Limitation of Remedies Clauses: What You Need to Know
What Is a Limitation of Remedies Clause?
A limitation of remedies clause restricts the types or amount of relief available to a party if the other side breaches the contract. Instead of pursuing the full range of legal remedies — damages, specific performance, rescission — you are limited to whatever the clause specifies.
For example, a software license might state that your sole remedy for defects is a replacement or repair, not a refund or lawsuit for consequential damages.
How These Clauses Work
Limitation of remedies clauses typically operate in one of several ways:
- Exclusive remedy: The contract designates one specific remedy (like repair or replacement) as your only option
- Damages cap: Total recoverable damages are capped at a specific dollar amount, often tied to fees paid
- Exclusion of damage types: Consequential, incidental, special, or punitive damages are excluded entirely
- Time limits: Claims must be brought within a shortened period, sometimes shorter than the statute of limitations
Red Flags
- A clause that eliminates all meaningful remedies, leaving you with no real recourse
- Caps set unreasonably low relative to the potential harm
- Exclusions that apply even in cases of gross negligence or willful misconduct
- One-sided limitations that restrict only your remedies but not the other party's
Legal Enforceability
Courts generally enforce limitation of remedies clauses in commercial contracts between sophisticated parties. However, under the Uniform Commercial Code (UCC Section 2-719), a limitation may fail if the exclusive remedy "fails of its essential purpose" — for instance, if a seller cannot actually provide the repair it promised as the sole remedy.
When to Consult a Lawyer
If a contract significantly limits your ability to recover damages, consider having an attorney evaluate whether the limitations are reasonable and enforceable in your jurisdiction.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.