Liability cap

Regarding section 10.9 of your form “terms and conditions of supply international standard”,  what should be the amount of the liability cap?  Would this normally be your insurance limit?

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Alasdair Taylor's Answer

In standard T&Cs, liability caps usually need to be “reasonable” under UCTA to be enforceable. Relevant insurance cover is one of the factors that you ought to take into account in setting a liability cap, because it has an impact on the assessment of its reasonableness.  Other relevant factors to consider in assessing reasonableness include:

  • the parties’ bargaining positions relative to one another
  • whether there was an inducement to agree to the cap
  • whether there was an alternative contract available that did not include a liability cap
  • whether the person subject to the cap knew or ought reasonably to have known about the cap’s existence and extent.

Unfortunately, there are no hard-and-fast rules for setting the level of a cap.

For more information on this subject, see:

https://seqlegal.com/blog/contract-liability-caps-under-ucta

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