Limitation clauses restrict exposure by capping total liability, commonly at fees paid or a stated amount, and by excluding categories of damages such as consequential, incidental, and lost profits.
Enforceability generally requires that the clause be conspicuous and not unconscionable, and many states will not enforce limitations covering gross negligence, willful misconduct, or fraud.
Alternative Names:
Liability Cap, Limitation Clause
Why it Matters?
These clauses frequently determine whether a commercial dispute is worth litigating, since a cap at fees paid can reduce a substantial claim to a nominal one. Plaintiff strategy accordingly focuses on escaping the cap by pleading fraud, gross negligence, or independent tort claims. Whether those theories survive depends heavily on the state and on how carefully the clause was drafted to address them.
Frequently Confused with
Related terms
Frequently asked questions
Can a limitation clause bar all recovery?
How do plaintiffs try to escape the cap?
