Limitation of Liability Explained

A limitation of liability clause caps how much a company has to pay if something goes wrong. It's one of the most common provisions in any terms of service, and it can dramatically reduce your ability to recover damages, even when the company is at fault.

What these clauses do

Most limit liability to the amount you paid for the service, or to a small fixed cap. Many also exclude "indirect, incidental, or consequential" damages entirely, meaning lost data, lost business, or other downstream harm may not be recoverable at all.

Why this matters

If a service loses your files, leaks your data, or causes a financial loss, a broad liability cap can leave you with little or no recourse. The narrower the company's responsibility, the more risk you absorb personally.

Example

A cloud storage service's terms state: "In no event will our liability exceed the amount you paid in the past twelve months, and we are not liable for lost data or lost profits." Termcon flags this as a high-risk limitation because it caps recovery and excludes the most common types of harm.

What Termcon checks

Termcon measures how broadly liability is disclaimed, from absent or narrow to broad caps that exclude most real-world harm.