The lines you cannot cross
Drafting freedom over liability has hard edges. Some liabilities cannot be excluded or limited at all, no matter how clear the clause or how sophisticated the parties. A clause that tries to cross those lines is void to that extent, and a badly aimed clause can even fail more widely.
There are three to keep in view: death or personal injury from negligence, fraud inducing the contract, and the difference between a primary obligation and a claim for damages.
Death or personal injury from negligence
Section 2(1) of the Unfair Contract Terms Act 1977 is absolute: you cannot, by a contract term, exclude or restrict liability for death or personal injury resulting from negligence. Any clause purporting to do so is void.
The practical drafting point is to carve this out, not cap it. A clause that says liability shall not exceed a stated figure, except for death or personal injury, is fine; a clause that tries to cap death or personal injury is not, and the attempt can taint the wider clause.
Fraud inducing the contract
You cannot exclude liability for your own fraud in inducing the other party to contract - the tort of deceit. A clause purporting to exclude liability for fraudulent misrepresentation inducing the contract is void as contrary to public policy.
Fraud in performing a valid contract is different and can, with clear words, be limited - that is a separate question, covered in the guide on excluding liability for fraud.
Primary obligations: a cap does not erase a debt
A limitation clause caps secondary obligations - the duty to pay damages for breach - not primary obligations to perform. The clearest example is a debt. In Costcutter Supermarkets Group Ltd v Vaish [2024] EWHC 152 (KB), retailers argued that a liability cap reduced what they owed for goods delivered. The court disagreed: the cap applied to damages for breach, not to the primary obligation to pay the price. Clear words are needed before a limitation clause will touch a primary payment obligation.
So a GBP 1 million cap will not limit the price owed for goods or services delivered, or the duty to perform itself - only the damages that flow from a failure to perform. (Indemnities are different again: whether a cap reaches them is a drafting and negotiation question, not a fixed rule.)
And then reasonableness
Beyond these absolute limits sits the UCTA reasonableness test, which can strike down an exclusion or cap that is technically valid but unreasonable in a business contract (covered in its own guide). The two work together: first ask whether the law allows the liability to be excluded at all; then, if it does, whether the clause is reasonable.
In review, run the carve-out check first: are death and personal injury, fraud in the inducement, and payment debts all outside the cap? Their absence is not just a drafting gap - it can make the clause fail where it matters most.
Use at the desk
Practical checklist
- Never try to cap death or personal injury from negligence - carve it out (UCTA 1977 s.2(1)).
- Never exclude fraud inducing the contract; dishonest performance is a separate question.
- Remember a damages cap does not limit a primary obligation to pay a debt (Costcutter v Vaish [2024] EWHC 152 (KB)).
- Use clear words if you ever intend a limitation to reach a primary payment obligation.
- Carve out, rather than cap, the liabilities that cannot be excluded - a bad attempt can taint the clause.
- After the absolute limits, check the clause still passes UCTA reasonableness.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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