DETERMINE LIMITATIONS OF LIABILITIES
Most agreements for technology will include a provision that limits the liability of the vendor.
It is common and reasonable for the vendor to disclaim any liability for incidental, special or consequential damages that are speculative and not foreseeable. The vendor should however remain liable for direct damages that are foreseeable, quantifiable, and the direct result of their actions. There may also be a dollar cap imposed on any damages. In some cases the cap may be limited to the amount of fees actually paid by customer during the preceding 12 months or other limited time period. The cap could be extended to all fees paid regardless of when paid. It is reasonable for the customer to make an exception to any cap for damages that result from third party claims of infringement so that such claims and any resulting damages assessed against customer are not limited to the cap on damages. The vendor might also try to reduce the statute of limitations so that the customer loses the right to bring an action against vendor if the lawsuit is not commenced in a timely fashion. These discussions and negotiations are all about allocating the risk between both parties in a fair and reasonable manner. The limitations of liability should be drafted in a way that the risk is reasonably allocated between both parties.
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