Insights | September 1, 2023

Toni Siimes on liability limitations

We asked our people to share their thoughts about legal terms or concepts that they find useful, necessary, challenging, fun or irritating. In part one, Partner Toni Siimes thinks about liability limitations.

One key legal concept I often think about is the liability limitation, or, to be more precise, the concept of excluding liability for indirect damage or indirect loss. This is something that seems to have been drilled into generations of young, starry-eyed lawyers fresh out of law school: Whenever you are commenting on any agreement, always make sure that you are excluding liability for indirect damage or loss. This is almost a knee-jerk reaction.

But who even knows where the line is drawn between direct damage/loss and indirect damage/loss? Maybe it’s time to go back to the basic literature, and to check some Supreme Court precedents. There might be surprises there.

And sometimes it would be good to actually think about the situation and the relationships that are being governed by the contract instead of simply seeking (or accepting) the liability exclusion. For example, several situations relating e.g., to consulting are such that the exclusion of indirect losses would effectively mean the exclusion of all conceivable liability. Accordingly, I’m seeing more and more clauses where liability for reasonably foreseeable indirect damage/loss is being accepted, with an appropriate monetary liability cap.

So here is my recommendation: Next time, think instead of just reacting. By the way, this applies to life in general, not only to liability clauses.