Limitation of Liability and Exceptions

Commercial Contract

Limitation of Liability and Exceptions

Basis of Bargain

Limitation of liability clauses are used to manage risk for contracting parties by limiting potential damages or costs for which a party may be liable for contract breach. Such clauses may be an important factor for a party to determine whether to enter into a contractual agreement. On the other hand, they may later become the target for dispute by a party who is unable to recover full compensation for a contract breach. In the following exemplars, the parties stipulate that the express liability limits prescribed in a contract are supported by adequate consideration to obviate any later challenge to its validity or enforceability:

Exemplar C46-1

The parties expressly acknowledge and agree that Licensor has set its prices and entered into this Agreement in reliance upon the limitations of liability specified herein, which allocate the risk between Licensor and Customer and form a basis of the bargain between the parties.

Exemplar C46-2

THE LIMITATION OF LIABILITY AND EXCLUSION OF CERTAIN DAMAGES STATED HEREIN WILL APPLY REGARDLESS OF THE FAILURE OF ESSENTIAL PURPOSE OF ANY REMEDY. BOTH PARTIES HEREUNDER SPECIFICALLY ACKNOWLEDGE THAT THE LIMITATIONS OF LIABILITY AND EXCLUSION OF CERTAIN DAMAGES STATED HEREIN ARE REFLECTED IN THE PRICING AND BUT FOR SUCH LIMITATIONS AND EXCLUSIONS, SELLER WOULD NOT HAVE MADE THE SELLER OFFERINGS AND OTHER SERVICES AVAILABLE TO CUSTOMER.

Exemplar C46-3

NEITHER SELLER NOR ITS SUPPLIERS OR LICENSORS SHALL BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSS (INCLUDING DAMAGES FOR LOSS OF BUSINESS, LOSS OF PROFITS, OR THE LIKE), ARISING OUT OF THIS AGREEMENT WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, PRODUCT LIABILITY OR OTHERWISE, EVEN IF SELLER OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION ON LIABILITY IS A FUNDAMENTAL ELEMENT OF THE BASIS OF THE BARGAIN BETWEEN SUPPLIER AND COMPANY, AND SUPPLIER WOULD NOT HAVE ENTERED INTO THIS AGREEMENT ABSENT SUCH LIMITATION.

Exemplar C46-4

The disclaimer of warranties, exclusive remedies and limited liability set forth above are fundamental elements of the basis of the bargain between Supplier and Company. Company agrees that Supplier would not be able to provide the Products on an economic basis without such limitations.

Liability Cap

To contain and fairly predict risk, parties may agree on express caps on the potential liability arising from an agreement, including limiting such liability to fixed amounts and/or amounts paid during a moving window of time:

Fixed Amount

Exemplar C46-5

EACH PARTY’S ENTIRE LIABILITY TO THE OTHER PARTY FOR DAMAGES CONCERNING PERFORMANCE OR NONPERFORMANCE BY SUCH PARTY, COMPANY’S USE OR INABILITY TO USE THE APPLICATION OR IN ANY WAY RELATED TO THE SUBJECT MATTER OF THIS AGREEMENT OTHER THAN FOR PAYMENT OF FEES DUE TO SUPPLIER, AND REGARDLESS OF THE FORM OF ANY CLAIM OR ACTION, SHALL NOT EXCEED $100,000 (ONE HUNDRED THOUSAND US DOLLARS).

Amounts Paid

Exemplar C46-6

IN NO EVENT WILL SUPPLIER BE LIABLE FOR ANY AMOUNT GREATER THAN WHAT COMPANY ACTUALLY PAID FOR PRODUCTS UNDER THIS AGREEMENT.

Exemplar C46-7

To the extent permitted by Law, each party’s total, cumulative liability arising out of or related to this Agreement and the products and services provided under it, whether based on contract, tort (including negligence), or any other legal or equitable theory, will be limited to the amounts paid by Customer for use of the products or provision of the services giving rise to the claim during the 12-month period preceding the first event giving rise to liability. Multiple claims will not enlarge this limit.

Exemplar C46-8

EACH PARTY’S AGGREGATE LIABILITY WITH RESPECT TO A PARTICULAR ORDER WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE (INCLUDING IN EACH CASE NEGLIGENCE), WILL NOT EXCEED THE TOTAL AMOUNT PAID AND PAYABLE BY CUSTOMER UNDER THE APPLICABLE ORDER DURING THE 12-MONTH PERIOD IMMEDIATELY PRECEDING THE DATE ON WHICH SUCH LOSS, DAMAGE, INJURY, COST OR EXPENSE OCCURRED.

Exemplar C46-9

TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL EACH PARTY’S AGGREGATE LIABILITY ARISING OUT OF OR RELATING TO THIS AGREEMENT EXCEED THE AMOUNT OF FEES PAID OR PAYABLE BY CUSTOMER UNDER THE ORDER GIVING RISE TO THE CLAIM FOR THE 12 MONTHS PRECEDING THE EVENT GIVING RISE TO THE CLAIM. THE FOREGOING LIMITATION SHALL APPLY WHETHER AN ACTION IS IN CONTRACT, TORT, OR OTHERWISE AND REGARDLESS OF THE THEORY OF LIABILITY.

Insurance Coverage

In the following exemplar, the cap on liability is pegged to the level of insurance coverage:

Exemplar C46-10

Each party’s liability to the other party will not exceed the amount equal to the aggregate of the total fees and charges paid and payable under this Service Order, or the amount recovered under its insurance policies (whichever is the greater).

Exceptions

In the following exemplars, the parties identify certain claims or responsibilities that are not subject to any liability cap, including payment obligations and personal injury claims:

Obligation to Pay

Exemplar C46-11

EXCEPT FOR INDEMNIFICATION OBLIGATIONS ARISING UNDER SECTION X, AND BREACHES OF CONFIDENTIALITY OBLIGATIONS ARISING UNDER SECTION Y, THE AGGREGATE LIABILITY UNDER THIS AGREEMENT OF EITHER AWS OR CUSTOMER, AND ANY OF THEIR RESPECTIVE AFFILIATES OR LICENSORS, WILL NOT EXCEED THE AMOUNTS PAID BY CUSTOMER TO AWS UNDER THIS AGREEMENT FOR THE SERVICES THAT GAVE RISE TO THE LIABILITY DURING THE 12 MONTHS BEFORE THE LIABILITY AROSE; PROVIDED, HOWEVER THAT NOTHING IN THIS SECTION WILL LIMIT CUSTOMER’S OBLIGATION TO PAY SUPPLIER FOR CUSTOMER’S USE OF THE SERVICE OFFERINGS PURSUANT TO THIS AGREEMENT, OR ANY OTHER PAYMENT OBLIGATIONS UNDER THIS AGREEMENT.

Exemplar C46-12

NEITHER PARTY SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, AND EXCEPT FOR CUSTOMER’S OBLIGATION TO PAY FEES AND OTHER AMOUNTS PURSUANT TO SECTION 1.2 EITHER PARTY’S TOTAL LIABILITY UNDER THIS AGREEMENT SHALL NOT EXCEED AN AMOUNT EQUAL TO THE FEES PAID BY CUSTOMER TO CT IN THE TWELVE-MONTH PERIOD IMMEDIATELY PRECEDING THE DATE UPON WHICH A CLAIM IS FIRST ASSERTED AGAINST CT BY CUSTOMER, LESS AGGREGATE DAMAGES PREVIOUSLY PAID BY SUCH PARTYCT UNDER THIS AGREEMENT. CT IS NOT AN INSURER WITH REGARD TO THE SERVICES AND SHALL HAVE NO LIABILITY FOR ANY LOSS OF UNDERLYING COLLATERAL OR LOSS (OR DECREASED PRIORITY) OF SECURITY INTEREST.

Personal Injury or Bodily Harm or Damage to Property

Exemplar C46-13

EACH PARTY’S LIABILITY TO THE OTHER PARTY FOR DEATH OR PERSONAL INJURY RESULTING FROM ITS OWN OR THAT OF ITS EMPLOYEES', AGENTS’ OR SUBCONTRACTORS’ NEGLIGENCE, OR FOR FRAUDULENT MISREPRESENTATION, SHALL NOT BE LIMITED.

Exemplar C46-14

NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS AND LOST DATA, EVEN IF THE PARTY KNEW OR SHOULD HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION DOES NOT LIMIT EITHER PARTY’S LIABILITY FOR INTENTIONAL OR GROSSLY NEGLIGENT ACTS OR BODILY INJURY (INCLUDING DEATH), OR PHYSICAL DAMAGE TO TANGIBLE PROPERTY.

Exemplar C46-15

The foregoing limitations shall not limit a party’s liability for intentional or grossly negligent acts or for death or personal injury caused by a party’s negligence that result or arise from claims that in whole or in part allege bodily injury (including death) or physical damage to tangible property caused by a party’s negligence or willful misconduct for bodily injury, death or physical damage to tangible property to the extent proximately caused by the willful or negligent errors, acts or omissions of a party.

Other Standard Exclusions

As the following exemplars illustrate, the parties may agree to unlimited liability for other types of claims and responsibilities, including indemnification obligations, confidentiality and license breaches, and gross negligence/willful misconduct:

Exemplar C46-16

NOTWITHSTANDING THE LIMITATIONS SET FORTH ABOVE, NEITHER PARTY EXCLUDES NOR LIMITS ITS LIABILITY FOR:

(a)EITHER PARTY’S INDEMNIFICATION OBLIGATIONS SET FORTH IN SECTION;

(b)DAMAGES RESULTING FROM EITHER PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD;

(c)DAMAGES RESULTING FROM EITHER PARTY’S BREACH OF SECTION X (RESTRICTIONS) AND SECTION Y (CONFIDENTIALITY); OR

(d)CUSTOMER’S PAYMENT OBLIGATIONS.

Exemplar C46-17

NOTWITHSTANDING THE IMMEDIATELY PRECEDING SENTENCE, THE FOLLOWING SHALL BE EXCLUDED FROM THE LIMITATIONS SET FORTH IN THIS SECTION:

(A) DAMAGES RESULTING FROM EITHER PARTY’S GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR FRAUD; AND

(B) DAMAGES RESULTING FROM EITHER PARTY’S BREACH OF SECTION X (CONFIDENTIALITY).

Exemplar C46-18

Nothing in this Master Agreement or in any Order will operate to exclude or limit a party’s indemnity obligations, or a party’s liability for breach of Section X (Compliance warranties), Y (Confidentiality), Z (Privacy Terms) or for Customer’s unauthorized use, disclosure, or distribution of Services.

Exemplar C46-19

The foregoing limits and exclusions do not apply to: (1) obligations to pay for products, services or taxes; (2) obligations to pay third parties under Section X; (3) obligations to indemnify for IPR infringement; (4) obligations to protect confidential information under section Y; or (5) an action in tort, separate and distinct from a cause of action for breach of this Agreement, for the party’s gross negligence or willful misconduct.

Exemplar C46-20

Nothing in the Agreement excludes or limits either party’s Liability for:

1. death, personal injury, or tangible personal property damage resulting from its negligence or the negligence of its employees or agents;

2. its fraud or fraudulent misrepresentation;

3. its obligations under Section X (Indemnification);

4. its infringement of the other party’s Intellectual Property Rights;

5. its payment obligations under the Agreement; or

6. matters for which liability cannot be excluded or limited under applicable law.

Exemplar C46-21

THE FOREGOING LIMITATION OF LIABILITY AND DAMAGES DOES NOT APPLY TO A BREACH OF THE CONFIDENTIALITY PROVISIONS CONTAINED IN SECTION X, THE INDEMNIFICATION OBLIGATIONS CONTAINED IN SECTION Y, OR OF THE SOFTWARE LICENSE AND INTELLECTUAL PROPERTY PROTECTIONS CONTAINED IN SECTION Z.

Exemplar C46-22

TO THE EXTENT ALLOWED BY APPLICABLE LAW AND EXCEPT FOR LIABILITY UNDER SECTION X (RESTRICTIONS), SECTION Y (INTELLECTUAL PROPERTY RIGHTS INDEMNITY), SECTION Z (CONFIDENTIALITY) AND PERSONAL INJURY OR DEATH ARISING FROM ONE PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT: (A) IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOSS OF PROFIT, LOSS OF BUSINESS, BUSINESS INTERUPPTION, LOSS OF USE OF DATA OR BUSINESS INFORMATION, OR FOR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

Exemplar C46-23

Except for Seller’s indemnification obligations and breaches of confidentiality obligations, the maximum liability, if any, of either party for all damages, including without limitation contract damages, whether arising from a breach of the agreement, breach of any warranty, negligence, strict liability or other tort, shall be limited to an amount not to exceed the sum of all payments (without interest thereon) made by Buyer to Seller with respect to the Supplies at issue in the dispute. The foregoing limitations shall not limit either party’s liability for intentional or grossly negligent acts, or bodily injury (including death), or physical damage to tangible property.

No Precedent

A customer may agree to limit a supplier’s liability for purposes of certain preliminary transactions where the risk-benefit balance favors such limit (e.g., trial, beta, or evaluation agreements where access to new products is desired by the customer and the risk of breach by supplier is high due to the pre-release status of the product). However, as the following exemplar demonstrates, that concession for purposes of testing should not operate as precedent to limit liability in a follow-on definitive commercial agreement:

Exemplar C46-24

Vendor acknowledges that Customer, in good faith, has agreed to impose a limit on Vendor’s liability with respect to IP infringement based on the short-term exposure to IP infringement risk under this Agreement. Vendor acknowledges and agrees that in the event the parties enter into an agreement for the purchase of the Product for Customer’s commercial use, the foregoing limits of liability with respect to IP infringement matters shall not apply and shall not be construed as a precedent that can be relied upon by the Vendor with respect to the subject matter in such future agreement.

Limitation of Liability and Exceptions

Commercial Contract

Table of Contents: