Limitation of Liability

A contract clause that caps the maximum dollar amount each party can be liable for under the agreement.

The standard cap is 12 months of fees paid, with carve-outs for indemnification, confidentiality breach, willful misconduct, and gross negligence. The carve-outs are often more important than the cap itself. Buyers should confirm the carve-outs apply to both parties, that they don''t have their own sub-caps, and that the notice procedures for invoking them are realistic.