What Does Limitation of Liability Clause Mean?

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What does Limitation of Liability Clause mean? Read on to discover the definition & meaning of the term Limitation of Liability Clause - to help you better understand the language used in insurance policies.

Limitation of Liability Clause

Limitation of Liability Clause

A contractual provision that caps the amount of liability one party to the contract may have to the other party. Frequently used to equalize the imbalance between the potentially enormous risks assumed in performing a contract, as related to the relatively small profit or fee received for that performance. Design contracts, for example, commonly include a limitation of liability clause that limits the architect's or engineer's liability for design flaws to the amount of its fee for work performed under the contract. Note that these provisions only apply to the liability of one contracting party to the other. They do not limit liability with respect to others who are not subject to the contract. When drafted appropriately, these clauses are largely enforceable.

We hope the you have a better understanding of the meaning of Limitation of Liability Clause.

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