CIO Wisdom II: More Best Practices

Liquidated Damages Provisions and Limitations on Liability

Your vendor may request that you agree to a provision limiting the vendor's liability for damages in the event of a breach. A vendor typically justifies this request on the grounds that its potential exposure in the event that the vendor's products or services affect your business may dwarf the amount of the vendor's fee, and that the vendor cannot afford to take that risk. You should take care in considering such a request that you do not leave your company without an adequate remedy. Also, in a situation in which it would be difficult or expensive to prove your own damages in the event of a breach, you should consider using a liquidated damages provision as an approximation of your ...