of insurance;
• whether the client has in-house legal support; and
• the fees being charged.

Such an approach is more closely aligned with the factors a court would ordinarily consider when assessing reasonableness. However, it is administratively burdensome and may produce inconsistent outcomes across a large practice.

Conclusion

For solicitors, the practical lesson is therefore not simply “include a cap”, but “set, explain and justify the cap.” The most robust position will usually be one where the engagement letter clearly identifies the limit, explains its effect in terms the client can understand, and records why the selected figure is appropriate for the particular matter. A limitation clause that is commercially defensible and transparently agreed can provide meaningful protection. One imposed routinely, without regard to the client, the retainer, the foreseeable loss or available insurance, may prove considerably less valuable when it is needed most.

If you have any questions regarding the information discussed in this article, please contact Claire Revell and Carole Foster.