What is limitation of liability clause? - Definition from WhatIs.com

Definition

limitation of liability clause

Part of the Business terms glossary:

A limitation of liability clause (sometimes referred to simply as a liability clause) is the section in a contracted agreement that specifies the damages that one party will be obligated to provide to the other under terms and conditions stipulated in the contract.

In a legal context, a liability is generally a responsibility to compensate for some failure to perform according to an established or agreed-upon stipulation. Because there is an element of risk inherent in most business agreements, limitation of liability clauses are common in all areas of contract law.

In IT, limits of liability clauses are typically written into contracts between any two parties, including distribution agreements,  software license agreements and service-level agreements. In a software license agreement, for example, the limitation of liability is one of the most important clauses because it limits the amount and types of damages one party can recover from the other party. For example, if the software doesn't work and the company suffers damages as a result, the limitation of liability will restrict the company's ability to recoup its loss.

Because a limitation of liability clause typically favors whichever party drafted the agreement -- usually the vendor -- it's particularly important to negotiate that part of the contract after careful consideration. 

 

This was last updated in June 2014
Contributor(s): Ivy Wigmore
Posted by: Margaret Rouse

Related Terms

Definitions

  • T-shaped employee

    - A T-shaped employee, in the context of human resources, is an individual that has a depth of knowledge and skills in a particular area of specialization, along with a breadth of knowledge in relate... (WhatIs.com)

  • risk management

    - Risk management is a company's process for identifying and controlling threats to its assets, including proprietary corporate data, customers' PII and intellectual property. (SearchCompliance.com)

  • rebranding

    - Rebranding is an update of the materials and presentation used to represent a business. A company may rebrand to appear more modern or to distance itself from past issues, among other possibilities. (WhatIs.com)

Glossaries

  • Business terms

    - Terms related to business, including definitions about project management and words and phrases about human resources, finance and vertical industries.

  • Internet applications

    - This WhatIs.com glossary contains terms related to Internet applications, including definitions about Software as a Service (SaaS) delivery models and words and phrases about web sites, e-commerce ...

Ask a Question About limitation of liability clausePowered by ITKnowledgeExchange.com

Get answers from your peers on your most technical challenges

Tech TalkComment

Share
Comments

    Results

    Contribute to the conversation

    All fields are required. Comments will appear at the bottom of the article.