Limitation on Liability Clause

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A Limitation on Liability Clause is a liability and risk management clause that limits the total amount of liability or damages that a party can be responsible for under a contract.



References

2024

  • [to Law Insider Limitation of Liability Clause]
    • NOTES: Here are the seven bullet points about Limitation of Liability Clauses with sample language added where possible:
      • Limitation of Liability Clauses can often cap the maximum aggregate liability of one or both parties to a specific dollar amount or to the total amount paid under the contract. These clauses help parties manage their potential exposure in the event of a breach or claim.

        "IN NO EVENT SHALL EITHER PARTY'S AGGREGATE LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER IN CONTRACT, TORT OR UNDER ANY OTHER THEORY OF LIABILITY, EXCEED THE TOTAL AMOUNT PAID BY CUSTOMER HEREUNDER IN THE 12 MONTHS PRECEDING THE INCIDENT GIVING RISE TO THE CLAIM."

      • Limitation of Liability Clauses can exclude certain types of damages, such as indirect, incidental, consequential, special, or punitive damages. This narrows the scope of potential liability and focuses on direct damages that are more foreseeable.

        "IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY FOR ANY LOST PROFITS, LOSS OF USE, COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, OR FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES HOWEVER CAUSED AND, WHETHER IN CONTRACT, TORT OR UNDER ANY OTHER THEORY OF LIABILITY."

      • Limitation of Liability Clauses can specifically disclaim liability for lost profits, revenues, data, or business opportunities, even if the party was advised of the possibility of such damages. This allocation of risk is often heavily negotiated between parties.

        "NEITHER PARTY SHALL BE LIABLE FOR ANY LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF DATA, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR EXEMPLARY DAMAGES OF ANY KIND, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES."

      • Limitation of Liability Clauses can carve out exceptions for certain types of claims, such as gross negligence, willful misconduct, breach of confidentiality, or intellectual property infringement. These exceptions ensure that parties remain liable for more egregious or intentional acts.

        "NOTHING IN THIS SECTION SHALL LIMIT OR EXCLUDE EITHER PARTY'S LIABILITY FOR (I) GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, (II) BREACH OF ITS CONFIDENTIALITY OBLIGATIONS, OR (III) INFRINGEMENT OR MISAPPROPRIATION OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS."

      • Limitation of Liability Clauses can specify a time period for which the cap on liability applies, such as the preceding 12-month period. This helps to further limit potential exposure by focusing on recent activity.
      • Limitation of Liability Clauses can often disclaim any warranties, express or implied, regarding the subject matter of the contract, except as otherwise provided. This places the risk of quality and fitness for purpose on the recipient of goods or services.

        "EXCEPT AS EXPRESSLY PROVIDED HEREIN, NEITHER PARTY MAKES ANY WARRANTY OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,

2024

  • LLM
    1. Aggregate Liability Cap Clause:
      "The total liability of either party under this Agreement, regardless of the form of action, shall not exceed the total amount of fees paid by the Customer for the Services during the twelve (12) months preceding the date of the claim, excluding liabilities arising from willful misconduct or intellectual property infringement."
    2. Enhanced Cap for Specific Breaches Clause:
      "In the event of a breach related to data security, privacy, or confidentiality, the liability cap shall be increased to an amount equal to two (2) times the fees paid by the Customer during the twelve (12) months preceding the claim."
    3. Liability Period Cap Clause:
      "The liability of either party for claims arising within any given period shall be limited to the total charges paid during that period, provided that if the period is less than twelve (12) months, the liability shall be prorated accordingly."
    4. Model Contract Clauses Liability Cap:
      "The aggregate liability of the parties and their respective affiliates under this Agreement and any related model contract clauses shall not exceed [specified amount], inclusive of all claims under both the primary and related agreements."
    5. Exclusion of Certain Claims Clause:
      "The liability cap set forth herein shall not apply to claims arising from fraud, gross negligence, willful misconduct, or any claims related to death or personal injury caused by the parties' actions or omissions."