A limitation of liability clause sets out restrictions on contractual exposure. It may place a financial ceiling on liability, exclude categories of loss, or do both. Start by separating those mechanisms: a cap is not the same thing as a damages exclusion.
Then read the exceptions. A large heading saying “liability is limited” does not establish that the limit covers the particular claim you are worried about.
Check which fees count and the period used to measure them:
Write down the formula before judging whether it fits the risk. “Twelve months’ fees” can mean something different from “fees actually paid in the twelve months before the event.”
This is a fictional illustration, not a customer outcome or an enforceability assessment.
A service costs $500 per month. The contract caps covered liability at fees actually paid in the twelve months preceding the relevant event. Assume only two monthly payments have been made, both fall within that window and there are no other qualifying payments or minimum cap.
On those assumptions, the fee-based figure is $1,000. Multiplying $500 by twelve to get $6,000 would overlook the “actually paid” wording. Check the definitions, event date, invoices and exceptions before applying the calculation to a real dispute.
If early-term exposure is a concern, discuss a stated minimum or a different calculation basis. The appropriate number depends on the service and risks; this example does not prescribe a cap.
A contract may exclude lost profits, lost data or other named losses as well as using categories such as indirect or consequential loss. Do not infer coverage from the label alone. Classification and enforceability can depend on the governing law and circumstances.
Ask which real business consequences would be left without a contractual remedy if the exclusion applied. For software, consider an outage, data restoration and migration costs. For services, consider defective work, delay and re-performance.
Read references to indemnities, confidentiality, security incidents, payment obligations and other excluded or specially treated claims. Check whether defense costs count toward a cap and whether multiple claims share the same limit.
List the treatment of each material risk in plain language: general cap, separate cap, excluded loss, or exception requiring further review. A short list with clause references is more useful than assuming everything fits under the headline number.
As a public example, section 14 of the Atlassian Customer Agreement separately addresses damage exclusions, a general cap and exceptions. That structure demonstrates the need to follow cross-references; its amounts and allocations are not a standard for your deal. Source checked September 29, 2026.
Ask what the cap would be early in the term, which orders contribute fees, how related claims accumulate and which obligations sit outside the cap. Read the indemnity provision alongside those answers. Record any agreed clarification in the final documents.
For a software purchase, use the wider SaaS agreement checklist. AnyContract can help you review and refine individual clauses, then download the selected version as a PDF report, Word memo and redline. A review costs $29 or one existing credit; the sample report is free.
AI does not determine the amount recoverable in a dispute. Check material findings and seek qualified advice where the legal effect or financial exposure remains uncertain.