Limiting liability

Liability for others’ loss under contracts, or restrictions on the ability to claim loss from a contracting party, can pose a considerable risk to an organisation. Appropriate contractual provisions limiting liability are therefore a key tool in an organisation’s risk management armoury.

Most commercial agreements contain provisions by which one or more parties seek to exclude, or to limit to a specified amount, their liability for various events causing loss.

Parties should always assess the suitability and enforceability of particular commercial provisions in the context of the contract they are negotiating. For example, a limitation on liability clause agreed between two parties with broadly equal bargaining power in a contract that has