This clause limits what you can claim from a supplier if they fail to deliver goods, services, or meet quality standards. It matters because suppliers often include caps on liability—meaning you can only recover a fixed amount, even if their failure costs you far more. For example, UK contract law allows "limitation of liability" clauses if they're reasonable and clearly written. If a supplier fails to deliver components and your factory shuts down for a week, costing you £500,000 in lost production, a liability cap might limit their payment to £50,000. This protects suppliers from catastrophic claims but leaves you exposed.
Negotiate to exclude liability caps for the supplier's core obligations (on-time delivery, product quality) and only accept caps on indirect damages. Try to make the cap equal at least 12 months of fees paid to the supplier, so it's meaningful. Insist that liability caps don't apply to the supplier's gross negligence, fraud, or breach of confidentiality—these are serious enough that they shouldn't be protected. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause limits what you can claim from a supplier if they fail to deliver goods, services, or meet quality standards.
Why should I care about this clause?
It matters because suppliers often include caps on liability—meaning you can only recover a fixed amount, even if their failure costs you far more.
What are my options?
For example, UK contract law allows "limitation of liability" clauses if they're reasonable and clearly written.
How does this affect small businesses?
If a supplier fails to deliver components and your factory shuts down for a week, costing you £500,000 in lost production, a liability cap might limit their payment to £50,000.