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Limitation of liability clause
See how liability caps, damage exclusions, carve-outs, and super caps work together. Compare your clause with published data from 289 negotiated low-risk U.S. IT agreements, then check the language that controls your largest contract risks.
Reviewed by
Brent Farese
Ex-General Counsel & CEO
July 23, 2026
Check your force majeure clause against published benchmarks
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What is a force majeure clause?
A limitation of liability clause sets financial boundaries for contract claims. It may cap the total amount one party can recover, exclude categories such as indirect damages, or use both methods. The clause should also say which claims sit outside the general cap and whether any claim has a separate higher cap. Governing law and the wording control enforceability, so a cap that works for one deal may fail in another.
Findings from public force majeure clause studies
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.
~48%of commercial contracts even contain a standalone force majeure clauseRutgers, n=621
18%of clauses named a pandemic, epidemic, or disease triggereBrevia / QuisLex, n=171
~12%granted a termination right (about 40% in supply chain / logistics)eBrevia / QuisLex, n=171
90 daysmedian duration before a termination right triggeredeBrevia / QuisLex, n=171
Force majeure terms without published percentages
- Payment carve-out: model clauses (BIMCO 2022, ICC 2020) build in a continuing-payment carve-out, pointing to a common market convention.
- Mitigation obligation: described as common in higher-specificity clauses, without a count.
- Economic hardship: courts do not treat it alone as force majeure unless the clause says so (EAPIL; Vici Racing, 3d Cir. 2014).
Sources- eBrevia / BakerHostetler / QuisLex AI contract study, n=171 (via DFIN).
- Rutgers Business Review, Force Majeure Clauses and the COVID-19 Pandemic, n=621 SEC-filed JV contracts.
- Shook, Hardy & Bacon, Force Majeure and Common Law Defenses: A National Survey.
- EAPIL, The COVID-19 Pandemic and Commercial Contracts. BIMCO 2022 / ICC 2020 model clauses.
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How to negotiate a force majeure clause
| Issue | Market posture | Reasonable fallback | Push back hard |
|---|
| Payment carve-out | Payment obligations excluded from force majeure | Short grace period for banking-system failure only | Any clause that lets the counterparty stop paying during an event |
| Event list | Enumerated list plus "including, without limitation" | Enumerated plus a catch-all tied to reasonable control | A closed "limited to" list, which leaves you litigating the gap |
| Epidemic | Expressly named after 2020 (most clauses still do not) | "Public health emergency declared by a competent authority" | Silence; courts split on whether "act of God" reaches COVID |
| Notice | Prompt written notice with a workable window | Prompt notice, no fixed day count | Notice as a condition precedent on a 48-hour fuse |
| Termination trigger | Either-party right after a prolonged event (public median 90 days) | A longer trigger, either party | Indefinite suspension with no termination right |
| Economic hardship | Expressly excluded | Silence | "Material adverse change in market conditions," a repricing right in disguise |
Force majeure clause mistakes that create enforcement risk
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.
Sample force majeure clause for commercial contracts
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.
Questions about force majeure clauses
What is a limitation of liability clause?
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.
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What is a typical limitation of liability 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.
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What is the difference between a liability cap and a consequential damages waiver?
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.
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What is a carve-out from a liability cap?
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."
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Should a limitation of liability clause be mutual?
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.
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Does the limitation of liability clause apply to indemnification?
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.
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Are limitation of liability clauses enforceable?
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.
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Can a liability cap equal fees paid under the contract?
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.
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Why use a super cap?
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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Related contract clause guides
More from Aline on drafting, negotiating, and managing commercial contracts.
- 92.9% of 289 negotiated agreements included a cap on vendor liability. Source: Legal Evolution and TermScout, n=289 negotiated agreements.
- 39% of the negotiated agreements used a cap equal to 12 months of fees. Source: Legal Evolution and TermScout, n=289 negotiated agreements.
- More than 32% of the negotiated agreements included a secondary or higher cap for specified claim types. Source: Legal Evolution and TermScout, n=289 negotiated agreements.
- 94% of the negotiated agreements limited at least one type of recoverable damages. Among that subset, about 99% excluded indirect damages. Source: Legal Evolution and TermScout, n=289 negotiated agreements; subset denominator applies.
Limitation of liability terms without published percentages
- Cap carve-outs: more than 75% of negotiated agreements excluded at least one claim type from the general cap. Indemnification, confidentiality, death or personal injury, and fraud or willful misconduct each appeared in more than 40% of agreements with a carve-out.
- Starting positions: 97% of vendor forms included a cap, while 53% of customer forms began with uncapped vendor liability.
- Other cap amounts: about 30% of negotiated agreements used a defined amount above 12 months of fees. About 3.5% used an amount below 12 months.
- Secondary-cap subjects: data-related claims, confidentiality, and indemnification led the source's rank order. The article did not publish a percentage for each category.
- Unquantified terms: no disclosed sample supports a general percentage for mutual caps, IP infringement carve-outs, or the treatment of indemnification under the cap.
Sources
- Bill Mooz, What is "market" for limitation of vendor liability? A look at the data, Legal Evolution, August 14, 2022.
- World Commerce & Contracting, Most Negotiated Terms 2024.
- Mark Cohen, Indemnification Provisions in Commercial Contracts: A Drafting Primer, Colorado Lawyer, January 2020.
- TriBar Opinion Committee, Common Qualifications to a Remedies Opinion in U.S. Commercial Loan Transactions, The Business Lawyer.
Method note: The Legal Evolution article reports three different populations, and the base changes by metric. Vendor and customer forms show opening positions. The 289 negotiated agreements show signed outcomes. The transactions were low-risk U.S. IT deals, and the article does not disclose the underlying contract dates. The WorldCC survey ranks negotiation frequency but does not measure clause structure. Do not blend those sources into one rate.
Qualitative drafting guidance, separate from the cited survey data. Attorney sign-off required.
| Issue | Market posture | Reasonable fallback | Push back hard |
|---|
| Mutuality and scope | Apply the general cap and damage waiver to both parties, then state any risk-based exceptions | Use one-sided treatment only for a risk one party controls | A one-sided cap that protects the party creating the larger operational risk |
| Aggregate cap | Use a clear aggregate cap tied to fees paid or payable over a defined 12-month period | Add a fixed floor when the agreement is new or fees vary | A per-claim cap with no aggregate ceiling, or a cap based only on a few months of fees |
| Damage exclusions | List excluded categories and preserve losses that the deal needs to cover | Define disputed categories, including lost profits or data restoration costs | A waiver that removes the main foreseeable loss while leaving a nominal cap |
| General carve-outs | Name each claim outside the general cap and say whether it is uncapped | Use a separate higher cap for insurable confidentiality, data, or indemnity risks | A blanket carve-out for every breach that makes the general cap meaningless |
| Secondary cap | Use a stated multiple or amount for named higher-risk claims | Tie the amount to exposure, fees, and available insurance | Unlimited exposure for risks that neither party can price or insure |
| Indemnification | State how the cap applies to each indemnified claim | Use a higher cap for specified third-party claims | Silence that leaves the indemnity and liability sections in conflict |
| Cap mechanics | Define aggregate versus per-claim treatment, the measurement period, currency, and included affiliates | Use one cap across the agreement and its statements of work | Separate caps that stack without a total ceiling |
