Liability cap
A contract clause limiting the total amount one party can be held financially responsible for - usually capped at the fees paid.
For example, an agency's contract caps its liability at the fees paid in the prior 12 months. If something goes wrong, the client's recovery is bounded to a known, survivable amount rather than an open-ended claim that could sink the agency.
Why it matters to your firm: a liability cap is one of the most important protections in an agency contract, turning unlimited risk into a known, survivable number. Pairing it with indemnification and insurance is how agencies take on meaningful work without betting the whole business on every project.
Agencies commonly cap liability at the fees paid - often the last 3-12 months' - keeping exposure proportionate to the contract value.
- Leaving liability uncapped.
- Capping at a number far above the fees at stake.
- Not excluding indirect and consequential damages.