Liability Cap

Liability Cap

A "Liability Cap" in contracts limits the maximum damages a party, often the contractor, must pay for breaches or legal claims. Typically a percentage of the total contract value or a fixed sum, it caps financial exposure. For instance, if a contract's cap is 50% of its $2 million value, the liable party pays a maximum of $1 million, regardless of actual losses. Caps manage risk, balance incentives, protect investments, and ensure cost predictability. They don't cover gross negligence, willful misconduct, or critical matters like personal injury, requiring careful negotiation for fairness and balance.

https://iax.digital/product/mastering...