Limitation of Liability Clause

A limitation of liability clause caps the most you can owe if something goes wrong. It's a ceiling on damages, protecting you from a $5,000 project turning into a $500,000 lawsuit.

Your SaaS contract has a limitation of liability capped at 'fees paid in the 12 months preceding the claim.' Your client pays $2,000/month. If your software crashes and causes them losses, their maximum recovery is $24,000, regardless of whether their actual damages are $500,000. Most commercial contracts carve out IP infringement and confidentiality breaches from the cap, since those can cause disproportionate harm. Limitation of liability clauses typically have two components: a cap on direct damages (usually tied to fees paid) and a mutual exclusion of indirect, consequential, and punitive damages. The consequential damages exclusion is often more valuable than the cap itself, it prevents claims for lost profits, lost customers, and business interruption that could dwarf the contract value.

In no event shall either Party's aggregate liability under this Agreement exceed the total fees paid or payable by the Client during the twelve (12) months preceding the event giving rise to the claim. In no event shall either Party be liable for any indirect, incidental, special, consequential, or punitive damages, including loss of profits, data, or business opportunities, regardless of the theory of liability.