Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Limitation of Liability definition

What does Limitation of Liability mean? In legal practice, a limitation of liability is a contract clause that allocates risk by capping, excluding or otherwise restricting the losses a party may recover for breach, non-performance or negligence. Typical features include an overall or per-claim liability cap, exclusions of indirect or consequential loss and loss of profits, time limits for claims, and carve-outs for liabilities that remain unlimited. This is a descriptive term (not a defined statutory concept), but its enforceability is governed by statute and common law. In England & Wales and Scotland, the Unfair Contract Terms Act 1977 (and in Northern Ireland, the...

Exemption Clauses in UK B2B Contracts: Incorporation, Construction and Statutory Controls under UCTA 1977 and the Misrepresentation Act 1967

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Practice notes

This Practice Note considers exclusion and Limitation of Liability in business-to-business (B2B) contracts.

This Practice Note offers guidance on the Common law and statutory Controls that govern exclusion and limitation of liability clauses (also described as limitation of liability clauses, limitation clauses, exclusion of liability clauses, exclusion clauses and exemption clauses), including the Unfair Contract Terms Act 1977 (UCTA 1977) and the Misrepresentation Act 1967 (MA 1967).

It identifies which provisions amount to exemption clauses and sets out three central matters to address when drafting them or assessing them in a dispute:

incorporation
construction
statutory controls

It also outlines the courts’ treatment of attempts to exclude or restrict liability for certain breaches (eg fundamental breach) and for different heads of loss (eg direct loss, indirect and consequential loss, loss of profits, loss of use and loss of data). It notes common techniques parties use to allocate or restrict risk (eg financial caps, time bars, excluding rights of set-off) and addresses exemption clauses in relation to third parties.

For a quick outline of each section of this Practice Note, and links to summaries of the principal issues covered, see: Quick view—contents and navigation below...

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Web page updated on 21/05/2026

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