Contract Clause Library
Liability limitation clause
Caps the total amount either party can be required to pay in damages if something goes wrong.
Also called a limitation of liability clause, this sets a ceiling — often tied to fees paid under the contract — on how much either party can be on the hook for, protecting against a dispute turning into an existential financial risk disproportionate to the size of the engagement. It typically excludes certain categories (like breach of confidentiality or IP infringement) from the cap.
Sample wording
Sample language (illustrative, not legal advice)
Except for breaches of confidentiality or infringement of intellectual property rights, neither party's total liability arising from this Agreement will exceed the total fees paid by Client in the 12 months preceding the claim. Neither party will be liable for indirect, incidental, or consequential damages.
Red flags
- No liability cap at all, which is unusual and worth flagging in any contract above a modest size
- A cap set so low relative to the engagement's scope that it doesn't provide meaningful protection
- Carve-outs from the cap broad enough to swallow the exception, effectively removing the cap's protection
How MarginFlow reads it
This clause is surfaced for reference rather than actively monitored — MarginFlow's alert engine flags scope and payment issues, not liability exposure, but having the exact cap amount and carve-outs on hand matters the moment a dispute gets serious enough to ask the question.