Common use of Dollar Cap Clause in Contracts

Dollar Cap. It is commercially standard practice for software licenses to contain a specified limit on vendor’s aggregate monetary liability under the agreement, subject to certain exceptions. The amount of the dollar cap is often expressed in relation to amounts paid under the agreement (for example, amounts paid under the previous twelve months, or all fees paid under the agreement), or perhaps a multiple of such amounts. The final dollar value of the cap is often correlated to the respective negotiating leverage of the parties. The parties should also pay particular attention to the exceptions to the cap, which historically have included indemnity obligations, gross negligence, willful misconduct, and breaches of confidentiality. In recent years, compliance with law and data breach liabilities have also become part of these negotiations. Depending on the circumstances, certain liabilities (such as for data breach) may be subject to a “super cap”—which might be a multiple of the dollar cap for other liabilities.

Dollar Cap. It is commercially standard practice for software licenses to contain a specified limit on vendor’s aggregate monetary liability under the agreement, subject to certain exceptions. The amount of the dollar cap is often expressed in relation to amounts paid under the agreement (for example, amounts paid under the previous twelve months, or all fees paid under the agreement), or perhaps a multiple of such amounts. The final dollar value of the cap is often correlated to the respective negotiating leverage of the parties. The parties should also pay particular attention to the exceptions to the cap, which historically have included indemnity obligations, gross negligence, willful misconduct, and breaches of confidentiality. In recent years, compliance with law and data breach liabilities have also become part of these negotiations. Depending on the circumstances, certain liabilities (such as for data breach) may be subject to a “super cap”—which might be a multiple of the dollar cap for other liabilities. Seek to have the negotiated exceptions to the dollar cap apply also to any exclusion of consequential or other types of damages.