A balanced, mutual starting point that reflects the market postures above.
Except for Excluded Claims and Special-Cap Claims, each party's aggregate liability arising out of or relating to this Agreement shall not exceed the greater of (a) the fees paid or payable under this Agreement during the twelve months before the event giving rise to the first claim and (b) [minimum amount]. The cap applies in the aggregate to all claims, regardless of the theory of liability.
Except for Excluded Claims, neither party shall be liable for indirect, incidental, special, exemplary, or consequential damages, or for lost profits, revenues, or business opportunity, to the extent applicable law permits the parties to exclude those damages.
"Excluded Claims" means liability for fraud or willful misconduct, death or personal injury caused by negligence, and any liability that applicable law does not permit a party to limit. "Special-Cap Claims" means liability arising from [confidentiality breaches, data-security breaches, or specified indemnification obligations]. Each party's aggregate liability for Special-Cap Claims shall not exceed [two times] the general cap. Payment obligations for fees and charges under this Agreement do not count toward either cap.
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These figures come from a 2022 analysis of low-risk U.S. IT transactions. The source reviewed 880 vendor forms, 117 customer forms, and 289 negotiated agreements. Each percentage below states its own denominator. Treat the results as a reference point for similar technology deals, not a market-wide rule for every commercial contract.
The clause uses "fees paid" without a lookback period, a payable-fees concept, or a floor. A claim early in the term may face a cap close to zero even when both parties expected a meaningful remedy.
The monetary cap looks adequate, but the damage waiver removes the losses the customer would claim after a service failure. Read the exclusions before judging the cap amount.
The clause says the cap applies "per claim" and never sets an aggregate ceiling. Several claims can stack, which defeats the financial boundary the parties thought they had set.
The carve-outs swallow the rule. If every breach, representation, indemnity, and confidentiality claim sits outside the cap, the general cap may cover little.
The indemnification section and liability section point in different directions. One promises to cover a claim, while the other caps all liability. State which cap applies to each indemnified risk.
It is a contract provision that sets financial boundaries for claims. The clause may cap total liability, exclude named damage categories, or combine both. It should also identify claims that sit outside the general cap or under a separate higher cap.
In the TermScout sample of 289 negotiated low-risk U.S. IT agreements, 39% used a cap equal to 12 months of fees. About 30% used a defined amount above 12 months, while about 3.5% went below. Those figures describe one technology submarket, not a legal standard.
A liability cap limits the total amount a party can recover. A damage waiver removes named categories of loss from recovery, even when the monetary cap has room left. Read both parts together because either one can control the result.
A carve-out removes a named claim from the general cap. The contract can leave that claim uncapped or place it under a separate higher ceiling, often called a super cap. State the treatment for each claim instead of relying on the word "carve-out."
Mutual wording can provide a clean starting point, but equal words do not guarantee equal risk. The parties may control different claims and face different losses. The public study used here did not publish a mutual-versus-one-sided percentage, so negotiate the allocation against the deal rather than an unsupported market rate.
It can. The contract should state whether each indemnified claim falls under the general cap, a separate higher cap, or an uncapped carve-out. Silence can produce a dispute between two sections that allocate the same loss differently.
Enforceability depends on the governing law, the wording, the parties and transaction, and the conduct the clause attempts to limit. Some jurisdictions restrict exclusions for specified conduct or loss. Ask counsel to review the clause under the law that governs the agreement.
Yes, if the contract defines the fee period and the formula fits the risk. A cap based only on fees already paid can approach zero early in the term. Consider fees paid or payable, a fixed floor, or another measure when the deal needs a meaningful remedy from day one.
A super cap places a higher but still finite ceiling on claims that carry more exposure than an ordinary breach. More than 32% of the negotiated agreements in the TermScout sample used one. The source ranked data-related claims, confidentiality, and indemnification as leading subjects, without publishing a percentage for each.
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