Our liability: Overview, definition, and example
What is "our liability"?
"Our liability" refers to the extent to which a business or organization is responsible for damages, losses, or legal claims arising from its products, services, or contractual agreements. This is typically outlined in contracts, terms of service, or business agreements to define what the company is—or isn’t—liable for in case of disputes or harm.
For example, a software company might limit its liability by stating that it is not responsible for data loss or indirect damages caused by its product.
Why is "our liability" important?
Clearly defining liability protects businesses from excessive financial and legal risks. Without a liability clause, a company could be held responsible for unexpected claims, including losses beyond its control.
For example, an e-commerce platform may include a liability clause stating that it is not responsible for third-party sellers’ actions, reducing its risk if a customer receives a defective product from an independent seller.
Understanding "our liability" through an example
Imagine a web hosting company that provides server space to businesses. To protect itself, the company includes a liability clause stating that it is not responsible for financial losses caused by website downtime. If a customer’s online store temporarily goes offline due to a server issue, they cannot claim lost revenue from the hosting company because liability was limited in the agreement.
Another example is a consulting firm that advises clients on business strategies. Their liability clause may state that they are not responsible for losses resulting from decisions clients make based on their advice, ensuring they are not sued for poor business outcomes.
An example of an "our liability" clause
Here’s how a liability clause might appear in a contract:
“To the fullest extent permitted by law, [Company Name] shall not be liable for any indirect, incidental, consequential, or special damages arising out of or in connection with the use of our services. Our total liability shall be limited to the amount paid by the customer for the service in the preceding 12 months.”
Conclusion
Clearly defining liability in contracts and agreements helps businesses manage risk and avoid unexpected legal claims. A well-drafted liability clause protects a company from financial exposure while setting clear expectations for customers and partners. Every business should review and tailor its liability terms to match its industry, services, and risk tolerance.
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.