Limitation of Liability Clauses Explained

A limitation of liability clause is a provision in a contract that limits the amount of damages that one party can be held liable for in the event of a breach of contract or other legal dispute. These clauses are often used in contracts between businesses, as they can help to mitigate the risk of exposure to large damages awards.

There are a few different types of limitation of liability clauses that may be included in a contract:

  • Caps on damages: A cap on damages limits the maximum amount of damages that one party can be held liable for in the event of a breach of contract or other legal dispute.

  • Exclusion of certain types of damages: Some limitation of liability clauses may exclude certain types of damages from coverage, such as consequential or indirect damages.

  • Limitation of liability per incident: This type of clause limits the amount of damages that one party can be held liable for in the event of a single incident, such as a product defect or data breach.

  • Limitation of liability in the aggregate: This type of clause limits the total amount of damages that one party can be held liable for over the course of the contract.

It is important to carefully review any limitation of liability clauses in a contract, as they can significantly impact your potential liability in the event of a legal dispute.

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