General Cap Clauses in Contracts
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What is a general liability cap clause?
The general cap is a limit on the total amount one party can be liable to the other party for under the contract. It’s the monetary liability ceiling for non-excluded claims. It often does not apply not to things like fraud or gross negligence, which can sit outside the cap.
Also known as: liability cap, limitation of liability, aggregate liability limit, cumulative liability cap, cap on damages, maximum liability, or overall cap.
What general cap terms do most contracts have?
Based on data from more than 10,000 contracts:
98% of sales contracts use a multiplier, rather than a fixed number, for the general cap amount
Of these, 92% use 1.0x the fees paid or payable in a twelve month period, and 4% use 0.5x
Example general cap language
Sample language from the Common Paper standard Cloud Service Agreement:
Liability Caps. Except as provided in Section 8.4 (Exceptions), each party’s total cumulative liability for all claims arising out of or relating to this Agreement will not be more than the Fees paid or payable by Customer to Provider in the 12 month period immediately before the claim.
Exceptions. The liability cap in Section 8.1(a) does not apply to any Increased Claims. Section 8.1 (Liability Caps) does not apply to any Unlimited Claims. Section 8.2 (Damages Waiver) does not apply to any Increased Claims or a breach of Section 10 (Confidentiality). Nothing in this Agreement will limit, exclude, or restrict a party’s liability to the extent prohibited by Applicable Laws.
Risks to watch for in general cap clauses
| ⚠️ Risk Type | Description |
|---|---|
| 📉 Low Liability Cap | The cap may be set too low to cover real damages, limiting recourse if something goes wrong. |
| 🧩 Hidden Carve-Outs | Excluded claims can quietly gut the cap, turning a “limited” liability into a blank check. |
| 📃 Unenforceable Cap | Liability caps that are too low or set to $0 may be deemed unenforceable. |
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