Limitation of liability clause

A limitation of liability clause is a clause that caps or excludes the damages a debtor owes for non-performance. It is deemed unwritten if it empties the debtor's essential obligation of its substance. The Chronopost decision, handed down by the commercial chamber of the French Cour de cassation on October 22, 1996 (no. 93-18.632), starts with late envelopes. Banchereau had twice entrusted Chronopost with an envelope holding a tender for an auction. The envelope was due before noon the next day and did not arrive in time; the clause limited compensation to the price of carriage. The Court deemed it unwritten because it contradicted the scope of the commitment made, delivery on time, the essential obligation of an express carrier. The ordinance of February 10, 2016 codified the solution in article 1170 of the French Civil Code: any clause that deprives the debtor's essential obligation of its substance is deemed unwritten. Article 1231-3 adds that the limitation to foreseeable damages gives way to gross or willful misconduct. Almost every information technology (IT) contract follows the same structure. The cap equals a multiple, often one or two times, of the amounts paid over the twelve months before the triggering event. Indirect damages (lost revenue, lost data, reputational harm) are excluded. Carve-outs cover confidentiality, intellectual property or personal data. Since the Faurecia decision (Cass. com., June 29, 2010, no. 09-11.841), a cap of this kind holds in principle, unless it makes the commitment negligible. For tech E&O (errors and omissions) underwriting, the clause matters twice. It bounds the insured's exposure, and the underwriter reads the standard contracts to see whether the cap is the rule or an exception negotiated client by client. It also bounds what the policy will pay: when the insured waives its cap by contract, the assumed contractual liability exclusion usually leaves the excess with the insured.