Product Update

Limitation of Liability Clauses Discussion Updated and Expanded in Contractual Risk Transfer


A limitation of liability clause is a risk transfer device used by contracting parties to limit or manage the risk to which they may become exposed when providing their goods or services. As contracting parties know all too well, a risk of liability exists in every business transition. Depending on the nature of the transaction, performance of the contract could result in legal liabilities for a range of conduct such as breach of contract, negligence, intellectual property infringement, or failure to comply with laws or regulations. The monetary amount of such liability could be grossly disproportionate to the amount of money that a party is being paid under the contract. Therefore, limitation of liability clauses serve 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 such performance. This Contractual Risk Transfer release contains an updated and expanded discussion of limitation of liability clauses. The topics covered include key differences from exculpatory clauses and indemnity provisions as well as how to recognize frequently used types of limitation of liability clauses. In addition, the "Court Interpretation of Limitation of Liability Clauses" section contains updated summaries of case law from the District of Columbia and the 50 states that have addressed the enforceability of limitation of liability clauses.

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