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  • Writer's pictureTanya S Osensky

Watch Out For Limitation of Liability Clauses in Contracts

Jay is ready to hire a software developer to create a new platform for his investment firm, and engaged me to review their 20-page contract.

Among the many issues was that the contract limited the developer’s liability to $100. Savvy sellers contractually limit their liability, which is great for the sellers, but not so great for the buyers.

Consider: if the developer is late delivering, Jay will incur several times the amount paid in keeping the old system running and for staff overtime. Because of the limit of liability, Jay won’t nearly be compensated for the loss sustained.

I’ve been an attorney for both the seller and the buyer, so I know what’s possible to get. I negotiated a higher cap on liability and excluded certain types of damages from the cap altogether.

Many business owners are leery of the long sales contracts but want to be protected in case the supplier disappoints. If you've ever had a disagreement with a supplier before, you’ll know exactly what I mean.

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