What is a limitation of liability clause?

A limitation of liability clause is a legal provision that sets a cap on the amount of damages a party can be held liable for in a contract or agreement. This clause is often included in business contracts to manage risks and protect the interests of the parties involved.

Limitation of Liability Clause - Understanding the Basics

When parties enter into a contract or agreement, they may include a limitation of liability clause to specify the maximum amount one party can be held responsible for in case of a breach or loss. This clause helps to define the extent of liability and protect each party from potentially unlimited financial damages.

Managing Risks and Protecting Business Interests

By including a limitation of liability clause in a contract, parties can better manage risks associated with the agreement. This clause provides a level of predictability and certainty regarding potential damages, allowing parties to plan and budget accordingly. Additionally, it helps to protect the business interests of each party by ensuring that liability is limited to a reasonable amount.