Limitation of liability clause: Copy, customize, and use instantly
Introduction
A limitation of liability clause defines how much and what types of damages one party can claim if something goes wrong under a contract. It helps protect both parties from large financial losses while still holding them accountable for key responsibilities. This clause is especially useful in high-stakes contracts or industries where disputes are more likely.
Below are limitation of liability clause templates tailored for various situations. Copy the one you need, customise it, and add it to your contract.
Standard limitation of liability clause
This clause sets a general cap on liability for both parties.
Neither party’s total liability under this agreement, whether in contract, tort, or otherwise, will exceed the amount paid or payable under this agreement in the [insert time period, e.g., “12 months”] preceding the claim, except for liability arising from gross negligence, willful misconduct, or fraud.
Mutual limitation of liability clause
This clause applies identical limits to both parties.
Each party’s liability under this agreement is limited to [insert amount or calculation method] and does not include indirect, consequential, or punitive damages, except where prohibited by law.
Exclusion of consequential damages clause
This clause specifically excludes consequential damages.
Neither party will be liable for any indirect, incidental, special, or consequential damages, including lost profits, revenue, or data, arising from or related to this agreement, even if advised of the possibility of such damages.
Liability carve-out clause
This clause excludes specific obligations from the limitation.
The limitations of liability in this agreement do not apply to claims arising from a breach of confidentiality, intellectual property infringement, or indemnification obligations.
Industry-specific liability clause
This clause addresses liability in regulated industries.
Notwithstanding anything to the contrary, the total liability of either party in connection with this agreement, excluding compliance with [specific regulation, e.g., “GDPR” or “HIPAA”], will not exceed [insert amount or formula].
Per-incident liability cap clause
This clause limits liability on a per-incident basis.
Each party’s liability under this agreement is capped at [insert amount] per incident, regardless of the number of claims or events giving rise to such liability.
Aggregate liability limitation clause
This clause sets an overall cap for all claims combined.
The aggregate liability of either party for all claims arising under or related to this agreement will not exceed [insert amount], except for claims arising from fraud, gross negligence, or intentional misconduct.
Unlimited liability for specific damages clause
This clause removes limits for specific high-risk situations.
The limitations of liability in this agreement do not apply to claims arising from death, personal injury, or damage to tangible property caused by either party’s negligence.
Time-bound liability clause
This clause limits the timeframe for liability.
Neither party will be liable for any claims arising more than [insert time period, e.g., “two years”] after the cause of action accrues, except where prohibited by law.
No liability for third-party actions clause
This clause excludes liability for actions beyond the party’s control.
Neither party will be liable for damages caused by third-party actions, including cyberattacks, natural disasters, or government interventions, except where expressly agreed in writing.
Technology-specific liability clause
This clause addresses liability for technology-related failures.
The total liability of the service provider for technology-related issues, including downtime, data loss, or software errors, is capped at [insert amount], provided the service provider uses reasonable efforts to mitigate the impact of such issues.
Proportional liability clause
This clause adjusts liability based on each party’s contribution to the issue.
Each party’s liability under this agreement will be limited to the proportion of its contribution to the damages incurred, as determined by mutual agreement or arbitration.
Exclusion of punitive damages clause
This clause explicitly rules out punitive damages.
Neither party will be liable for punitive or exemplary damages arising from or related to this agreement, regardless of the circumstances or claims asserted.
Liability cap with insurance coverage clause
This clause ties the liability cap to insurance coverage.
Each party’s liability under this agreement will not exceed the greater of [insert amount] or the available limits of the party’s applicable insurance policy.
Liability limitation by contract value clause
This clause ties liability to the total value of the contract.
Neither party’s liability will exceed the total amount paid or payable under this agreement. This limitation applies regardless of the number of claims or their basis.
Liability limitation for specific time periods clause
This clause applies liability limitations to specific phases of the agreement.
Liability for obligations arising during the [specific phase, e.g., “initial term” or “renewal period”] of this agreement will not exceed [insert amount]. Separate limitations apply to subsequent phases as agreed in writing.
No liability for incidental damages clause
This clause excludes liability for incidental, small-scale damages.
Neither party will be liable for incidental damages, including minor operational disruptions or temporary inconvenience, arising from or related to this agreement.
Adjusted liability for force majeure events clause
This clause limits liability during force majeure events.
Liability for obligations affected by a force majeure event will not exceed [insert amount] and is subject to the affected party demonstrating reasonable efforts to mitigate the event’s impact.
Cap on liability for joint ventures clause
This clause addresses liability in joint venture agreements.
Each party’s liability under this agreement is capped at its respective ownership share in the joint venture, as defined in the governing documents.
Performance-related liability cap clause
This clause ties liability to specific performance metrics.
Liability for breaches of performance obligations under this agreement is limited to [insert amount] or [percentage] of the affected performance metric, whichever is lower.
Exclusive remedy limitation of liability clause
This clause limits liability to predefined remedies only.
The remedies expressly stated in this agreement are the sole and exclusive remedies available to the parties. No additional claims for damages or compensation will be permitted.
Restricted liability for intellectual property disputes clause
This clause narrows liability for intellectual property claims.
Liability arising from intellectual property disputes under this agreement is limited to direct damages and does not include royalties, lost profits, or enhanced damages.
Tax-related liability limitation clause
This clause limits liability for tax-related obligations.
Neither party will be liable for taxes, penalties, or interest arising under this agreement except for those directly attributable to its own actions or omissions.
Data-specific liability limitation clause
This clause caps liability related to data breaches or losses.
Liability for damages arising from data breaches, losses, or unauthorized access under this agreement is limited to [insert amount] and applies only to data under the direct control of the affected party.
Inability to mitigate exclusion clause
This clause excludes liability for damages that could have been mitigated.
Neither party will be liable for damages that could have been avoided or minimized through reasonable efforts by the other party.
Retroactive liability exclusion clause
This clause excludes liability for actions before the agreement’s execution.
This agreement does not impose liability for actions, omissions, or events that occurred prior to its effective date, regardless of their connection to current obligations.
Operational disruption exclusion clause
This clause excludes liability for general operational disruptions.
Neither party will be liable for operational disruptions not directly attributable to a breach of this agreement, including delays caused by routine maintenance or third-party failures.
Cumulative liability limitation clause
This clause limits liability across multiple claims.
The total liability of either party for all claims arising under this agreement, regardless of the number or type of claims, will not exceed [insert amount].
Specified categories exclusion clause
This clause excludes liability for specific categories of damages.
Neither party will be liable for damages in specific categories, including loss of goodwill, anticipated profits, or reputational harm, arising from or related to this agreement.
No liability for regulatory penalties clause
This clause excludes liability for penalties imposed by regulatory authorities.
Neither party will be liable for fines, penalties, or sanctions imposed by regulatory authorities unless caused by that party’s willful misconduct or fraud.
Limitation based on negligence clause
This clause narrows liability for negligence-related claims.
Liability for claims arising from negligence is limited to direct damages and will not exceed [insert amount]. This limitation does not apply to claims of gross negligence or intentional misconduct.
Successor liability limitation clause
This clause limits liability for actions after a transfer of obligations.
Upon assignment or transfer of obligations under this agreement, the assigning party’s liability is limited to actions taken prior to the effective date of the transfer.
Equitable adjustment liability clause
This clause allows for adjustments to liability based on fairness.
If liability arises due to unforeseen circumstances, the parties agree to negotiate in good faith an equitable adjustment to the liability cap based on the impact of such circumstances.
Specific liability trigger clause
This clause limits liability to certain triggering events.
Liability under this agreement will only arise upon the occurrence of specific triggering events, such as material breach, failure to pay, or nonperformance of critical obligations.
Tiered liability cap clause
This clause creates separate caps for different types of claims.
Liability for direct damages is capped at [insert amount]. Liability for indirect damages, where allowed, is capped at [insert lesser amount]. Liability for all other claims is excluded unless expressly provided.
Declining liability clause
This clause reduces liability over time.
The liability cap under this agreement decreases proportionally over the term, beginning at [insert amount] and reducing by [insert percentage] annually, provided no claims are outstanding.
Benefit-of-bargain limitation clause
This clause ties liability to the value received under the agreement.
Liability for claims under this agreement will not exceed the value of the benefits received by the non-breaching party as a direct result of performance under the agreement.
No liability for independent contractors clause
This clause excludes liability for actions of independent contractors.
Neither party will be liable for damages caused by independent contractors engaged under this agreement, unless such contractors are acting under the direct supervision or instruction of that party.
Geographic-specific liability limitation clause
This clause limits liability based on geographic boundaries.
Liability under this agreement is limited to claims arising from actions or events within [specified geographic location]. Any claims outside this jurisdiction are excluded.
Statutory compliance exclusion clause
This clause excludes liability for failure to meet statutory obligations.
Neither party will be liable for statutory obligations outside the scope of this agreement, except where expressly required by law.
Limited liability for late performance clause
This clause caps liability for delays.
Liability for delayed performance under this agreement is limited to [insert amount] per day of delay, up to a maximum of [insert total amount].
Tiered risk allocation clause
This clause limits liability differently based on risk categories.
Liability is capped at [insert amount] for standard contractual breaches and [insert higher amount] for breaches involving critical obligations, such as confidentiality or intellectual property rights.
Absolute liability waiver clause
This clause eliminates liability for certain categories outright.
Neither party will be liable for claims related to incidental, indirect, or purely economic losses, regardless of their cause or foreseeability.
Early-stage limitation clause
This clause caps liability during the initial stages of the agreement.
Liability for obligations arising during the first [insert time period, e.g., “six months”] of this agreement is capped at [insert amount] and will increase incrementally thereafter as specified in an addendum.
Non-attributable damages clause
This clause excludes liability for damages not directly caused by a party.
Neither party will be liable for damages that are indirectly attributable to their performance under this agreement, including third-party actions or unrelated events.
Public policy exemption clause
This clause acknowledges certain liabilities that cannot be waived.
The limitations of liability under this agreement do not apply where such limitations are prohibited by applicable public policy or statutory requirements.
Overlapping agreements liability clause
This clause limits liability where multiple agreements govern the same relationship.
Liability under this agreement will not exceed the total combined liability cap for all related agreements between the parties, to prevent overlapping claims.
Service suspension liability clause
This clause excludes liability for service interruptions.
Liability for claims arising from temporary suspensions of services due to maintenance, upgrades, or unforeseen interruptions is expressly excluded, provided reasonable notice is given.
Resale liability limitation clause
This clause addresses liability for resold products or services.
Neither party will be liable for damages arising from the resale or redistribution of products or services provided under this agreement, except as expressly permitted in writing.
Ownership-specific liability clause
This clause adjusts liability based on asset ownership.
Liability for damages arising from assets used under this agreement will be borne by the party that owns the asset, regardless of operational control.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.