Limitation of Liability
Limitation of liability is the broader category of contract language that restricts what a party can be held responsible for -- of which a dollar-amount liability cap is one specific mechanism, not the whole clause.
In short
- A broader clause type than a liability cap alone -- it can also exclude categories of damages entirely, not just cap the dollar amount.
- Commonly excludes "consequential" or "indirect" damages (like lost profits) regardless of any dollar cap.
- A liability cap is one specific tool within it: the ceiling on damages that remain in scope after exclusions are applied.
- A contract can have a strong-looking cap and still leave a party heavily exposed if the exclusions and carve-outs are poorly drafted.
How it relates to a liability cap
Limitation of liability is the umbrella: it covers what types of damages are recoverable at all, which categories are carved out and left uncapped, and, within that, what the dollar ceiling is on what remains. A liability cap specifically is that dollar ceiling -- so a document can have a liability cap of "12 months' fees" while its limitation-of-liability language separately excludes consequential damages entirely, which changes the real exposure far more than the cap number does.
Why treating them as the same thing is a mistake
Reviewing only the cap amount and assuming that's the whole protection misses the exclusions doing most of the real work -- a generous-sounding cap paired with no consequential-damages exclusion can expose a party to far more than a modest cap paired with a well-drafted exclusion list. Both need to be read together, not the cap number in isolation.
How ScopeWise checks this
ScopeWise's Legal agent extracts the limitation-of-liability clause as a whole -- including whether it's missing or uncapped -- while the Commercial agent separately checks the specific cap amount and carve-out structure documented in the liability-cap entry; a finding from either can surface without the other, since they check different parts of the same clause.