A contractual provision that caps the amount of liability one party to the
contract may have to the other party. Frequently used to equalize the imbalance
between the potentially enormous risks assumed in performing a contract, as
related to the relatively small profit or fee received for that performance.
Design contracts, for example, commonly include a limitation of liability
clause that limits the architect's or engineer's liability for design
flaws to the amount of its fee for work performed under the contract. Note that
these provisions only apply to the liability of one contracting party to the
other. They do not limit liability with respect to others who are not subject
to the contract. When drafted appropriately, these clauses are largely
enforceable.