Risk-Limiting Clause

A Risk-Limiting Clause is a risk mitigation and liability clause that limits or allocates the exposure to potential liabilities between parties in a contract.

• Context:
  • It can (typically) contain Risk-Limiting Provisions ...
  • It can (typically) o manage and mitigate potential liabilities by setting clear limits or exclusions on certain types of risks.
  • It can (often0 be for ___-Risk Events, such as: ...
  • It can be supported by Indemnity Clauses, which shift the responsibility for certain risks to another party.
  • It can include Risk Carve-Outs for risks such as personal injury or environmental damages.
  • ...
• Example(s):
  • A Cap on Liability Clause in a construction contract that limits the contractor's financial liability to the contract value, protecting them from excessive damages.
  • A Force Majeure Clause in a supply agreement that exempts a party from liability for non-performance due to natural disasters, thereby limiting risk exposure.
  • A Limitation of Liability Clauses, which define the maximum extent of liability one party can incur.
  • ...
• Example(s):
  • A Cap on Liability Clause in a construction contract that limits the contractor's financial liability to the contract value, protecting them from excessive damages.
  • A Force Majeure Clause in a supply agreement that exempts a party from liability for non-performance due to natural disasters, thereby limiting risk exposure.
  • One in a Software Development Contract that restricts liability for defects to a maximum of the fees paid, excluding consequential damages.
  • An Indemnity Clause in a service agreement where one party agrees to cover legal costs for claims arising from specific breaches.
  • A Limitation of Liability Clause in a technology services contract that caps damages to the amount paid for the services, preventing large-scale financial exposure.
  • ...
• Counter-Example(s):
  • A Warranty Clause, which guarantees the quality or performance of goods and services but does not inherently limit risk.
  • A Non-Limiting Liability Clause, where no limits are set on the liabilities one party may face, potentially leading to full exposure to risks.
• See: Limitation of Liability Clause, Indemnity Clause, Exclusion Clause

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References

2024

• LLM
  1. Aggregate Liability Cap Clauses, such as:
     "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 Clauses, such as:
     "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 Clauses, such as:
     "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 Caps, such as:
     "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 Clauses, such as:
     "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.".

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