Proper Placement of Limitation of Liability Provisions

Did you know that where and how your limit of liability provision appears in a contract can result in it being unenforceable?

Here are two ways that happens:

1. It's not conspicuous

Limits of liability must be conspicuous, which means easily visible to the reader.

Some use all caps, but you don't have to. Just don't bury it.

Don't stick it in the one-paragraph boilerplate provision between severability and waiver. Don't drop it casually as the last few sentences of a long audit clause.

Give it a top level in your numbering scheme. So Section 7, not Section 7(a)(2)(i). Then make sure you label it as the limit of liability. Don't label it as "Risk Adjustments" or some other confusing heading.

2. It's in the same section as another unenforceable provision

Some limits of liability are found unenforceable when they appear in the same section as an unenforceable provision.

Some courts delete unenforceable provisions and enforce the rest of the contract. If your limit of liability is in the same section as the problematic one, you may lose them both.

Don't take that risk. Give your limit of liability its own section.