Reviewing a limitation of liability clause

A limitation of liability clause decides how much a party can lose if the contract goes wrong. The terms it uses have specific meanings under English law: 'consequential loss' covers a narrower set of losses than the words suggest, 'in aggregate' and 'per claim' produce different results, and a cap measured against fees depends on the period over which the fees are measured. Some liabilities cannot be capped at all. I review the clause from whichever side instructs me and return it marked up with a written explanation of what it does under English law, what it fails to do, and the changes the other side will accept, for a fixed fee of £495 in three working days.

Who this is for

Suppliers and customers in England and Wales negotiating the liability clause in a services, software, supply, consultancy, construction or outsourcing contract, whether it is the only clause in dispute or the one the deal turns on. Both parties are businesses; liability to consumers is governed by the Consumer Rights Act 2015 and is dealt with under the terms and conditions service.

What to look for in a limitation of liability clause

The cap: what it is measured against and how it accumulates

The cap should state the sum or the formula, the period over which fees are measured, whether it applies per claim, per year or in aggregate for the whole contract, and whether it resets. A cap of 'the fees paid' in the first month of a contract is close to nothing; a cap 'per claim' on a contract with many small claims is unlimited in practice. The review checks the arithmetic against the value of the contract and the losses each party could suffer, and drafts a cap by reference to a stated sum or a defined period of charges, with the wording that produces the number the parties intend.

Excluded losses and what 'consequential loss' means under English law

Clauses exclude 'indirect or consequential loss', and under English law that phrase excludes only losses that arise from special circumstances known to the parties, the second limb of the remoteness rule, not the loss of profit, revenue or business that flows directly from the breach. A supplier that wants to exclude loss of profit must say so in terms. In Triple Point Technology Inc v PTT Public Company Ltd [2021] UKSC 29 the Supreme Court read a carve-out from a cap for 'negligence' according to its ordinary meaning rather than narrowing it to leave the cap intact. The review checks that the excluded heads of loss are named, that the exclusions are consistent with the cap, and that neither party is left without a remedy for the loss it is most likely to suffer.

The liabilities that cannot be capped or excluded

Under section 2 of the Unfair Contract Terms Act 1977 a business cannot exclude or restrict liability for death or personal injury caused by negligence, and liability for fraud or fraudulent misrepresentation cannot be excluded at common law. Clauses add carve-outs for breach of confidentiality, data protection, intellectual property infringement and the indemnities, each of which becomes uncapped unless a separate cap is set. The review checks that the mandatory carve-outs are present, that the discretionary ones are ones the business's insurance can cover, and drafts separate higher caps for data and confidentiality breaches rather than leaving them uncapped.

The reasonableness test where the clause is in standard terms

Where one party deals on the other's written standard terms of business, section 3 of the Unfair Contract Terms Act 1977 subjects an exclusion or limitation of liability for breach to the reasonableness test in section 11, judged against the guidelines in Schedule 2: the parties' bargaining strength, whether the customer could have contracted elsewhere without the term, whether the customer knew of the term, and whether the risk was one the supplier could insure. The review considers whether the clause is likely to survive that test, which a cap with no relationship to the contract value or insurance may not, and whether a negotiated clause takes the contract outside section 3.

Indemnities, insurance and the interaction with the cap

An indemnity that sits outside the cap turns a limited liability into an unlimited one, and a cap that is higher than the party's insurance is a promise the party cannot keep. The review checks whether the indemnities are within or outside the cap, whether the insurance obligations match the cap, whether the cap applies to all claims however arising (contract, tort, statute, misrepresentation), and whether the clause's 'sole remedy' provisions remove remedies the party needs, such as termination or injunctive relief.

Drafting for the side you are on

For a supplier, the review drafts a cap by reference to charges in a defined period, named exclusions of loss of profit, revenue, business and data, the mandatory carve-outs and no more, and a sole remedy provision for service credits where appropriate. For a customer, it drafts a cap with a floor, separate higher caps for data and confidentiality, exclusions confined to genuinely indirect loss, and no exclusion of the direct losses the customer is buying protection against. Section 3 of the Misrepresentation Act 1967 applies the reasonableness test to any attempt to exclude liability for misrepresentation, and the Late Payment of Commercial Debts (Interest) Act 1998 sits outside the cap for interest on unpaid sums.

What it costs

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

The clause excludes consequential loss. Does that mean we cannot claim lost profit?

Not necessarily. Under English law 'consequential loss' excludes only losses arising from special circumstances, and lost profit that flows directly from the breach is direct loss. If the other side wants to exclude lost profit it has to say so, and the review checks whether the clause does.

Our liability is capped at the fees. Is that enough?

That depends on the period the fees are measured over, whether the cap is per claim or in aggregate, and what is carved out of it. The review checks the arithmetic, the carve-outs that leave you uncapped, and whether your insurance covers the figure the clause produces.

Can we exclude all liability in our standard terms?

Not all: death and personal injury from negligence and fraud cannot be excluded, and where you deal on your standard terms the exclusions have to be reasonable under the Unfair Contract Terms Act 1977. The review drafts a clause that limits what can be limited and is likely to survive the test.

Related guidance and services

• Contract review, £495, the service this page describes
• Terms and conditions drafting, £995
• Reviewing an indemnity clause
• Reviewing a contract with unlimited liability

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.