Limitations of Liability -
Software Licence Agreements and Software Development Contracts - Part 10

Limitations of Liability

Limiting liability can be one of the most contentious issues in negotiating licence terms. The purpose of limitations of liability is to exclude or otherwise limit liability that arises in a party in the event of a breach of contract or negligence in performing the contract. Liability that cannot be excluded should be insured and there is a good case for employing other means to manage corporate liability and protect the assets of a company, which naturally includes intellectual property assets. Liability arising from negligence that causes personal injury or death cannot be limited or excluded in any case. The types of liability that may be excluded include property damage; loss of profits, business or revenue; consequential or incidental loss; loss of goodwill and the damage caused by the loss and destruction of data.

In technology contracts that use facilities such as the Internet that are outside the control of the parties, force majeure clauses may be used to absolve the parties of liability when something goes wrong. Force majeure clauses may refer to named events as well as a general type of event. The effect is to avoid the instance of a party being in breach where the events are outside their control.