The carve-out preserves unlimited liability for fraud notwithstanding the negotiated limitations. Its scope depends on how fraud is defined, ranging from common law fraud to deliberate breach of a representation.
Definition scope is heavily negotiated.
Alternative Names:
Fraud Exception|Fraud Carveout
Why it Matters?
How fraud is defined determines whether the carve-out is narrow or swallows the limitations, since a definition reaching any knowing inaccuracy in a representation permits a buyer to characterize most breaches as fraud and escape the caps entirely. Sellers negotiate for common law fraud with scienter and reliance elements. The carve-out also interacts with exclusive remedy provisions, since fraud claims typically survive an exclusive indemnification remedy.
Frequently Confused with
Related terms
Frequently asked questions
Why does the fraud definition matter?
Do fraud claims survive exclusive remedy provisions?
