Risk Allocation
Limitation of liability (cap and carve-outs)
This clause sets the ceiling on what you could ever have to pay if something goes wrong, and without one your exposure is unlimited on a small fee. Capping liability at the fees you were paid is a widely used starting point for freelancers and small agencies. A few things (like fraud, or death and personal injury) cannot lawfully be capped, so expect those carve-outs.
What to look for
Whether total liability is capped, at what level (often the fees paid), whether indirect/consequential losses are excluded, and which carve-outs sit outside the cap. A missing cap is the single biggest exposure in a small-agency contract.
How Clause rates it
Wording you can ask for
Except for liability that cannot lawfully be limited (including death or personal injury caused by negligence, and fraud), neither party is liable for indirect or consequential loss, and each party's total liability under this agreement is limited to the total fees paid or payable under it.
The UK angle
In England & Wales, liability for death or personal injury caused by negligence and for fraud cannot be excluded, and under the Unfair Contract Terms Act 1977 exclusion clauses in business contracts must be reasonable to be enforceable.
See this on your own contract.
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