Limitation of liability: why you should cap risk to your fee
A limitation of liability clause caps how much you can be sued for. Without it, your downside can be infinite while your upside is your project fee — a terrible trade.
When to use
- Every contract, especially higher-risk technical work
Red flags
- Unlimited liability
- Liability for consequential damages
- Client wants you to indemnify them broadly
Copy/paste clause lines
Plain text — edit for your jurisdiction
Contractor’s total liability arising out of or relating to this agreement will not exceed the fees paid under this agreement in the 12 months preceding the claim. In no event will either party be liable for indirect, incidental, special or consequential damages.
Negotiation moves
- Offer a cap tied to fees paid (e.g. 1x–2x project fee)
- Exclude consequential damages
FAQ
Limitation of liability · FAQ
What’s a reasonable liability cap?
Common caps are 1x–2x fees paid, or fees paid in the last 12 months for ongoing engagements. The correct cap depends on risk and insurance.
Related
Other clauses
Further reading
Keep reading
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Editorial guidance only. This is not legal advice. Laws vary by jurisdiction and contract type. Use this as a starting point and consult a qualified lawyer for high-stakes agreements.