Limitation of Liability (LoL)

Limitation of Liability ( LoL) - is it good to have or must to have clause in contract?


LoL is the maximum amount a party can be held liable in the event of a default or breach of any contractual obligation.

Points to remember: - Ensure an adequate cap for liability and indemnification obligations. - Limit the liability to no more than the contract price. - Avoid exclusions such as general indemnity, any breach, and indirect or consequential losses from the LoL cap. - Acceptable exclusions to the LoL can include breaches of confidentiality, third party IPR infringements, indemnity for fines and penalties for violating applicable laws, bodily injury, death, willful misconduct, or fraud.

Example: The overall and aggregate liability, whether pursuant to any indemnity or in contract, tort or otherwise arising by reason of or in connection with the contract shall not exceed 100% of the Contract price. To summarize, LoL sets the maximum limit of risk liability a party is exposed to in a contract. It is a MUST TO HAVE clause. The ABSENCE of LoL clause in a contract is construed as UNLIMITED LIABILITY.

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