Legal Definitions - limitation-of-damages clause

A limitation-of-damages clause is a part of a contract where the parties agree on the maximum amount of money that can be recovered if there is a breach of the agreement. This means that if one party breaks the contract, the other party cannot sue for more than the agreed-upon amount.

Imagine that you are a freelance graphic designer and you have a contract with a client to design a logo for their business. The contract includes a limitation-of-damages clause that states that if you fail to deliver the logo on time, the client can only recover up to $500 in damages. If the client were to sue you for more than $500, the court would not award them any more money than what was agreed upon in the contract.

Another example could be a rental agreement for an apartment. The contract may include a limitation-of-damages clause that states that if the tenant damages the property, they can only be held liable for up to a certain amount, such as $1,000. If the damages exceed that amount, the landlord cannot sue the tenant for more than $1,000.

These examples illustrate how a limitation-of-damages clause can protect both parties in a contract by setting a clear limit on the amount of money that can be recovered in case of a breach.