Limitation of Liability Email Templates - NDA Clause Library

Request Higher Liability Cap

Disclosing Party Increase Cap

When to use: The draft NDA contains a liability cap that is too low relative to the value of confidential information being shared. Use this to request a meaningful increase.

Subject: Re: NDA Review - Limitation of Liability Cap

[Name], Thank you for sending over the draft NDA. We have completed our review and need to discuss Section [X] regarding limitation of liability. The current cap of [$X] does not provide meaningful protection given the nature of confidential information we will be sharing. Our [proprietary technology/trade secrets/business plans/customer data] represents substantial value, and the potential damages from unauthorized disclosure significantly exceed the proposed cap. We propose increasing the liability cap to [$Y], which we believe is more proportionate to the actual risk profile. For context: - The information we are sharing represents [describe value: $Z in R&D investment / Y years of development / core competitive advantage] - Industry standard for NDAs involving this type of information typically includes caps of [$range] - A breach could result in [specific harms: loss of competitive position, customer defections, regulatory exposure] Alternatively, we would accept a formula-based cap tied to any future commercial relationship, such as [X] times fees paid, with a floor of [$minimum]. We are committed to reaching agreement and flexible on the specific structure, but the current cap level is below what we can accept. Please let us know your thoughts. Best regards, [Your Name]

Defend Existing Liability Cap

Receiving Party Maintain Position

When to use: The other party is pushing to increase or remove the liability cap. Use this to explain why the current cap is appropriate and offer alternatives.

Subject: Re: NDA - Liability Cap Discussion

[Name], Thank you for your comments on the limitation of liability section. I understand your desire for a higher cap, but I need to explain our constraints and propose some alternatives. Our company policy requires liability caps in all NDAs, and this cap has been approved by our risk management team. The amount reflects our assessment of reasonable exposure for an NDA relationship where no fees are being exchanged. Uncapped liability creates open-ended exposure that we cannot quantify or insure against. That said, I want to find a path forward. Here are some options we can offer: 1. Carve-outs: We can add specific carve-outs so the cap does not apply to: - Willful or intentional breaches - Gross negligence in handling confidential information - Breaches resulting from failure to implement agreed security measures 2. Increased Cap for Specific Information: If certain categories of your information are particularly sensitive, we could agree to a higher cap (or no cap) specifically for those designated materials. 3. Insurance Backstop: We can provide a certificate of insurance showing our cyber liability and professional liability coverage, which provides additional recourse beyond the contractual cap. 4. Cap Linked to Future Relationship: If we proceed to a commercial agreement, we would tie the NDA liability cap to fees paid under that agreement. Would any of these approaches address your concerns? Best regards, [Your Name]

Request Gross Negligence Carve-Out

Disclosing Party Add Carve-Out

When to use: The liability cap has no exceptions for egregious conduct. Use this to request carve-outs for gross negligence, willful misconduct, and similar bad acts.

Subject: Re: NDA - Carve-Outs from Liability Cap

[Name], Following up on our discussion of the limitation of liability clause, we have an additional request regarding carve-outs. We understand the business rationale for liability caps and can accept a cap for ordinary breaches. However, we believe there should be no cap on liability for egregious conduct. The current draft applies the [$X] cap to all claims, including those arising from gross negligence or intentional misconduct. We propose adding the following carve-outs to Section [X]: "The limitations set forth in this Section shall not apply to: (a) Willful or intentional breaches of confidentiality obligations; (b) Gross negligence in the handling, storage, or transmission of Confidential Information; (c) Unauthorized disclosure of Confidential Information to competitors; (d) Failure to implement reasonable security measures as required by this Agreement; or (e) Fraud or criminal conduct." The rationale is straightforward: a liability cap is intended to allocate risk for honest mistakes and ordinary negligence. It should not create a ceiling that effectively prices intentional misconduct. No party should be able to deliberately breach an NDA and know their maximum exposure in advance. We believe these carve-outs are fair and should be mutual. Please confirm you can accept this revision. Best regards, [Your Name]

Accept Limited Carve-Outs Only

Receiving Party Narrowing Request

When to use: The other party requested broad carve-outs from the liability cap. Use this to accept some carve-outs while pushing back on overly expansive exceptions.

Subject: Re: NDA - Response on Liability Carve-Outs

[Name], Thank you for your proposed carve-outs to the limitation of liability. We agree in principle that certain egregious conduct should not be subject to the cap. However, some of your proposed carve-outs are too broad and could effectively swallow the limitation entirely. Here is what we can accept: ACCEPTED CARVE-OUTS: - Willful breach: We agree that intentional, deliberate breaches should not be capped - Fraud: Fraudulent conduct should not be subject to any limitation - Criminal conduct: No cap for criminal violations CARVE-OUTS WE CANNOT ACCEPT AS DRAFTED: - "Gross negligence" - This standard is too subjective and could be alleged in nearly any dispute. We propose replacing this with "reckless disregard" which requires a higher showing - "Failure to implement reasonable security measures" - This is essentially a restatement of breach and would eliminate the cap in most scenarios. We propose limiting this to "failure to implement specific security measures expressly set forth in Schedule A" - "Unauthorized disclosure to competitors" - This is already covered by willful breach. Adding it separately creates ambiguity PROPOSED COMPROMISE LANGUAGE: "The limitations set forth in this Section shall not apply to: (a) willful or intentional breach of confidentiality obligations; (b) fraud; (c) criminal conduct; or (d) conduct constituting reckless disregard for the confidentiality of the Disclosing Party's information." This provides you with meaningful protection for egregious conduct while preserving the purpose of the liability cap. Would this work for your team? Best regards, [Your Name]

Remove Consequential Damages Exclusion

Disclosing Party Expand Recovery

When to use: The NDA excludes consequential damages, which would prevent recovery for lost profits and business harm - the primary damages from NDA breaches. Use this to remove or limit the exclusion.

Subject: Re: NDA - Consequential Damages Provision

[Name], We need to discuss Section [X] regarding the exclusion of consequential damages. As currently drafted, neither party may recover "indirect, incidental, consequential, special, or punitive damages, including lost profits." This exclusion fundamentally undermines the protection this NDA is supposed to provide. The reality is that harm from confidential information disclosure is almost entirely consequential in nature: - Lost business opportunities when competitors learn our strategy - Lost customers who defect after learning our pricing or terms - Lost competitive advantage when our technology becomes known - Reputational harm affecting future business development Direct damages from an NDA breach are minimal - perhaps the cost of an investigation. If consequential damages are excluded, the NDA provides almost no practical protection. We propose one of the following modifications: Option 1: Remove the consequential damages exclusion entirely for confidentiality breaches: "The exclusion of consequential damages shall not apply to any breach of confidentiality obligations under this Agreement." Option 2: Specifically preserve lost profits and competitive harm: "Notwithstanding the foregoing, either party may recover lost profits, lost business opportunities, and competitive harm resulting from the other party's breach of confidentiality obligations." Option 3: Apply a separate, higher cap to consequential damages: "Consequential damages for breach of confidentiality shall be subject to a separate cap of [$X], in addition to the general liability cap." We are flexible on the structure but need meaningful protection for the actual harms that could result from disclosure. Please let us know which approach works best for you. Best regards, [Your Name]

Justify Consequential Damages Exclusion

Receiving Party Defend Position

When to use: The other party wants to remove the consequential damages exclusion. Use this to explain the rationale while offering alternative protections.

Subject: Re: NDA - Consequential Damages Discussion

[Name], I understand your concern about the consequential damages exclusion, and I want to address it directly. Our position on consequential damages exclusions is not about avoiding accountability - it is about managing unquantifiable risk. Consequential damages by definition are speculative and can spiral into enormous claims that bear no relationship to the actual circumstances of a breach. Consider: - Lost profits claims can be inflated based on optimistic projections - Competitive harm is inherently difficult to value and easy to exaggerate - Business opportunity claims can encompass theoretical deals that may never have closed - The party claiming damages has an incentive to maximize claimed harm The exclusion protects both parties from these risks. We would also be protected if your confidential information were to cause us consequential harm. That said, I recognize your need for meaningful protection. Here is what we can offer as an alternative: 1. Injunctive Relief: Section [Y] already provides for injunctive relief, which allows you to stop ongoing or threatened breaches immediately - often more valuable than damages. 2. Higher Direct Damages Cap: We can increase the cap on direct damages to [$X], providing more meaningful monetary recovery. 3. Liquidated Damages: For specifically identified categories of highly sensitive information, we could agree to liquidated damages of [$X] per incident, which provides certainty for both sides. 4. Insurance: We maintain cyber liability insurance with [$X] in coverage, which provides an additional source of recovery. Would a combination of these alternatives address your concerns? Best regards, [Your Name]

Object to One-Sided Limitation

Disclosing Party Request Mutuality

When to use: The limitation of liability clause only protects the receiving party or has asymmetric caps. Use this to request balanced, mutual limitations.

Subject: Re: NDA - One-Sided Limitation of Liability

[Name], We have identified a significant issue with the limitation of liability in Section [X] that we need to address before we can proceed. As currently drafted, the limitation of liability protects only [receiving party/your company]. Specifically: - The [$X] cap applies only to [receiving party's] liability - The consequential damages exclusion benefits only [receiving party] - Carve-outs from the limitation apply only when [disclosing party] is the liable party This creates a fundamental imbalance. While we are the primary discloser in this relationship, the NDA is structured as a mutual agreement, and there may be circumstances where we receive your confidential information as well. Even if information flow is primarily one-directional, there is no justification for liability protections that run only one way. We require the limitation of liability to be fully mutual: 1. The liability cap must apply equally to both parties 2. The consequential damages exclusion must benefit both parties 3. Any carve-outs must apply symmetrically This is a standard request and reflects basic fairness in commercial agreements. We expect the same contractual protections that you are seeking for yourselves. Please revise Section [X] to make the limitations mutual, and confirm when we can expect the updated draft. Best regards, [Your Name]

Propose Tiered Cap Structure

Receiving Party Compromise

When to use: You need to find middle ground on liability caps. Use this to propose a tiered structure with different caps for different types of claims.

Subject: Re: NDA - Liability Cap Compromise Proposal

[Name], Thank you for your patience as we have worked through the limitation of liability issues. After internal discussions, I want to propose a tiered structure that I believe addresses both parties' concerns. PROPOSED TIERED LIABILITY STRUCTURE: Tier 1 - General Claims (Cap: $[X]): All claims arising under this Agreement except those in Tier 2 and Tier 3, including claims for breach of representations, warranties, and general covenants. Tier 2 - Confidentiality Breaches (Cap: $[Y]): Claims arising from breach of confidentiality obligations, including unauthorized disclosure or use of Confidential Information. This higher cap reflects the greater potential harm from confidentiality breaches. Tier 3 - Egregious Conduct (No Cap): Claims arising from willful breach, gross negligence, fraud, or criminal conduct. No monetary limitation applies to these claims. CONSEQUENTIAL DAMAGES: - Excluded for Tier 1 claims - Available (but subject to the Tier 2 cap) for confidentiality breach claims - Available without limitation for Tier 3 claims This structure provides: - Meaningful protection for you on confidentiality breaches with the higher Tier 2 cap - Full accountability for egregious conduct with no cap - Risk management certainty for us with defined caps on routine claims - Mutual application - same tiers apply to both parties I believe this is a fair compromise. Would you like to discuss on a call, or can you confirm this structure works for your team? Best regards, [Your Name]