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Contractual Terms

Standard limitation-of-liability clauses are commonplace in all types of contracts. Because courts of law rarely consider the fairness of contract terms, parties to a contract must carefully review its terms and negotiate any limitation of liability.

An example of a limiting clause in a contract might be language similar to “The liability of contractor to customer, whether in tort or in contract and for any reason and upon any cause of action or claim relating to the performance of work under this agreement, shall be limited to the amount paid by customer to contractor pursuant to this agreement.”

Limitations-of-liability clauses are one-sided terms (favorable to the drafter of the contract), and should always be reviewed with scrutiny. Unless they are clearly unconscionable or against public policy, courts will seldom set them aside, despite their obvious unfairness to an unwary party to the contract.

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