This clause limits how much money you can recover if the other party makes a careless (but not intentional) false statement in the contract. For example, if a seller wrongly claims their business makes £100,000 profit per year, and you later discover it actually makes £50,000, this clause caps what you can sue for. Under UK law, you can normally claim damages for negligent misstatement under the Misrepresentation Act 1967, but this clause restricts that right. It matters because without it, you could potentially recover unlimited damages; with it, you know exactly what your maximum loss is.
Accept this clause if the cap is set at a reasonable level—typically matching the contract value or the specific claim's importance. Push back if the cap is extremely low (like 1% of contract value) or if it covers statements the other party made with obvious carelessness. Ask for carve-outs so the cap doesn't apply to statements about ownership, legal authority, or financial fraud. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause limits how much money you can recover if the other party makes a careless (but not intentional) false statement in the contract.
Why should I care about this clause?
For example, if a seller wrongly claims their business makes £100,000 profit per year, and you later discover it actually makes £50,000, this clause caps what you can sue for.
What are my options?
Under UK law, you can normally claim damages for negligent misstatement under the Misrepresentation Act 1967, but this clause restricts that right.
How does this affect small businesses?
It matters because without it, you could potentially recover unlimited damages; with it, you know exactly what your maximum loss is.