Limitation of liability is a legal term applied when the defendant’s offense isn’t severe or considered serious enough for a certain type of compensation. The legal term applies if the plaintiff is responsible for the injury or accident.

It’s also expedient to understand that not every claimant is entitled to damages compensation from the other party. However, a professional lawyer will carefully draft a contract stating the reasons for reducing the expected amount of compensation. Thus, you must fully understand the information in a limitation of liability clause before signing it.

Examples of a Limitation of Liability Clause

Although the rules may vary with the province’s jurisdiction, hiring a proficient lawyer will help ease the burden. However, what common incident could reduce the liability or charges a defendant expects to pay?

1. Comparative negligence is a valid reason to draft a limitation of liability clause. This happens when the court agrees that the injured person is responsible for the accident. A certain percentage will be removed from the supposed liability, depending on the degree of fault caused by the plaintiff.
2. If you are filing a claim against a defendant who is a government entity, it could require a limitation of liability. This mostly happens when the government entity has immunity from certain claims.
3. A limitation of liability clause can also be created due to statutory limits. This is usually common among businesses. Thus, the attorney in charge of the case will set a limitation of liability clause, which often differs for retailers and consumers.

Drafting a Limitation to Liability Clause

The content of a limitation to liability clause should be detailed and specific as much as possible. The legal counsel is also responsible for stating the type of damages that will be limited. This could be consequential damages or direct damages. Other information that should be included in a limitation to liability clause is highlighted below.

• Identify the losses that are not included in the liability

A legal counsel will specifically state what losses each party is responsible for, including loss of profit or revenue. This also applies to exceptions where applicable. The legal counsel will state if the limitation applies to injury caused by intentional misconduct or gross negligence.

• Include a severability clause

An experienced attorney will always know to state that the clause is still effective, even though any part of the limitation liability seems unenforceable. However, every party involved needs a common ground. You should also be open to the other party negotiations, as there may be some counter proposals.

• Placing a cap on the clause

You need to set a cap or a certain percentage on the number of damages that can be recovered. The cap may also be determined based on the contract value or the insurance policy.