Liability Provisions In IT Contracts

IT contracts often address liability only by limiting the value of claims, if at all. Elias Mühlemann (Managing Associate, IT/IP) and Florian Fallegger (Associate, Corporate/M&A) highlight key points for drafting contractual liability provisions. 

In practice, we often observe two extremes regarding liability provisions in IT contracts: they are either completely absent or highly restrictive. The absence of such provisions can be problematic for service providers, as it exposes them to significant liability risks, even with small order values.

1. What happens if there is no liability provision?

The Swiss Code of Obligations (CO) governs such situations. It stipulates that a party who fails to fulfil a contractual obligation, or does so improperly, must compensate for the resulting damage unless they can prove they are not at fault. If the contractual service requires performing an activity with due care, a breach of this obligation is presumed to be negligent,