Limiting Liabilities

Limiting Your Liabilities

Lately we have seen contracts used by service providers that do not limit the service provider’s liability for a damages claim. If you are a service provider charging $1,000 for a project, you do not want to be responding to a claim for $1,000,000 when your customer claims your service caused that much damage. There is legal authority in Washington to contractually limit your damages. Some factors that determine the extent of possible limitations include (1) whether the customer is a sophisticated business or a family consumer, (2) whether the service is a necessary service (e.g. medical provider) or a non-necessity (e.g. recreational service), and (3) how the limitation is stated in the contract. Of course, your errors and omissions insurance policy is important in limiting your exposure. If you are on the receiving end of a liability limitation clause, make sure you understand the consequences. Review your contracts for these provisions