Limitation of liability clause
The contract paragraph that caps how much you can be made to pay when things go wrong, usually at the fees already paid to you.
See it
What it is
A limitation of liability clause makes two separate moves, and people usually only notice the first. It caps total damages at a number (most often the fees paid in the 12 months before the claim), and it excludes whole categories of harm: indirect, incidental and consequential damages, lost profits, lost revenue, lost data, business interruption. Without the exclusion, a 4,000 dollar site build can face a 400,000 dollar lost-revenue claim, and the cap alone will not always save you.
Reach for it in every terms of service and every client contract. The cap is priced risk: charge more, accept a bigger number. Carve-outs are normal and should be mutual, typically breach of confidentiality, IP infringement, gross negligence and willful misconduct, all of which sit outside the cap. Indemnification is the one to decide deliberately instead of copying: capped at the same number, given its own higher super-cap, or fully uncapped are three different deals, and only one of them leaves your headline cap meaning anything.
Gotchas: caps are not magic. Courts routinely refuse to enforce them for fraud, death or personal injury, and many consumer-protection regimes void them outright against consumers. The shouty all-caps formatting is not decoration either: several US states require a disclaimer or limitation to be 'conspicuous' to bind at all. And the biggest own-goal is leaving indemnity uncapped, which quietly reopens the exposure you just closed.
Ask AI for it
Draft a mutual limitation of liability clause for the agreement described below. Include: (1) an exclusion of indirect, incidental, consequential, special and punitive damages, naming lost profits, lost revenue, lost data and business interruption; (2) an aggregate cap equal to the greater of fees paid in the 12 months preceding the claim or [amount]; (3) carve-outs from the cap for breach of confidentiality, IP infringement, gross negligence, willful misconduct, and death or personal injury; (4) an explicit decision on indemnification rather than a default carve-out: ask me first whether indemnity obligations are subject to the general cap, subject to a negotiated super-cap (and at what number), or uncapped, then draft the allocation I choose and note in one line what it does to the headline cap; (5) a line stating the clause survives termination and reflects the allocation of risk the pricing was built on. Set the damages exclusion in conspicuous type. Flag any part likely unenforceable in [jurisdiction] instead of leaving it in silently.