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.

1. Walk the four checklist items in order; mark each PASS or FLAG with the specific reason.
2. Cross-check item 3 against item 4 — confirm the consequential waiver does not undo the

carve-outs, and that direct damages survive.

1. Surface the single deviation that most exposes the reviewer's side as the headline

push-back.