Loading...
 
 
 

Risk Management

 
Options
 
 
« view all forum posts
Anonymous
2019-02-12 17:03:56

Limitation of Liability

I was recently having coffee with four other individuals involved in contracting for IT Professional Services. During the course of conversation one of the participants suggested that rather than having unlimited direct liability for certain aspects (breach of confidentiality, indemnification of third-party claims, gross negligence and willful misconduct) that EVERYTHING be limited to the extent permitted by law -- but then increase the limitation to a number that would cover the majority of potential issues ($5,000,000 USD was a suggestion).

When questioned, the participant stated that when it comes to contracting parties where one has "deep pockets" and the other does not, having the unlimited liability may sound nice on paper, but in reality it is a one-way protection that benefits the party that does not have deep pockets. Effectively, if the party that does not have deep pocket had a very large claim against them, they could declare bankruptcy and later reorganize as a different business concern - while the deep pocket party with the same claim would be obligated to pay.

Their perspective was in essence: No consequential damages; limit all direct damages to a pre-defined/agreed amount ($5,000,000 or amount that will cover 90%-95% of historic claims in the industry); and include indemnification from third-party claims in the cap.

Thoughts?