This clause caps what you can recover in damages to match the other party's degree of fault. For example, if a breach is 60% the other party's fault and 40% your own, you can only recover 60% of your losses. This is based on the legal principle of "comparative negligence," which is standard in most US states and increasingly used in UK contract law. It's fair in theory because it prevents you from recovering for your own mistakes, but it can be dangerous if you're not careful about how "fault" gets calculated in a dispute.
This clause is usually reasonable, but add clear language about how fault will be determined (for example, "by a court" or "by an independent expert") so you're not arguing about percentages later. Also check whether the clause applies to all types of breach or only negligence—you want to make sure intentional wrongdoing isn't treated the same as an honest mistake. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause caps what you can recover in damages to match the other party's degree of fault.
Why should I care about this clause?
For example, if a breach is 60% the other party's fault and 40% your own, you can only recover 60% of your losses.
What are my options?
This is based on the legal principle of "comparative negligence," which is standard in most US states and increasingly used in UK contract law.
How does this affect small businesses?
It's fair in theory because it prevents you from recovering for your own mistakes, but it can be dangerous if you're not careful about how "fault" gets calculated in a dispute.