Generate limitation of liability clauses
AI writes comprehensive liability caps limiting damages to fees paid. Get professional liability protections instantly.
Generate limitation of liability clauses
River's Limitation of Liability Clause Generator creates comprehensive provisions capping contractual damages. Limitation of liability clauses protect parties from excessive damages by capping total liability at specified amounts (typically fees paid) and excluding consequential damages (lost profits, business interruption). You specify the cap amount, whether to exclude consequential damages, mutual or one-way protection, and exceptions. The AI generates professional liability limitations with conspicuous formatting. Perfect for all commercial contract drafters managing liability exposure.
Unlike unlimited liability (which creates excessive risk), reasonable liability limitations cap damages while maintaining enforceability. The AI generates provisions using conspicuous formatting (ALL CAPS), excluding consequential damages, capping direct damages at reasonable amounts, and including exceptions for situations where caps shouldn't apply (fraud, willful misconduct, indemnification). You get balanced clauses that courts respect while providing meaningful protection.
This tool is perfect for all commercial contract drafters, SaaS and technology vendors, services providers, corporate counsel managing risk, and anyone creating B2B agreements. Use limitation of liability clauses in services agreements, software licenses, vendor contracts, and virtually all commercial agreements. Great for creating standard liability protections across contract templates. The AI generates foundation clauses attorneys customize for specific risk profiles.
Why Limitation of Liability Clauses Matter
Without liability limitations, a small contract can create enormous liability. A vendor providing $10,000 of software might face a $1 million lawsuit if that software fails and causes business losses. Limitation of liability clauses cap exposure to reasonable amounts, typically the fees paid or a specified dollar amount. This makes contracts commercially viable by ensuring liability is proportional to the contract value. Courts generally enforce reasonable liability caps in commercial contracts between sophisticated parties. The key is making caps proportional to the contract value and circumstances.
Excluding consequential damages is critical for managing risk. Direct damages compensate for immediate losses (the cost of defective goods or services). Consequential damages compensate for downstream losses (lost profits, business interruption, lost data). Consequential damages can dwarf direct damages. A $1,000 service error might cause $100,000 in lost profits. Excluding consequential damages prevents disproportionate liability. Include language like 'NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INDIRECT, SPECIAL, INCIDENTAL, OR PUNITIVE DAMAGES, INCLUDING LOST PROFITS, LOST REVENUE, OR BUSINESS INTERRUPTION, EVEN IF ADVISED OF THEIR POSSIBILITY.'
Include exceptions for situations where liability caps shouldn't apply. Common exceptions: indemnification obligations (third-party claims), confidentiality breaches, IP infringement, fraud, willful misconduct, gross negligence, and payment obligations. These exceptions prevent parties from evading serious obligations through general liability caps. For example, a party shouldn't be able to cap liability for intentionally stealing trade secrets or committing fraud. Make exceptions specific and limited. Too many exceptions undermine the cap's effectiveness. Balance protection with reasonable exceptions for serious misconduct.
What You Get
Comprehensive limitation of liability provision
Monetary liability cap (fees paid or specified amount)
Consequential damages exclusion
Mutual or one-way protection as specified
Appropriate exceptions for serious breaches
How It Works
- 1Specify liability capEnter cap amount, exclusions, and exceptions
- 2AI generates clauseOur AI creates conspicuous liability limitation in seconds
- 3Insert into contractAdd clause to agreement's liability section
Frequently Asked Questions
What's a reasonable liability cap?
For services and software, capping liability at fees paid during the 12 months preceding the claim is common and generally enforceable. For one-time sales, cap at the purchase price or a specified multiple (e.g., 2x fees). For high-risk or high-value contracts, caps might be higher. Courts are more likely to enforce caps that are proportional to the contract value. Extremely low caps (e.g., capping $100,000 contract at $500 liability) might be challenged as unconscionable. Make caps reasonable given the contract value and risks.
Should liability caps be mutual?
Usually yes in commercial contracts. Mutual caps mean both parties' liability is limited. This is balanced and common between commercial parties with relatively equal bargaining power. One-way caps (one party capped, other party uncapped) favor the capped party and require stronger negotiating leverage. However, caps often have different amounts or exceptions for each party. For example, vendors might be capped at fees paid but liable for IP indemnification, while customers are capped at fees paid with no exceptions. Tailor to the risks each party is taking.
What exceptions should I include?
Common exceptions where caps don't apply: payment obligations (parties should pay what they owe), indemnification obligations (third-party claims), confidentiality breaches (trade secret theft shouldn't be capped at contract value), IP infringement claims, fraud or intentional misconduct, gross negligence (though some courts don't distinguish gross from ordinary negligence), and violations of law. Don't make exceptions so broad they swallow the cap. Each exception should address a specific serious breach where capping liability would be inappropriate or unenforceable. Balance protection with reasonable exceptions.
Do liability caps work in consumer contracts?
Often no. Consumer protection laws frequently prohibit or restrict liability limitations in consumer transactions. Courts scrutinize liability caps in consumer contracts much more heavily than in commercial contracts. Some jurisdictions prohibit limiting liability for personal injury, fraud, or negligence in consumer contexts. These clauses are primarily for commercial B2B contracts between sophisticated parties with opportunity to negotiate. For consumer contracts, consult consumer protection laws and expect courts to interpret limitations narrowly or strike them entirely. Don't assume commercial liability caps work for consumers.
Why are liability limitations in ALL CAPS?
Courts require liability limitations to be conspicuous so parties can't claim they didn't see them. ALL CAPS is the most established and safest way to make limitations conspicuous. While bold or larger font might also work, ALL CAPS is the standard courts consistently recognize. Many liability limitation challenges succeed because the limitation wasn't conspicuous. Don't risk enforceability by using normal text. Use ALL CAPS for key liability limitations (consequential damages exclusions and liability caps) to maximize the chance courts will enforce them.
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