In this episode, Richard Wells, a Partner in our Corporate and Commercial team, talks with Senior Associate, Sarah Redding, about the legal fundamentals of limitation of liability clauses; how to interpret and negotiate them and why it’s important to strike a contractual balance of fairness when utilising these types of clauses.
[01:19] Richard and Sarah begin the episode talking through the basics of limitation of liability clauses, explaining how they cap a party's potential liability to an agreed upon amount and why such limitations are crucial for providing financial foresight and managing risk.
[03:11] Sarah highlights key components that need to be considered when drafting or reviewing a limitation of liability clause, including ensuring fairness to avoid unfair contract terms and deciding whether the limitations should be reciprocal or one-sided, depending on the specific context of the contract.
[05:41] Sarah then explains the importance of understanding aggregate versus per claim limitations and the types of losses that might be excluded from such clauses.
[08:14] Richard and Sarah discuss different approaches to structuring the value of the limitation, such as using fixed caps, "greater of" clauses, or multiples of the contract value. Richard notes the importance of choosing the right structure to reflect the nature of the contract and the risk profile of the parties involved.
[10:47] Lastly, they highlight some potential pitfalls in negotiating limitation of liability clauses, including the importance of clarifying how limitations interact with other fees or charges under the contract. Sarah emphasises the importance of specificity and clarity to ensure that the limitation of liability is enforceable.
Information in this episode is accurate as at the date of recording, 26 August 2024.
Please contact Richard Wells or Sarah Redding or our Corporate and Commercial team if you need legal advice and guidance on any of the topics discussed in the episode.
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