Drafting limitation and exclusion of liability in UK outsourcing agreements: UCTA reasonableness, caps, heads of loss (data protection, IPR, TUPE), insurance, liquidated damages and market practice

Published by a LexisNexis Commercial expert

Practice notes

This Practice Note sets out and clarifies the principal issues to consider when negotiating and drafting limitation of liability provisions in information technology and business process outsourcing contracts. It addresses:

Legal principles
Approaches in outsourcing
Heads of losses
Specific provisions in the agreement
Dealing with data protection liabilities
General considerations

For comprehensive commentary on excluding and limiting liability in commercial contracts more generally, see Practice Note: Exclusion and limitation of liability, and for hands-on guidance on negotiation and drafting, refer to: Drafting and negotiating a limitation of liability clause—checklist. For a sample limitation of liability provision, see Precedent: Limitation of liability clause.

Legal principles

A contractual term that excludes or limits liability is governed by both statute and the common law, with most of the significant statutory controls contained in the Unfair Contract Terms Act 1977 (UCTA 1977). The courts are, nonetheless, usually disinclined to disturb commercial bargains reached between sophisticated enterprises. That said, suppliers became apprehensive after a series of IT cases in the 1990s in which the courts adopted a strongly interventionist approach to construction and concluded that many such clauses were unreasonable...

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Web page updated on 27/05/2026

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