Just wondering if you could help in a question for the Terms and Conditions for a B2C website selling physical goods, how necessary is a clause 10.6 on liability caps? How would you calculate a sum?
Our aggregate liability to you in respect of any contract to purchase products
from us under these terms and conditions shall not exceed the greater of:
(a) [amount]; and
(b) [the total amount paid and payable to us under the contract].
Alasdair Taylor's Answer
Thanks for your question.
Liability caps are not necessary as such: they are not required to ensure compliance with any rule of (English) law. Conceivably, an insurance policy might require the insured to include a cap in their T&Cs, but I’ve never seen that in a standard policy.
In many situations, however, caps are considered an important risk management tool. Accordingly, they are common.
A low liability cap may be unenforceable under the Consumer Rights Act 2015 or the Unfair Contract Terms Act 1977. For this reason, the drafting in the template allows you to include a specified floor on the cap, whilst the ceiling rises with contract value.
What is a reasonable floor here? That depends upon all the circumstances. Sometimes these figures are set by reference to expected contract value or some multiple of expected contract value. At other times they are set by reference to insurance cover. As you can imagine, these approaches may result in very different figures.