Limitation of Liability (LoL)
Without this clause, a minor bug or delayed deliverable could trigger a lawsuit demanding millions in lost customer revenue or business interruption damages. It acts as the ultimate shield for your business.
Plain-English Definition
A Limitation of Liability clause caps the maximum financial exposure either party can face in a lawsuit and disclaims indirect, punitive, and consequential damages (like lost profits).
Standard vs. Protective Language
Compare typical counterparty-favored phrasing against our attorney-approved balanced alternative.
⚠ Often leaves you exposed to uncapped liabilities or third-party indemnities without defense control.
Dangerous Red Flags in this Clause
If you spot any of these phrases or omissions in your contract, pause and propose counter-language immediately:
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Frequently Asked Questions
What is the standard monetary cap in commercial contracts?
For software, consulting, and service contracts, the standard cap is the total fees paid or payable by the client under the contract in the preceding 12 months.
What are consequential damages?
Consequential (or indirect) damages are financial losses that do not flow directly from the breach itself, but from the downstream consequences—such as lost sales, reputational harm, or lost investors. A proper LoL clause disclaims these entirely.
Agreements Containing This Clause
Commercial and employment contracts where the Limitation of Liability (LoL) is routinely included and negotiated.
SaaS Agreement & Master Terms of Service
A complete guide to SaaS contract risks: limitation of liability, uptime SLAs, data ownership, auto-renewals, and IP protection.
Freelance & Independent Contractor Agreement
Protect your freelance business: payment schedules, kill fees, scope creep defense, IP transfer upon payment, and liability caps.
Master Consulting Services Agreement (MSA)
Navigate consulting agreements: statements of work (SOW), warranties, IP licensing, contractor status, and dispute resolution.
Related Companion Clauses
When redlining this provision, review these related clauses to prevent unintended liability shifts.
Indemnification Clause
An indemnification clause (also called a 'hold harmless' provision) is a contractual agreement where one party promises to pay for legal costs, damages, or settlements incurred by the other party from third-party lawsuits.
Termination Clause (Cause & Convenience)
The termination clause specifies how, when, and why a contract can be brought to an end—including termination for cause (breach) and termination for convenience (without reason).