A contract term capping the damages one party can be required to pay the other.
Example
Liability limited to the fees paid in the previous twelve months.
Important
An uncapped contract can expose a small company to claims larger than it can pay.
Related terms
Exclusivity clause — A contract term preventing one party from working with competitors, in certain markets, or with other suppliers or customers.
Lessons that explain it
A few clauses in a few contracts can decide an exit — Legal diligence reviews the company's most important customer, supplier and partner contracts for clauses that transfer risk or restrict future options: change of control, exclusivity, most-favoured pricing, uncapped liability and easy termination. (11 min)