Practical examples of limitation of liability disclaimers in service contracts

Short, realistic examples of limitation of liability disclaimers in service contracts

Let’s start where most lawyers don’t: with actual wording you might copy into a draft and then refine with your attorney. Here are several examples of limitation of liability disclaimers in service contracts that mirror what you’ll see in SaaS, consulting, and agency agreements.

SaaS subscription – liability cap based on fees paid

“To the maximum extent permitted by law, Provider’s total aggregate liability arising out of or related to this Agreement shall not exceed the fees actually paid by Customer to Provider under this Agreement during the twelve (12) month period immediately preceding the event giving rise to the claim.”

Marketing agency – fee-based cap plus exclusion of lost profits

“Agency’s total liability for any and all claims arising out of or relating to the Services shall be limited to an amount equal to the fees paid by Client to Agency for the specific campaign giving rise to such claims. In no event shall Agency be liable for any loss of profits, loss of revenue, or any indirect, incidental, or consequential damages.”

Managed IT services – higher cap for data loss, lower for everything else

“Except for Provider’s indemnity obligations and liability for data breach caused by Provider’s gross negligence or willful misconduct, Provider’s total liability under this Agreement shall not exceed an amount equal to six (6) months of Service Fees. Provider’s total liability for data loss resulting from such gross negligence or willful misconduct shall not exceed twelve (12) months of Service Fees.”

Professional services (consulting) – reliance on client data

“Consultant’s liability for any claim arising from the Services shall be limited to the amount of fees paid by Client for the Services giving rise to such claim. Consultant shall have no liability for decisions made or actions taken by Client in reliance on the Deliverables where such decisions or actions are based on inaccurate or incomplete information provided by Client.”

Freelance designer / creative agency – portfolio-friendly but risk-aware

“Designer’s total liability for any claim arising out of this Agreement shall not exceed the total fees paid by Client to Designer under this Agreement. Designer shall not be liable for any loss of business, loss of contracts, or reputational harm, even if advised of the possibility of such damages.”

Cloud hosting provider – service credits as exclusive remedy

“Customer’s sole and exclusive remedy for any unavailability, errors, or defects in the Services shall be the receipt of service credits as described in the Service Level Agreement. In no event shall Provider’s aggregate liability exceed the total amount of service fees paid by Customer for the affected Services during the three (3) months preceding the event giving rise to the claim.”

These are all examples of limitation of liability disclaimers in service contracts that real businesses use every day, with minor variations. The differences in caps, carve-outs, and remedies are where the strategy lives.

How the best examples of limitation of liability clauses are structured

The best examples of limitation of liability disclaimers in service contracts tend to share a familiar structure. They usually combine:

• A cap on total monetary liability (often tied to fees paid or a fixed dollar amount)
• An exclusion of certain categories of damages (like lost profits or consequential damages)
• Carve-outs for things a court is unlikely to let you limit (fraud, intentional misconduct, sometimes data breaches or IP infringement)
• A statement that the limitation applies “to the maximum extent permitted by law”

Here’s a composite example of a limitation of liability clause that pulls these elements together:

“To the fullest extent permitted by applicable law, Service Provider’s total aggregate liability arising out of or related to this Agreement, whether in contract, tort (including negligence), or otherwise, shall not exceed the greater of (a) the amounts actually paid by Customer to Service Provider under this Agreement during the twelve (12) months prior to the event giving rise to the claim, or (b) $50,000. In no event shall Service Provider be liable for any loss of profits, loss of revenue, loss of data, or any indirect, incidental, special, or consequential damages, even if advised of their possibility. The foregoing limitations shall not apply to liability resulting from Service Provider’s fraud or willful misconduct.”

This kind of wording shows up in many examples of limitation of liability disclaimers in service contracts used by mid-market and enterprise SaaS providers.

Real-world examples include SaaS, IT, and professional service contracts

If you skim public filings and standard terms from large providers, you’ll see consistent patterns. Some real-world inspired examples of limitation of liability disclaimers in service contracts include:

Enterprise SaaS vendor
A major SaaS provider’s online terms often say its total liability is limited to the fees paid in the twelve months before the incident, with exclusions for indirect and consequential damages. Many also carve out IP infringement indemnity, meaning the cap doesn’t apply if the vendor’s software infringes someone else’s copyright or patent.

Cloud infrastructure provider
Large cloud providers typically:

• Cap liability at the amount paid for the affected service in a short period (often 3–12 months)
• Offer service credits as the primary remedy for downtime
• Exclude loss of profits, revenue, or business interruption

Their limitation clauses are often backed up by detailed service level agreements (SLAs). For a good sense of how risk allocation shows up in contracts, the U.S. Small Business Administration offers high-level guidance on reading and negotiating business contracts.

Consulting firm / professional services
Large consulting firms usually:

• Cap liability at the fees paid for the engagement (sometimes 1x–2x fees)
• Exclude lost profits and consequential damages
• Carve out willful misconduct and sometimes regulatory fines if caused by the consultant’s intentional violation of law

Regulators and courts in the U.S. and UK have repeatedly signaled that if you try to limit liability for fraud or intentional wrongdoing, that language is likely to be unenforceable. For example, the UK’s unfair contract terms rules, summarized by the UK government at legislation.gov.uk, restrict how far businesses can go in limiting negligence liability.

2024–2025 trends shaping limitation of liability in service contracts

Limitation of liability language hasn’t stood still. A few clear trends are shaping the best examples of limitation of liability disclaimers in service contracts going into 2024–2025:

1. Specific carve-outs for data breaches and privacy

With high-profile data incidents and expanding privacy regimes (CCPA/CPRA in California, GDPR in Europe), many service providers are:

• Adding separate caps for data breach or security incidents, often higher than the general cap
• Carving out liability for intentional or grossly negligent security failures from the general limitation
• Tying obligations to recognized security frameworks (like NIST guidance from NIST.gov)

A modern example of limitation of liability wording in a data-heavy service contract might be:

“Notwithstanding the foregoing, Provider’s aggregate liability arising from a Security Incident directly caused by Provider’s failure to maintain commercially reasonable security measures shall not exceed two (2) times the total fees paid by Customer to Provider during the twelve (12) months preceding the Security Incident.”

2. AI, automation, and “recommendation-only” services

Service providers using AI or algorithmic tools are increasingly:

• Clarifying that outputs are recommendations, not guarantees
• Limiting liability for decisions made by the client based on AI-generated insights

An example of a limitation of liability clause in an AI-enabled analytics agreement:

“Client acknowledges that the Services provide predictive analytics and recommendations only and do not constitute legal, financial, or medical advice. Provider shall have no liability for Client’s decisions or actions taken in reliance on such recommendations. Provider’s total liability arising from the Services shall be limited to the fees paid by Client for the three (3) months preceding the event giving rise to the claim.”

3. Higher caps for regulated industries

In finance, health, and other regulated sectors, customers often demand higher caps or special treatment for regulatory fines and investigations. For instance, in health-related service contracts, parties may negotiate separate language for HIPAA-related breaches, often referencing guidance from agencies like HHS.gov.

A negotiated example of limitation of liability language in a healthcare data processing agreement might say:

“The limitation of liability set forth in this Section shall not apply to Covered Entity’s direct damages arising from Business Associate’s material breach of its obligations under HIPAA where such breach results from Business Associate’s willful or intentional misconduct; provided, however, that Business Associate’s total liability for such direct damages shall not exceed $1,000,000.”

Key drafting choices that separate weak from strong clauses

When you look at examples of limitation of liability disclaimers in service contracts, a few drafting choices show up over and over again—and they matter.

How you define the cap

Most commonly, the cap is tied to:

• Fees paid in the last X months (12 months is common for SaaS)
• Total fees paid under the agreement (more generous to the customer)
• A fixed dollar amount, sometimes with a “greater of” or “lesser of” structure

For instance:

“…shall not exceed the greater of (a) $100,000, or (b) the total fees paid by Customer under this Agreement in the twelve (12) months preceding the event giving rise to the claim.”

That “greater of” language is a customer-friendly tweak you’ll see in better-negotiated examples of limitation of liability disclaimers in service contracts.

Which damages you exclude

Most limitation clauses exclude categories like:

• Indirect or consequential damages
• Loss of profits, revenue, or business
• Loss of data (sometimes, unless data is central to the deal)

But courts don’t always interpret these terms the way drafters expect. U.S. courts, for example, often look closely at whether the language is clear and conspicuous. The American Bar Association has practical commentary on contract interpretation and damage waivers at americanbar.org, which is worth reviewing if you’re negotiating higher-risk deals.

Carve-outs that keep the clause enforceable

Better-drafted examples include carve-outs for:

• Fraud
• Willful misconduct
• Sometimes gross negligence (especially in consumer-facing contracts)
• IP infringement indemnity
• Data breach or privacy violations in certain sectors

An example of balanced carve-out language:

“The limitations in this Section shall not apply to liability arising from (a) either party’s fraud or willful misconduct; (b) Customer’s payment obligations; or (c) Provider’s obligations under its intellectual property indemnity.”

This kind of wording makes it more likely a court will enforce the rest of the limitation, instead of striking the whole clause as unfair.

Practical tips for using these examples in your own service contracts

Looking at all these examples of limitation of liability disclaimers in service contracts is helpful, but copying text blindly is not. A few practical points:

• Match the cap to your risk profile. If you’re a small agency doing low-dollar work, a cap equal to fees paid may be reasonable. If you’re handling sensitive health or financial data, you may need higher caps or separate treatment for specific risks.
• Be realistic about negotiation. Large enterprise customers often insist on higher caps, “greater of” formulations, and carve-outs for data breaches and IP infringement. Plan for that in your pricing and risk modeling.
• Make the clause conspicuous. Courts are more likely to enforce a limitation of liability if it’s clearly labeled, not buried in fine print, and not written in opaque legalese.
• Check local law. Some jurisdictions limit how far you can go in excluding negligence or limiting certain kinds of damages, especially in consumer contracts. U.S. state law, UK unfair contract terms rules, and EU consumer law all impose guardrails.

If the stakes are high—significant data, regulated industries, or large-ticket projects—working with a qualified attorney is not optional. Public resources like the SBA’s contract guidance or law school clinics (many listed on .edu sites) can at least help you frame the right questions before you get to the negotiation table.

FAQ: Limitation of liability disclaimers in service contracts

Q1: Can you give a simple example of a limitation of liability clause for a small service business?
A straightforward example of a limitation of liability clause for a small design or marketing shop might be:

“Provider’s total liability arising out of or related to this Agreement shall not exceed the total amount of fees paid by Client to Provider under this Agreement. In no event shall Provider be liable for any loss of profits, loss of business, or any indirect or consequential damages.”

This is a common starting point in many examples of limitation of liability disclaimers in service contracts for small businesses.

Q2: Are limitation of liability clauses always enforceable?
No. Courts may refuse to enforce a limitation of liability clause if it is unconscionable, hidden in fine print, drafted in extremely one-sided language, or attempts to limit liability for fraud or intentional misconduct. Consumer contracts and certain regulated sectors face tighter scrutiny.

Q3: Should the limitation of liability be mutual?
In many B2B service contracts, yes. Larger customers often insist the clause applies to both parties, sometimes with different caps depending on who bears more operational risk. Mutuality is common in better-balanced examples of limitation of liability disclaimers in service contracts.

Q4: How do limitation of liability clauses interact with insurance?
Your liability cap should align with your insurance coverage. If your professional liability or cyber policy covers up to $1 million, it rarely makes sense to accept uncapped liability in a contract. Insurers sometimes review large customer contracts and may push back on language that creates uninsurable risk.

Q5: Do I need separate limitation of liability language for data or security incidents?
If your service touches personal data, financial records, or health information, it’s smart to consider separate caps or carve-outs for security incidents. Many 2024–2025 contracts now have a general limitation of liability plus specific language for data breaches, reflecting the growing regulatory and reputational impact of security failures.

This article is for general informational purposes only and does not constitute legal advice. Always consult a qualified attorney in your jurisdiction before relying on any specific limitation of liability wording in your service contracts.