The Case for Contractual Exculpation of Lawyers’ Liability: Doctrine, Economics, and Policy

Authors

• Timothy Ke, Bennett Jones LLP.

Document Type

Article

Abstract

For over a century, Canadian lawyers have been prohibited from agreeing to contractual clauses limiting, allocating, or excluding their civil liability—a stark contrast to the graduated regimes governing other Canadian professionals and lawyers in major international jurisdictions, including the United Kingdom, United States, Australia, Germany, Switzerland, and Belgium. This article seeks to initiate a critical conversation about legitimizing such clauses. It anchors its analysis in doctrinal integrity, economic efficiency, and policy, addressing competing objectives in relation to fiduciary responsibility, the market for legal services, and liability insurance. In doing so, this work delineates the benefits and bounds of contractual freedom, explores requisite client and public interest safeguards, and articulates guiding principles towards a legitimate privately ordered regime. Carefully crafted, such a regime derives legitimacy because of—not in spite of—the competing interests of lawyer, client, profession, and public, which demand stabilization.

Creative Commons License

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Citation Information

Ke, Timothy. "The Case for Contractual Exculpation of Lawyers’ Liability: Doctrine, Economics, and Policy." Osgoode Hall Law Journal 63.1 (2026) : 123-170.
DOI: https://doi.org/10.60082/2817-5069.4207
https://digitalcommons.osgoode.yorku.ca/ohlj/vol63/iss1/5

References

1. LLB; BCL (Oxon.); Associate, Bennett Jones LLP. I am ever indebted to Stephen P. Sibold, K.C., on whose initiative and wisdom I embarked on this project. This article is a modest contribution to his work, and the work of Chelsea S. Tolppanen and Rebecca M. Taylor, whose past research on this topic imparted valuable direction. To Panpailin Jantarasombat and her ceaseless patience and good sense, I owe the completion of this piece. Appreciation is also due to Joan D. Bilsland for her tireless review of earlier drafts. Finally, I must acknowledge the helpful comments of the anonymous reviewers of the Journal and the time and care with which the Editorial Board has brought this article to fruition. I submit this piece to you with gratitude. As always, any errors or omissions remain mine alone.

2. Alberta Law Reform Institute, Limited Liability Partnerships, Final Report 77 (Alberta Law Reform Institute, 1999) at 6 [ALRI LLP]. See also Canadian Bar Association, Professional Liability: Submission in Response to Senate Committee on Banking, Trade and Commerce Options Discussion Paper (Canadian Bar Association, 1997) at 10 [CBA Professional Liability]. The LLP is now, of course, a trite anatomical feature of partnership law in Canada. See e.g. the Partnership Act, RSA 2000, c P-3, Part 3; Partnerships Act, RSO 1990, c P.5, ss 44.1-44.4; Partnership Act, RSBC 1996, c 348, Part 6.

3. See MacDonald Estate v Martin, 1990 CanLII 32 at paras 50-51 (SCC). See also William H Raley Co, Inc v Superior Court of Imperial County, 149 Cal App (3d) 1042 (Cal App Ct 1983) (“[a]utomatic or mechanical application of the vicarious disqualification rule can be harsh and unfair to both a law firm and its client” at 1049); Chronometrics, Inc v Sysgen, Inc, 110 Cal App (3d) 597 at 607 (Cal App Ct 1980).

4. Federation of Law Societies of Canada, Model Code of Professional Conduct (Federation of Law Societies of Canada, 2024), r 4.1-1, commentary 4 [FLSC Model Code].

5. American Bar Association, Model Rules of Professional Conduct (2020), r 1.16(b)(4) [ABA Rules].

6. See generally Maree Quinlivan, “The Cab Rank Rule: A Reappraisal of the Duty to Accept Clients” (1998) 28 VUWLR 113, DOI: .

7. As quoted in Roy St George Stubbs, “Lord Brougham” (1947) 25 Can Bar Rev 335 at 344.

8. See e.g. FLSC Model Code, supra note 4, r 5.1-1 and associated commentary; ABA Rules, supra note 5, Preamble at paras 8-9; Richard Du Cann, The Art of the Advocate, revised ed (Penguin Books, 1993) at 35-36, 42-43.

9. Oliver Wendell Holmes Jr, The Common Law (Little, Brown and Company, 1881) at 1.

10. The initial adoption of the prohibitions included: the Alberta Rules of Court, 1914, r 750; An Act to Amend Chapter 24 of the Revised Statutes of British Columbia, being the “Legal Professions Act,” RSBC 1901, c 24, s 1; The Law Reform Act, SO 1909, c 28, s 30. Modern incarnations of the rule include: Alberta Rules of Court, Alta Reg 124/2010, r 10.6(1)(a) [Alberta Rules of Court 2010]; Legal Profession Act, SBC 1998, c 9, s 65(3) [Legal Profession Act (BC)]; Solicitors Act, RSO 1990, c S.15, s 22(1).

11. Ingwersen v Dykstra, 1983 CanLII 658 (BCSC) [Ingwersen].

12. Ashraf v Zinner, 2019 ABQB 389 at para 52.

13. Hannuneh v Economical Mutual Insurance Company, 2019 ONSC 3712.

14. See e.g. Liebrecht v Lieder, 2010 BCSC 1548, where a forum selection clause provided merely that the retainer was to be governed under German law. However, the Registrar of the Supreme Court of British Columbia suggested the case may be different where the clause sought to exempt the solicitor from having his bills assessed according to the laws of British Columbia: Liebrecht v Lieder, 2010 BCSC 549 at para 23.

15. Canada Trustco Mortgage Co v Bartlet & Richardes, 1991 CanLII 7336 (ON Ct J (GD)). Note, though, that the prohibitive statute was not cited—if it had been, query whether the result would have followed Ingwersen, supra note 11.

16. Consider e.g. the engineering profession, Edgeworth Construction Ltd v ND Lea & Associates Ltd, 1993 CanLII 67 (SCC); and the accounting profession, Felty v Ernst & Young LLP, 2015 BCCA 445.

17. Michael J Trebilcock, The Limits of Freedom of Contract (Harvard University Press, 1993) at 20, cited in Steven L Schwarcz, “Rethinking Freedom of Contract: A Bankruptcy Paradigm” (1999) 77 Tex L Rev 515 at 520-21, DOI: .

18. CBA Professional Liability, supra note 2 at 10.

19. For further detail, see notes 44-57 and accompanying text.

20. See e.g. Aon, “Professional Indemnity Insurance Market Insights, 2021” (2021) at 2, online (pdf): [perma.cc/NV8F-ZHZX] [“Aon 2021 Market Insights”]. Significant premium increases remained in many sectors between 2021 and 2022 as well: Aon, “Professional Indemnity Market Insights Q2 2022” (2022) at 3-4, online (pdf): [perma.cc/RSP3-5NF2] [“Aon 2022 Market Insights”].

21. A report by the Insurance Bureau of Canada indicated an increase in net written premiums for liability insurance by 18% from 2019 to 2020, and 22.4% from 2020 to 2021. This was a set of the most drastic increases since 2001-2002. See Insurance Bureau of Canada, “2022 Facts of the Property and Casualty Insurance Industry in Canada” (2022) at 9, online (pdf): [perma.cc/36KV-4VS8].

22. The Australian Prudential Regulation Authority indicated a further average premium increase of roughly 10% in the year ending March 2023. See Australian Prudential Regulation Authority, “Quarterly General Insurance Performance Statistics - Highlights” (25 May 2023) at 3, online (pdf): [perma.cc/KJE2-MLH3].

23. Jennifer J Johnson, “Limited Liability for Lawyers: General Partners Need Not Apply” (1995) 51 Bus Lawyer 85 at 88.

24. Ibid.

25. Ames & Gough, “LPLI 2022 Claims Survey: Malpractice Claim Severity Hits All-Time High as Law Firms Face Rapid Change” (2022) at 2, online (pdf): [perma.cc/VU7P-SNAL].

26. Stephen M Grant, Linda R Rothstein & Sean Campbell, Lawyers’ Professional Liability, 3rd ed (LexisNexis, 2013), s 1.4, citing RM Mahoney, “Lawyers – Negligence – Standard of Care” (1985) 63 Can Bar Rev 221 at 224; Keith R Hamilton, “A Lawyer’s Liability for Negligence – Care is Not Enough” (Paper delivered at the Canadian Institute for the Administration of Justice National Seminar on Professional Liability, October 1986), online: [perma.cc/E2ME-T2E9]; Allied Finance & Investments Ltd v Haddow & Co, [1983] NZLR 22 at 31 (NZCA).

27. ALRI LLP, supra note 2.

28. Ibid at 3.

29. Ibid.

30. UK, HL Deb (23 May 1977), vol 383, cols 1122-23.

31. Solicitors Regulation Authority, “SRA Indemnity Insurance Rules” (16 December 2024), online: , rr 3.1-3.2, “Annex 1,” s 2.1.

32. Stefan Rutten, Bernard Hubeau & Jean Van Houtte, “Legal Malpractice in Belgium: Redress from a Client Perspective” (2017) 24 Intl J Leg Profession 145 at 148-49, DOI: .

33. JB Clark, “Insurance and Business Profit” (1892) 7 QJ Econs 40 at 40, DOI: .

34. See e.g. Aon 2022 Market Insights, supra note 20 at 8; Shauhin A Talesh, “Data Breach, Privacy, and Cyber Insurance: How Insurance Companies Act as ‘Compliance Managers’ for Businesses” (2018) 43 Law & Soc Inquiry 417, DOI: ; Tom Baker & Rick Swedloff, “Regulation by Liability Insurance: From Auto to Lawyers Professional Liability” (2013) 60 UCLA L Rev 1412; Anthony E Davis, “Professional Liability Insurers as Regulators of Law Practice” (1996) 65 Fordham L Rev 209.

35. Tom Baker & Rick Swedloff, “Liability Insurer Data as a Window on Lawyers’ Professional Liability” (2015) 5 UC Irvine L Rev 1273 at 1300 [Baker & Swedloff, “Liability Insurer”] (claims exceeding one million USD likely represent payments by large insurance companies to indemnify large law firms with institutional clients).

36. See e.g. Commonwealth of Australia, Available and Affordable: Improvements in Liability Insurance Following Tort Law Reform in Australia (Commonwealth of Australia, 2006) at 11-12.

37. Ibid at v.

38. See especially notes 133-45 and accompanying text; Professional Standards Act 1994 (New South Wales), 1994/81 at Parts 2-5 (Austl) [Professional Standards Act (NSW)]; Law Society of New South Wales, “Professional Standards Scheme” (6 September 2024), online (pdf): [perma.cc/T5Q3-C3QP].

39. Commonwealth of Australia, supra note 36 at 55-64.

40. John K Morgan & Pamela Hanrahan, “Professional Indemnity Insurance: Protecting Clients and Regulating Professionals” (2017) 40 UNSWLJ 353 at 355, 380-81, DOI: .

41. See e.g. Bazley v Curry, 1999 CanLII 692 at para 31 (SCC); Jacobi v Griffiths, 1999 CanLII 693 at paras 22, 31 (SCC); Lister and Others v Hesley Hall Limited, [2001] UKHL 22 at para 27; Johnston v Long, 30 Cal (2d) 54 at 64 (Cal Sup Ct 1947); PS Atiyah, Vicarious Liability in the Law of Torts (Butterworths, 1967) at 22-23, 27.

42. John R v Oakland Unified School District, 48 Cal (3d) 438 (Cal Sup Ct 1989) [John R].

43. Ibid at 451.

44. In particular, see the statistical work by Aon, the Insurance Bureau of Canada, and the Australian Prudential Regulation Authority, supra notes 20-22.

45. Aon 2021 Market Insights, supra note 20 at 5; Aon, “Professional Indemnity and Silent Cyber” (January 2023), online (pdf): [perma.cc/5S9K-8WQ5].

46. See e.g. Yogesh Malhotra, “Advancing Cyber Risk Insurance Underwriting Model Risk Management beyond VaR to Pre-Empt and Prevent the Forthcoming Global Cyber Insurance Crisis” (2017) at 1, 22, DOI: .

47. Mark Thompson & Jethro Mullen, “World’s Biggest Cyberattack Sends Countries into ‘Disaster Recovery Mode,’” CNN (14 May 2017), online: [perma.cc/FD4F-VZ3R]; Adam Taylor, “The Era of Cyber-Disaster May Finally Be Here,” The Washington Post (15 May 2017), online: [perma.cc/7PER-DERB].

48. Richard Taylor, “Sony Pictures Computer System Hacked in Online Attack,” BBC (25 November 2014), online: [perma.cc/FL64-CKH4].

49. Lozanski v Home Depot Inc, 2016 ONSC 5447; Jonathan Stempel, “Home Depot reaches $17.5 Million Settlement over 2014 Data Breach,” Reuters (24 November 2020), online: .

50. CBC News, “Target Data Hack Affected 70 Million People,” CBC News (10 January 2014), online: [perma.cc/C3Z6-39GM].

51. Target Corporation, “Form 10-Q: Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended October 31, 2015” (25 November 2015) at 11, online (pdf): [perma.cc/9WWE-9PKV].

52. Sweet v Canada, 2022 FC 1228.

53. Cisco, “Annual Security Report” (2015) at 14, online (pdf): [perma.cc/4YNE-47FC]. See also Mark Stevens, “Guest Commentary: Boston’s Law Firms are Targets for Cyber Criminals” (22 April 2015), online: ; Meganne Tillay, “Why Cybersecurity Has Become a Bigger Problem for Law Firms” (23 February 2021), online: .

54. “Understanding Cyberattacks and Breaches to Cybersecurity” (2021) 21 Asper Rev Intl Bus & Trade L 7 at 9-10. The Asper Review also helpfully pointed to two articles highlighting weakness in cybersecurity exhibited in law firms: Pablo Fuchs, “Leaking Information,” The National (25 September 2013), online: [perma.cc/3KHZ-W4BH]; Pablo Fuchs, “On Guard,” The National (25 September 2013), online: [perma.cc/45QQ-9PEW].

55. Johnson, supra note 23 at 85-89.

56. Consider, for instance, prescribed leverage ratios and risk-based capital ratios. Bank Act, SC 1991, c 46, s 485; Office of the Superintendent of Financial Institutions, “Leverage Requirements: Guideline (2023)” (31 January 2022), online: [perma.cc/8U8H-7C7B] (based on Basel III reforms now integrated into the Bank for International Settlements); Basel Committee on Banking Supervision, “Basel Framework” (2023), online: [perma.cc/EGM2-K2XA]; Office of the Superintendent of Financial Institutions, “Capital Adequacy Requirements (CAR): Guideline (2026)” (last modified 11 September 2025), online: [perma.cc/J4GW-TFSB].

57. See e.g. Insurance Companies Act, SC 1991, c 47, Part IX, ss 515, 517; Investment Limits (Insurance Companies) Regulations, SOR/2001-396; Insurance Act, RSA 2000, c I-3, ss 414, 416-17; Financial Institutions Act, RSBC 1996, c 141, ss 67, 136; Insurance Act, RSO 1990, c I.8, Part XVII, s 48.

58. See e.g. Dan B Dobbs, Handbook on the Law of Remedies (West, 1973) at 816; LL Fuller & William R Perdue Jr, “The Reliance Interest in Contract Damages” (1936) 46 Yale LJ 52 at 88, DOI: .

59. § 351(3) (1981).

60. Ibid, comment f.

61. David Thomas, “Law firm Proskauer Must Face Trial in $636 Million Legal Malpractice Case,” Reuters (16 May 2023), online: .

62. JSC BTA Bank v Ablyazov, [2015] UKSC 64 at para 3.

63. Brookfield Asset Management Ltd, “Brookfield Asset Management Announces Strong Third Quarter Results” (6 November 2023) at 2, online (pdf): [perma.cc/4PTL-D6XV].

64. Del Giudice v Thompson, 2021 ONSC 6974 at para 6.

65. Especially for large-firm clients, this example figure might be deemed somewhat conservative. For comparison purposes, consider the projection of $740 million in yearly pre-tax cost synergies in connection with RBC’s acquisition of HSBC Canada with a deal value of $13.5 billion. See Royal Bank of Canada, “RBC to Strengthen Premium Canadian Business with Agreement to Acquire HSBC Canada” (29 November 2022), online: [perma.cc/B29T-9K2N]. Large mergers and acquisitions frequently carry a mean deal value between $5.12 billion and $31.10 billion, not adjusting for inflation. See John Armour, Bernard Black & Brian Cheffins, “Is Delaware Losing Its Cases?” (2012) 9 J Empirical Leg Stud 605 at 615, DOI: . Of course, while such liability might be seen as subject to restrictions on recovery for pure economic loss, such recovery may be permissible given the relationship of proximity in supplying the due diligence report. See Canadian National Railway Co v Norsk Pacific Steamship Co, 1992 CanLII 105 at 1145 (SCC); Bergen v Guliker, 2015 BCCA 283 at para 72; Foresters Life Insurance Company v Bingham Group Services Corp, 2019 BCSC 556 at para 40.

66. This classic analogy is attributable to Donald Harris, David Campbell & Roger Halson, Remedies in Contract and Tort, 2nd ed (Butterworths, 2002) at 97. See also Adam Kramer, “An Agreement-Centred Approach to Remoteness and Contract Damages” in Nili Cohen & Ewan McKendrick, eds, Comparative Remedies for Breach of Contract (Hart, 2005) 249 at 269-70.

67. For illustration, the ratio has been applied to an assumed contractual price between taxi driver and passenger of $30. The ratio may, of course, be steeper in practice, as loss in cases of a lost merger would be more expansive than merely lost synergies but might encompass, say, opportunity costs of other available transactions, out-of-pocket expenses in pursuing the merger, and so forth. Though, the plaintiff may of course be required to elect between recovery of expectation and reliance damages. See Hubrisca Enterprises Ltd v Canada (AG), 2001 BCSC 238 at para 31.

68. The case would be different if the parties agreed to raise the taxi fare to $18,000, such that the driver might legitimately be taken to have assumed responsibility for the loss of the business deal: Harris, Campbell & Halson, supra note 66 at 92.

69. For detail on the principles that separate “appropriate” from “inappropriate” liability waivers, see Part II, especially Part II.A.3, below.

70. This is, de facto, the case in the US, which requires the client to be independently represented in making the retainer agreement for exculpatory clauses to take effect. See ABA Rules, supra note 5, r 1.8(h)(1).

71. Jordan Furlong, Law is a Buyer’s Market: Building a Client-First Law Firm (Law21 Press, 2017) at 137.

72. Law Society of Alberta, Code of Conduct (Law Society of Alberta, 2025), r 5.1-1, commentary 8; Law Society of British Columbia, Code of Professional Conduct for British Columbia (Law Society of British Columbia, 2025), r 5.1-1, commentary 7; Law Society of Ontario, Rules of Professional Conduct (Law Society of Ontario, 2022), r 5.1-1, commentary 7.

73. Law Society of Alberta, supra note 72, r 3.3-1; Law Society of British Columbia, supra note 72, r 3.3-1; Law Society of Ontario, supra note 72, r 3.3-1.

74. Law Society of Alberta, supra note 72, r 3.3-1, commentary 1; Law Society of British Columbia, supra note 72, r 3.3-1, commentary 1; Law Society of Ontario, supra note 72, r 3.3-1, commentary 1. See also Alice Woolley, Understanding Lawyers’ Ethics in Canada (LexisNexis, 2011) at 58. Woolley states: “the only ethical approach for a lawyer in any case, whether a criminal trial, civil litigation, or otherwise, is to make decisions cooperatively, and in a way that does not ‘overwhelm the client’s freedom of choice,’” (ibid, citing Michael Proulx & David Layton, Ethics and Canadian Criminal Law (Irwin Law, 2001) at 133).

75. See generally David A Lax & James K Sebenius, The Manager as Negotiator: Bargaining for Cooperation and Competitive Gain (Free Press, 1986) for an authoritative work addressing implementation of the concepts of Pareto inefficiency (value claiming) and Pareto improvement (value creation) in practical negotiation, as well as the competitive tensions therein (i.e., the negotiator’s dilemma).

76. Getting to Yes: Negotiating Agreement Without Giving In, 2nd ed (Penguin Books, 1991) at 56.

77. Leonard E Gross, “Contractual Limitations on Attorney Malpractice Liability: An Economic Approach” (1986) 75 Ky LJ 793 at 802.

78. I am grateful to Nicholas P. Fader for this point.

79. See generally Joshua A Bachrach, “Offshore Legal Outsourcing and Risk Management: Proposing Prospective Limitation of Liability Agreements Under Model Rule 1.8(h)” (2008) 21 Geo J Leg Ethics 631; Jayanth K Krishnan, “Outsourcing and the Globalizing Legal Profession” (2007) 48 Wm & Mary L Rev 2189.

80. Bachrach, supra note 79 at 634.

81. Cassandra Burke Robertson, “A Collaborative Model of Offshore Legal Outsourcing” (2011) 43 Ariz St LJ 125 at 135-36.

82. On the ethical considerations applying to legal outsourcing, see generally Steven C Bennett, “The Ethics of Legal Outsourcing” (2009) 36 N Ky L Rev 479.

83. Bachrach, supra note 79 at 634, citing Krishnan, supra note 79 at 2214.

84. That is, a bargaining process free of transaction costs, which can include, e.g., costs of obtaining information. See Part II.A.1, below.

85. See e.g. M Sonal Sekhar & N Vyas, “Defensive Medicine: A Bane to Healthcare” (2013) 3 Annals of Medical Health and Sciences Research 295, DOI: ; Daniel Kessler & Mark McClellan, “Do Doctors Practice Defensive Medicine?” (1996) 111 QJ Econs 353, DOI: ; Laura D Hermer & Howard Brody, “Defensive Medicine, Cost Containment, and Reform” (2010) 25 J General Internal Medicine 470, DOI: .

86. Gross, supra note 77 at 802, citing Peter Waldman, “Lawyers Adopt New Strategies to Avoid Suits,” Wall Street Journal (28 April 1986) at 27, col 3.

87. Printing and Numerical Registering Co v Sampson (1875), LR 19 Eq 462 at 465 (UK).

88. RH Coase, “The Problem of Social Cost” (1960) 3 JL & Econ 1, DOI: .

89. Trebilcock, supra note 17 at 20.

90. Such is the “transformation of contract” where private ordering in a policy-heavy subject matter like employment, guarantees, and insurance is rendered legitimate within a system of state regulation. See Wolfgang G Friedmann, “Contract” in Law In A Changing Society (Penguin Books, 1964) 89, cited in GHL Fridman, “Freedom of Contract” (1967) 2 Ottawa L Rev 1 at 2-3.

91. A welcome exception is found in Noel Semple, Russell G Pearce & Renee Newman Knake, “A Taxonomy of Lawyer Regulation: How Contrasting Theories of Regulation Explain the Divergent Regulatory Regimes in Australia, England and Wales, and North America” (2013) 16 Leg Ethics 258, DOI: .

92. See e.g. James D Cox, “Corporate Law and the Limits of Private Ordering” (2015) 93 Wash U L Rev 257. Cox critiques the “nexus of contracts” theory of the firm on the ground that even sophisticated shareholders experience informational and fundamental inefficiencies in the market. Cf Jeffrey Evans Stake & Michael Grossberg, “Roundtable: Opportunities for and Limitations of Private Ordering in Family Law” (1998) 73 Ind LJ 535.

93. Alice Woolley, “Imperfect Duty: Lawyers’ Obligation to Foster Access to Justice” (2008) 45 Alta L Rev 107 at 121, DOI: ; Morris M Kleiner, Licensing Occupations: Ensuring Quality or Restricting Competition? (WE Upjohn Institute for Employment Research, 2006) at 44, DOI: ; Amir N Licht, “Lord Eldon Redux: Information Asymmetry, Accountability and Fiduciary Loyalty” (2017) 37 Oxford J Leg Stud 770 at 771, DOI: .

94. Jonathan Baron, “Heuristics and Biases” in Eyal Zamir & Doron Teichman, eds, The Oxford Handbook of Behavioral Economics and the Law (Oxford University Press, 2014) 3, DOI: .

95. Coase, supra note 88 at 15; Guido Calabresi, “The Pointlessness of Pareto: Carrying Coase Further” (1991) 100 Yale LJ 1211 at 1212, DOI: .

96. Stake & Grossberg, supra note 92 at 539.

97. See generally Herbert A Simon, “A Behavioral Model of Rational Choice” (1955) 69 QJ Econs 99, DOI: .

98. Robert C Ellickson, Order Without Law: How Neighbors Settle Disputes (Harvard University Press, 1991) at 283-84, cited in Jonathan R Macey, “Public and Private Ordering and the Production of Legitimate and Illegitimate Legal Rules” (1997) 82 Cornell L Rev 1123 at 1133.

99. Carolyn Cox & Susan Foster, The Costs and Benefits of Occupational Regulation (Bureau of Economics of the Federal Trade Commission, 1990) at 9-11.

100. Gross, supra note 77 at 812.

101. Restatement (Third) of the Law Governing Lawyers § 54 (2000) (expressing a concern that exculpatory clauses may “undermine competent and diligent legal representation,” comment b).

102. Infants Act, RSBC 1996, c 223, s 21; Family Code, Cal Stat, c 162, §§ 6750-6753 (1992); Arts & Cultural Affairs, NY CLS, c 876, art 35 (1983).

103. See e.g. Attila Dogan Construction & Installation Co v AMEC Americas Ltd, 2014 ABCA 74 (vitiation not made out where plaintiff’s allegation of duress and undue influence was 13 years tardy).

104. See e.g. Bennett, supra note 82; ABA Standing Committee on Ethics and Professional Responsibility, Formal Opinion 08-451: Lawyer’s Obligations When Outsourcing Legal and Nonlegal Support Services (American Bar Association, 2008) at 2-3.

105. Ian Ayres & Robert Gertner, “Filling Gaps in Incomplete Contracts: An Economic Theory of Default Rules” (1989) 99 Yale LJ 87 at 88-91, DOI: ; Ellickson, supra note 98 at 283-84; Robert K Rasmussen, “Debtor’s Choice: A Menu Approach to Corporate Bankruptcy” (1992) 71 Tex L Rev 51 at 62; Guido Calabresi & A Douglas Melamed, “Property Rules, Liability Rules, and Inalienability: One View of the Cathedral” (1972) 85 Harv L Rev 1089 at 1093, 1099-100, DOI: ; Macey, supra note 98 at 1141; Anthony T Kronman, “Specific Performance” (1978) 45 U Chicago L Rev 351 at 370, DOI: ; Schwarcz, supra note 17 at 545-46.

106. George J Stigler, “The Law and Economics of Public Policy: A Plea to the Scholars” (1972) 1 J Leg Stud 1 at 12, DOI: . See also Ronald N McKean, “Products Liability: Trends and Implications” (1970) 38 U Chicago L Rev 3 at 31, DOI: .

107. The concept of being “better off” is employed here in a wide sense which refrains from making substantive assessments of the unique reasons for which market actors enter contracts. In practice, it may be neither feasible nor appropriate to evaluate, for instance, whether an individual who prefers to replace a product whose defects are repairable at a fraction of the monetary cost, albeit with added convenience, is truly “better off.” The end goal and/or product of efficiency-based analysis is unanimous consent: Nicholas Kaldor, “Welfare Propositions of Economics and Interpersonal Comparisons of Utility” (1939) 49 Econ J 549 at 551, DOI: . Accordingly, we can usefully say that socioeconomic welfare is constituted by the satisfaction of the reasons, however idiosyncratic, for which individuals enter contracts.

108. Ibid; Stigler, supra note 106 at 12-16; Richard A Posner, “The Law and Economics Movement” (1987) 77 Am Econ Rev 1 at 5 (arguing that the common law itself constitutes ad hoc searches for Pareto or Kaldor-Hicks improvements); Harold Demsetz, “The Exchange and Enforcement of Property Rights” (1964) 7 JL & Econ 11 at 20-26, DOI: ; Richard A Posner, “Utilitarianism, Economics, and Legal Theory” (1979) 8 J Leg Stud 103 at 135, DOI: .

109. Michael J Trebilcock, Carolyn J Tuohy & Alan D Wolfson, Professional Regulation: A Staff Study of Accountancy, Architecture, Engineering and Law in Ontario Prepared for the Professional Organization Committee (Ministry of the Attorney General, 1979) at 45-46. See also the sources cited in supra note 93.

110. Spencer v Honorable Justices of Supreme Court of Pennsylvania, 579 F Supp 880 (ED Pa 1984), aff’d 760 F (2d) 261 (3d Cir 1985); Bates v State Bar of Arizona, 433 US 350 at 375 (1977).

111. Marc Galanter, “Why the ‘Haves’ Come Out Ahead: Speculations on the Limits of Legal Change” (1974) 9 Law & Soc’y Rev 95 at 95, DOI: .

112. The term “reactive appreciation” is employed as a converse to the cognitive bias known as “reactive devaluation,” whereby one’s feelings of enmity or disrespect for another cause one to irrationally devalue the other’s suggestions. See Lee Ross, “Reactive Devaluation in Negotiation and Conflict Resolution” in Kenneth J Arrow et al, eds, Barriers to Conflict Resolution (WW Norton & Company, 1995) 26 at 27.

113. See e.g. Lotepro Engineering & Construction Ltd v Air Canada, 1981 CanLII 1213 (ABQB) (carrier’s exculpatory clause held effective despite failure to carry out the sole purpose of the contract, where terms incorporated by reference were available to the customer “upon request” at para 5); Frederickson v VIA Rail Canada Inc, [1984] OJ No 68 (ONCA) (rail company’s exculpatory clause clearly drawn to the plaintiff’s attention through ticket and baggage documentation).

114. Alberta Rules of Court 2010, supra note 10, r 10.6(1). See functionally equivalent provisions in e.g. Legal Profession Act (BC), supra note 10, s 65(3); Solicitors Act, supra note 10, s 22(1).

115. See e.g. Matthias Kilian, “Managing Liability Risks in German Law Firms in Times of Doomsday Claims” (2015) 18 Leg Ethics 87 at 91, DOI: ; Heinrich Honsell, “Liability of Professional Advisors under Swiss and German Law” in Nedim Vogt, ed, The International Practice of Law (Helbing & Lichtenhahn, 1997) 87 at 93 (Switzerland and Germany); Rutten, Hubeau & Van Houtte, supra note 32 at 148 (Belgium).

116. Macey, supra note 98 at 1126, 1140.

117. Efficiency is treated as central with respect to the internal defects of private ordering, whereas external objectives not attended to by private ordering form the subject of external defects, as discussed below.

118. This example is adapted from a discussion on liability and property rules in Calabresi & Melamed, supra note 105 at 1111.

119. See e.g. Criminal Interest Rate Regulations, SOR/2024-114, s 3.

120. See e.g. Technology Innovation and Emissions Reduction Regulation, Alta Reg 133/2019; Clean Fuel Regulations, SOR/2022-140.

121. Royal Bank of Scotland v Etridge (No 2), [2001] UKHL 44; Canadian Imperial Bank of Commerce v Finlan, [1999] OJ No 54 (ONCJ), aff’d 2000 CanLII 27007 (ONCA).

122. Automobile Insurance, RRO 1990, Reg 664, s 9.1.

123. See Ontario, Legislative Assembly, Hansard, 35-1 (5 November 1991) at 15:00 (emphasizing that the regulation protects, inter alia, insureds’ right to sue for full compensation for pain and suffering).

124. Chauvette v Massey, 2013 ONSC 4146 at para 12, citing Igbokwe v HB Group Insurance Management Ltd, 2001 CanLII 3804 (ONCA), leave to appeal to SCC refused, 28802 (15 March 2002).

125. Solicitors Regulation Authority, supra note 31, rr 3.1-3.2.

126. Ibid, “Annex 1,” s 2.1.

127. Baker & Swedloff, “Liability Insurer,” supra note 35 at 1299-1300.

128. Ibid at 1300.

129. Unfair Contract Terms Act 1977 (UK), c 50, ss 2(2), 3(2), 11.

130. c 47.

131. Ibid, s 87(1).

132. Ibid, s 60(5).

133. For a list of parallel legislation in every Australian jurisdiction, see Professional Standards Councils (last visited 25 May 2026), online: [perma.cc/K78R-LKKK].

134. Professional Standards Act (NSW), supra note 38, Parts 2-5; Law Society of New South Wales, supra note 38.

135. Professional Standards Act (NSW), supra note 38, s 26(1).

136. Ibid, s 22.

137. Ibid, s 27.

138. Ibid, Part 4.

139. Ibid, Part 5.

140. Ibid, s 5(1).

141. Professional Standards Councils, “What To Include in Your Annual Report to Us” (last visited 24 May 2026), online: [perma.cc/K7FU-KTPG].

142. Morgan & Hanrahan, supra note 40 at 368-69.

143. Austl, New South Wales, Legislative Assembly, Parliamentary Debates (14 September 1994) at 2935 (Mr. Hannaford, Attorney General, Minister for Justice and Vice President of the Executive Council).

144. Riggs v Palmer, 115 NY 506 (NY Ct App 1889) (“[n]o one shall be permitted to profit by his own fraud, or to take advantage of his own wrong, or to found any claim upon his own iniquity, or to acquire property by his own crime” at 511).

145. Commonwealth of Australia, supra note 36, especially at 42, 67-68.

146. Supra note 5.

147. US, State Bar of Texas, Texas Disciplinary Rules of Professional Conduct, r 1.08.

148. US, New Jersey Court Rules, 1969, r 1.8, imposing an additional condition of validity: the client must fail to act in accordance with the lawyer’s advice, and the lawyer must nevertheless continue to represent the client at the latter’s request.

149. US, The Florida Bar, Rules Regulating the Florida Bar, r 4-1.8.

150. US, Louisiana Attorney Disciplinary Board, Louisiana Rules of Professional Conduct, r 1.8.

151. US, The Supreme Court of Pennsylvania, The Rules of Professional Conduct, r 1.8.

152. US, Illinois Supreme Court, Illinois Supreme Court Rules, r 1.8.

153. US, Supreme Court of Ohio, The Ohio Rules of Professional Conduct, r 1.8.

154. US, The State Bar of Georgia, Georgia Rules of Professional Conduct, r 1.8.

155. In Canada, for instance, consider too the availability of formal retainer reviews for reasonableness. See e.g. Alberta Rules of Court 2010, supra note 10, r 10.9. Questions not resolvable by the review officer may be referred to court: Cowling v Carpenter, 2014 ABQB 460 at para 101, citing MacKimmie Matthews v Hectors, 1998 ABCA 278 at para 7.

156. See e.g. Art 1474 CCQ.

157. See generally Angela Swan, Jakub Adamski & Annie Y Na, Canadian Contract Law (LexisNexis, 2018), ch 2.

158. Gross, supra note 77 at 804-805. In the US, independent legal advice is a hard requirement before lawyers’ exculpatory clauses can be agreed. See notes 146-54 and accompanying text.

159. See Ross, supra note 112 and accompanying text.

160. See notes 200-209 and accompanying text.

161. In such contexts, the reader is also invited to consider the inadequate control mechanisms against immense lawyer liability discussed above.

162. See e.g. Canada Business Corporations Act, RSC 1985, c C-44, s 122.

163. BCE Inc v 1976 Debentureholders, 2008 SCC 69 at para 66.

164. Of course, it is conceivable that such a client would never have agreed to such a waiver.

165. See e.g. Art 1474 CCQ (gross negligence and intentional torts); Professional Standards Act (NSW), supra note 38, s 5(1) (breach of trust, fraud, and dishonesty). By analogy, see also Doyle v Olby (Ironmongers) Ltd, [1969] 2 QB 158 at 167 (CA UK) [Doyle] (private law carve-outs from liability such as remoteness, collateral benefits, and mitigation not applying to dishonest wrongs such as deceit, where all consequential losses flowing from breach are recoverable), cited in Canson Enterprises Ltd v Boughton & Co, 1991 CanLII 52 at 552-54, 565 (SCC) [Canson].

166. Ellickson, supra note 98 at 283-84; Macey, supra note 98 at 1133, 1141; Stake & Grossberg, supra note 92 at 539.

167. Similar themes are discussed in Owen M Fiss, “Against Settlement” (1984) 93 Yale LJ 1073 at 1081-87, DOI: .

168. See e.g. Empire Linotype School v United States, 143 F Supp 627 (SDNY 1956) (“without firm judicial support, the Canons of Ethics would be only reverberating generalities” at 633); Deborah L Rhode, “Why the ABA Bothers: A Functional Perspective on Professional Codes” (1981) 59 Tex L Rev 689 at 709-10; Lisa H Newton, “Professionalization: The Intractable Plurality of Values” in Wade L Robison et al, eds, Profits and Professions: Essays in Business and Professional Ethics (Humana Press, 1983) 23.

169. Cox & Foster, supra note 99 at 10.

170. Gross, supra note 77 at 811.

171. Semple, Pearce & Knake, supra note 91 at 267.

172. § 54 (2023), commentary b.

173. Gross, supra note 77 at 832ff.

174. Christopher H Schroeder, “Corrective Justice, Liability for Risks, and Tort Law” (1990) 38 UCLA L Rev 143 at 143-44.

175. UK, Royal Commission on Legal Services, Final Report (Cmnd 7648, 1979) at para 23.29 [Royal Commission Report]; Canson, supra note 165 at para 79 (minority).

176. Robinson v Harman, (1848) 1 Exch 850 at 855 (UK) (compensatory principle for breach of contract); Livingstone v Rawyards Coal Company, (1880) 5 App Cas 25 at 39 (HL (Scot)) (compensatory principle for torts); Fuller & Perdue Jr, supra note 58; Canson, supra note 165 (equitable remedies).

177. Herbert M Kritzer, “Lawyers’ Professional Liability: Comparative Perspectives” (2017) 24 Intl J Leg Profession 73 at 74, DOI: .

178. Ibid.

179. Pearlman v Manitoba Law Society Judicial Committee, 1991 CanLII 26 at para 15 (SCC). See also R v Wigglesworth, 1987 CanLII 41 at para 32 (SCC); Law Society of Saskatchewan v Abrametz, 2022 SCC 29 at para 54.

180. Traditionally, one necessary element of corrective justice is that compensation to the victim of a wrong must constitute a commensurate detriment to the wrongdoer. See Schroeder, supra note 174 at 144; Peter Cane, “Distributive Justice and Tort Law” (2001) 4 NZLR 401 at 406ff. Corrective justice may be thought to be imperfectly supplied by the wrongdoer’s payment of premia for liability insurance.

181. “Compensation” is used in a wide sense to denote both loss-based and other (e.g., restitutionary) civil awards.

182. The scope of a lawyer’s fiduciary and common law duties is generally confined to relationships where the lawyer can reasonably be said to be acting for a particular party or, in specific cases, has special proximity in controlling the prospect of harm to a third party, or has made a negligent misrepresentation to that party. See Witten, Vogel, Binder & Lyons v Leung, 1983 CanLII 1028 (ABQB); Anns v Merton London Borough Council, [1978] AC 728 (HL (Eng)).

183. Sissela Bok, “Can Lawyers Be Trusted?” (1990) 138 U Pa L Rev 913 at 914ff, DOI: .

184. FLSC Model Code, supra note 4, r 5.1-1, comment 8.

185. Gross, supra note 77 at 812-17, citing, for those propositions, inter alia, F Raymond Marks & Darlene Cathcart, “Discipline Within the Legal Profession: Is It Self-Regulation” (1974) 2 U Ill L Forum 193 at 216; ABA Committee on Professional Ethics and Grievances, Informal Opinion 1273: ‘Neglect’ – Definition (American Bar Association, 1973).

186. See generally Eric D Beal, “Posner and Moral Hazard” (2000) 7 Conn Ins LJ 81 at 82; Steven Shavell, “On Moral Hazard and Insurance” (1979) 93 QJ Econs 541, DOI: ; Ralph A Winter, “Optimal Insurance under Moral Hazard” in Georges Dionne, ed, Handbook of Insurance (Springer, 2001) 155, DOI: ; Thomas F Sheehan, “The History of Lawyers’ Professional Liability Insurance” (1978) 13 Forum 808; Grant, Rothstein & Campbell, supra note 26, ss 1.49-1.67.6. Other forms of liability insurance, such as employer’s liability insurance, have been in existence for an even longer period. See WF Moore, “Liability Insurance” (1905) 26 Ann Am Acad Pol Soc Sci 499, DOI: .

187. Canadian General Electric Co v Canadian Rubber Co, 1915 CanLII 45 (SCC).

188. Whiten v Pilot Insurance Co, 2002 SCC 18.

189. ALRI LLP, supra note 2 at 3.

190. On the conceptual difference between deterrence and prophylaxis, see Lionel Smith, “Deterrence, Prophylaxis and Punishment in Fiduciary Obligations” (2013) 7 J Eq 87.

191. Professional Standards Act (NSW), supra note 38, Part 4; Law Society of New South Wales, supra note 38 at 11.

192. FLSC Model Code, supra note 4, r 3.1; contrast the American sources cited at note 185.

193. Ibid, r 3.2.

194. Ibid, r 3.3.

195. Ibid, r 3.4.

196. Ibid, r 3.5.

197. Ibid, r 6.1.

198. Law Society of Alberta, The Rules of the Law Society of Alberta (Law Society of Alberta, 2023), r 119.59; Law Society Act, RSO 1990, c L.8, s 49.2; Law Society of British Columbia, Law Society Rules (Law Society of British Columbia, 2023), rr 3.67-71, 3.75.

199. Thompson & Mullen, supra note 47.

200. PA Media, “Morrisons Not Liable for Massive Staff Data Leak, Court Rules,” The Guardian (1 April 2020), online: [perma.cc/LM8D-WAW4].

201. WM Morrison Supermarkets plc v Various Claimants, [2020] UKSC 12.

202. James Walsh, “Indemnities for Cyber Risks – Blank Cheques that your Insurance May Not Cover,” Fieldfisher (31 October 2019), online: [perma.cc/S8GC-REQ5].

203. Asamera Oil Corporation Ltd v Sea Oil & General Corporation, 1978 CanLII 16 at 673 (SCC), rev'd in part on other grounds 1979 CanLII 197 (SCC).

204. 1965 CanLII 554 (BCCA).

205. Ibid at para 59.

206. Ibid at para 55.

207. [1934] All ER 54 at 57 (HL (Eng)).

208. See e.g. notes 85-86 and accompanying text.

209. Goodley v Wank & Wank, Inc, 62 Cal App (3d) 389 at 397 (Cal App Ct 1976).

210. Royal Commission Report, supra note 175 at para 23.29; Canson, supra note 165 at para 79; American Bar Association, ABA Model Code of Professional Responsibility (1980), EC 6-6.

211. Fiduciary accountability was recognized as a generic opportunism-combating mechanism by early English courts for all kinds of limited access, confidence-based relations, a description which has stood the test of time: York Buildings Co v MacKenzie (1795), 3 ER 432 (HL (Eng)); Fawcett v Whitehouse (1829), 39 ER 51 (Ch UK); Attorney-General for Hong Kong v Reid, [1994] UKPC 36. For a discussion of exculpation for engineers and accountants in Canada, see supra note 16 and accompanying text.

212. Hospital Products Ltd v United States Surgical Corporation, [1984] HCA 64 (“[t]he fiduciary relationship, if it is to exist at all, must accommodate itself to the terms of the contract …. The fiduciary relationship cannot be superimposed upon the contract in such a way as to alter [its] operation” at para 70). For illustrations of ex ante sanctioning of otherwise proscribed behaviour, contrast In re Sykes, [1909] 2 Ch 241 (CA UK) and Hayim v Citibank NA, [1987] AC 730 (JCPC UK).

213. Armitage v Nurse, [1997] EWCA Civ 1279; Committee on the Modernization of the Trustee Act, BCLI Report No 17: Exculpation Clauses in Trust Instruments (British Columbia Law Institute, 2002); D Gordon Smith, “The Critical Resource Theory of Fiduciary Duty” (2002) 55 Vand L Rev 1399, DOI: ; Peter Birks, “The Content of Fiduciary Obligation” (2000) 34 Israel LR 3, DOI: ; Lionel Smith, “The Motive, Not the Deed” in Joshua Getzler, ed, Rationalizing Property, Equity and Trusts (LexisNexis UK, 2003) 53, DOI: .

214. Doyle, supra note 165 at 167, cited approvingly in Canson, supra note 165.

215. Item Software (UK) Ltd v Fassihi, [2004] EWCA Civ 1244, cited approvingly in Procon Mining & Tunnelling Ltd v McNeil, 2010 BCSC 487 at para 132.

216. Girardet v Crease & Co, 1987 CanLII 160 at para 3 (BCSC).

217. Professional Standards Act (NSW), supra note 38, s 5(1) (liability immutable for fraud, dishonesty, and breach of trust).

218. Supra note 165 at para 57.

219. Gross, supra note 77 at 796.

220. Calabresi & Melamed, supra note 105 at 1114.

221. For an analogous economic analysis in the context of product warnings, see Robert D Cooter, “Defective Warnings, Remote Causes, and Bankruptcy: Comment on Schwartz” (1985) 14 J Leg Stud 737, DOI: .

222. Gross, supra note 77 at 804.

223. Coase, supra note 88 (“[t]he argument has proceeded … on the assumption … that there were no costs involved in carrying out market transactions. This is, of course, a very unrealistic assumption” at 15).

224. See e.g. Hunter Engineering Co v Syncrude Canada Ltd, 1989 CanLII 129 at 98 (SCC). A clause excluding liability even for fundamental breaches of contract would be upheld because “parties of equal bargaining power should be allowed to make their own bargains” (ibid at 98).

225. As noted above, retainer reviews are an existing mechanism in Canada. See e.g. Alberta Rules of Court 2010, supra note 10, r 10.9.

226. This is akin to the “indivisible” regulatory scenario discussed previously.

227. See Professional Standards Act (NSW), supra note 38, s 5(1).

228. Doyle, supra note 165 (“[i]n fraud, damages are not so limited [as they are in contract]…[I]t does not lie in the mouth of the fraudulent person to say that [the loss] could not reasonably have been foreseen” at 167).

229. See e.g. Charles Dickens, Bleak House (Bradbury and Evans, 1853) (“[t]he one great principle of the English law is to make business for itself” at 385).