Liability and Risk

Consequential Damages Exclusion A consequential damages exclusion is a contract clause that stops you from recovering the knock-on losses a vendor failure causes, such as lost profits, lost sales or lost data, leaving you only the direct cost of the failure. Customer Indemnity A customer indemnity is your promise to defend the vendor and pay for third-party claims that come from your data, your users or your breach of the terms. Force Majeure Force majeure is a contract clause that excuses a party from performing while an event outside its control, such as a disaster, war or major outage, stops it, without that party being in breach. Hold Harmless Hold harmless is a contract promise that one side will not have to bear certain losses or claims, usually written as "defend, indemnify and hold harmless." Courts differ on whether it adds anything to indemnify. Indemnification Clause An indemnification clause decides who pays when a third party sues: one side promises to defend the other and cover legal fees, settlements and judgments for claims the contract assigns to it. Insurance Requirements An insurance requirements clause lists the insurance a vendor promises to carry, such as cyber or errors and omissions coverage, and the minimum amount for each. IP Indemnity An IP indemnity is a vendor's promise to defend you and pay the costs if someone sues claiming the vendor's product infringes their patent, copyright or trademark. Liability Cap A liability cap is the maximum amount one side can recover from the other under a contract, often calculated from the fees paid over a set period. Limitation of Liability A limitation of liability clause caps how much a vendor must pay you if something goes wrong, often at the fees you paid over a set period, and excludes certain losses such as lost profits or data. Representations and Warranties Representations are statements of fact a party makes when signing, and warranties are promises about how things will be, such as a vendor promising its service will perform as documented. Service Credits Service credits are discounts on a future bill that a vendor gives when it misses its promised uptime, often a percentage of the monthly fee that you must request before a deadline. Sole and Exclusive Remedy A sole and exclusive remedy clause says one specific fix, such as a service credit, is the only thing you can get for a specific problem, so you cannot sue for your wider losses. Super Cap A super cap is a separate, higher limit on what a vendor will pay for named high-risk claims, most often data breaches, set above the general liability cap. Warranty Disclaimer ("As Is") A warranty disclaimer is the clause where a vendor says it makes no promises about its service beyond the few it writes down, often with the words "as is," so bugs and outages are not by themselves a breach.