From time to time, I answer questions – typically about the law or about startups – on LinkedIn. Recently I answered the following question:
What is the best way [in a contract] to limit liability when you’re the party receiving payment?
I believe the answer will be helpful to any supplier of goods or services, so I am reproducing it here in slightly edited form.
I interpret “best” to mean the highest level of protection that is reasonably likely to be acceptable to the customer based on common commercial practices. The contract with the customer should:
- Exclude liability for consequential damages.
- Limit liability for any damages to the amount of payments actually received. (Some customers will ask for a multiple of the amount received; this should be resisted, if possible, or kept to a low number, such as 1.5.)
- Disclaim as many warranties as possible. (Many customers will not accept a disclaimer of all warranties.)
- Limit indemnification obligations as much as possible. (Note that indemnification obligations normally are carved out from both exclusions of consequential damages and limitations of damages.)
- Include favorable jurisdiction, venue and choice of law provisions.
Dana H. Shultz, Attorney at Law +1 510 547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.