In previous articles, I’ve talked about clauses excluding the recovery of consequential damages.  Here’s an example of such a clause:

BUYER RELEASES SELLER FROM ANY LIABILITY FOR INCIDENTAL AND CONSEQUENTIAL DAMAGES ATTRIBUTABLE TO OR RELATING TO THE PRODUCT, SELLER’S LIABILITY BEING LIMITED TO THE COST OF REPAIR OR REPLACEMENT OF ANY DEFECTIVE PRODUCT PURSUANT TO THE FIRST SENTENCE OF THIS PARAGRAPH.

This is exactly how such a clause should look in a contract – big, prominent, capitalized letters.  In a legal dispute, when you try to use this clause to your advantage, the other side can’t say they missed or ignored it.

So, let’s say your business is sued and your adversary is claiming they lost profits because a machine you sent them didn’t perform to specification.   Your lawyer can argue strenuously that the lost profits can’t be recovered in any lawsuit.  Lost profits are a form of “consequential damages” – damages that were caused by some breach of contract.  Based on this clause, a strong argument can be made that your adversary can only recover the cost of the machine you sold them – at most.

So do courts usually uphold these kinds of provisions?  The answer is often yes.