Limitation of Liability Clauses in Business Contracts: Limiting Potential Damages and Avoiding Pitfalls

Description

The LOL clause can operate to limit a company's direct, indirect, consequential, special, and incidental damages in the event of a claim arising out of the company’s contractual relationship. LOL provisions may cap damages at either an amount agreed upon by the parties, the contract amount, or the parties' insurance coverage limits. The clauses may also expressly exclude certain types of damages.

Courts routinely scrutinize LOL provisions to ensure that they are not ambiguous, unconscionable, unfairly negotiated for, or in violation of a state statute or public policy. LOL clauses that were not explicitly drafted or fairly negotiated may be held unenforceable. Likewise, enforcing LOL clauses when the performing party did not maintain its insurance or meet other conditions can result in unintended (and harsh) results.

Listen as our authoritative panel explains best practices for drafting and negotiating LOL provisions in business agreements. The panel will provide strategies for avoiding common negotiation pitfalls, anticipating and overcoming enforcement hurdles, and reconciling LOL provisions with indemnification clauses.