---
name: indemnity-liability-review
source: https://app.decimal.ai/s/indemnity-liability-review@1/SKILL.md
source_sha256: 17b95ccfb29f
---

# Indemnity and limitation-of-liability review

## What this does

Given the indemnity / limitation-of-liability (LoL) language from a commercial contract,
review it against the standard playbook and flag where it deviates. Produce a short,
item-by-item verdict — for a reviewer deciding what to push back on before signing.

## Output format

Return one line per checklist item, each as `PASS` or `FLAG`, with a one-clause reason:

```
Mutuality:            FLAG — cap protects the vendor only; customer liability is unlimited
Cap basis:            PASS — 12 months' fees, backward-looking
Uncapped carve-outs:  FLAG — IP-infringement indemnity is subject to the general cap
Consequentials:       PASS — mutually excluded, with carve-outs preserved
```

End with the single most important push-back. Do not invent facts the text does not state;
if a term is silent, say it is silent (a missing exclusion is itself a finding).

## The checklist

**1. Mutuality.** The cap and the damages waiver should apply to *both* parties on the same
terms. A cap or a consequential-damages exclusion that protects only one side is a red flag —
name which party is left exposed. The same goes for an enhanced ("super") cap offered in only
one direction.

**2. Cap basis.** The market-standard cap is a multiple of the **fees paid in the trailing
12 months** before the claim. Flag departures: a fixed nominal sum untethered from contract
value, "fees paid to date" on a young contract, or a sub-one-year multiple all read as
below-market and are negotiation points. A party's duty to **pay fees already owed** must sit
*outside* the cap — a cap that limits what a customer owes the vendor is improper.

**3. Uncapped and super-cap carve-outs.** Certain liabilities conventionally sit **outside**
the general cap — either fully uncapped or under a higher super-cap. Their absence, or their
being folded into the general cap, is the most common finding. The standard set:

| Carve-out | Why it sits outside the cap |
|---|---|
| **IP-infringement indemnity** | Third-party claims that the product infringes IP; potentially ruinous, so uncapped or super-capped, not inside the fees cap. |
| **Breach of confidentiality** | Misuse or disclosure of the other side's confidential information; excluded from the general cap, often super-capped. |
| **Gross negligence / willful misconduct** | Cannot be limited in many jurisdictions; conventionally uncapped. |
| **Data-protection / security breach** | Privacy-law breach and data-incident costs; a super-cap or uncapped carve-out (or a specifically negotiated enhanced cap). |
| **Indemnification obligations** | A party's duty to defend/indemnify third-party claims commonly sits outside the general cap. |
| **Death / personal injury and property damage** | Bodily-injury and tangible-property tort liability is conventionally uncapped. |

If the clause caps *everything* with no carve-outs, flag that the standard exclusions are
missing. If a listed item is inside the general cap, flag that it belongs outside it.

**4. Exclusion of consequential / indirect damages.** The clause should **mutually** exclude
indirect, incidental, special, punitive, and consequential damages, including lost profits.
Flag if the exclusion is missing (open-ended exposure) or one-sided. Also check the
**interaction with the carve-outs**: a blanket consequential-damages waiver with no exception
for the uncapped items (confidentiality, data, IP) *swallows* those carve-outs — the excluded
liability may be uncapped in amount but still unrecoverable in kind. And an exclusion so broad
it removes **direct** damages leaves the non-breaching party with no meaningful remedy — flag
that too.

## Procedure

1. Read the clause and locate: the cap amount/basis, whom it protects, any listed exceptions
   to the cap, and the damages-type waiver.
2. Walk the four checklist items in order; mark each PASS or FLAG with the specific reason.
3. Cross-check item 3 against item 4 — confirm the consequential waiver does not undo the
   carve-outs, and that direct damages survive.
4. Surface the single deviation that most exposes the reviewer's side as the headline
   push-back.