The Limits On Limited Liability

Clauses which seek to limit or exclude liability for loss can be a sensible way of allocating risk and are frequently used within contractual documentation. However, disputes frequently arise as to whether such clauses are enforceable. Whether or not an exclusion/limitation clause is enforceable will often have a very significant impact on the amount of damages that can be recovered and such clauses need to be clearly communicated and very carefully drafted if they are to be enforceable.

The parties to contract will often seek to exclude or restrict their liability to one another in the event of default. Such exclusions can take a number of forms, with some clauses seeking to exclude liability altogether. Others put a limit on liability, perhaps by capping the amount payable in damages on a breach, restricting the types of loss recoverable or the remedies available or imposing a short time limit for claims. In these circumstances, the general principle of freedom of