It caps how much one party can owe the other if things go wrong — often limited to fees paid, and often excluding "consequential" damages like lost profits. The cap’s size and its exceptions are what matter.
A limitation of liability clause sets the ceiling on damages if the contract goes bad. Two mechanisms usually appear together: a cap (commonly the amount you paid under the contract, or a multiple of it) and an exclusion of consequential damages — lost profits, lost data, business interruption — which are often the largest real-world losses. Read whose liability is capped (mutual or one-sided), what’s carved out of the cap (breaches of confidentiality, IP infringement, and gross negligence often are), and whether the cap is realistic against your actual downside. A tiny cap plus broad exclusions can make a breached contract effectively consequence-free for the other side.
Indirect losses flowing from a breach — lost profits, lost data, business interruption. They’re often the biggest real losses and the first thing these clauses exclude.
Generally yes between businesses, with exceptions — many jurisdictions won’t enforce caps against gross negligence, willful misconduct, or certain statutory claims.
Upload the actual document and Main AI reads every clause, flags the risks, extracts the deadlines, and cites the law — free to start, no signup to see your first analysis.
Run the Contract Analyzer — free →