Framing and limiting contractual liability
Objective: Draft balanced limitation of liability clauses, knowing the insurmountable legal boundaries.
Sources
- Art. 1231-3 C. civ. - Only foreseeable damages are compensable (except in case of fraud)
- Cass. com., 29 June 2010, No. 09-11.841 (Faurecia case) - Limitation clause defeating the essential obligation
- Art. L442-1 C. com. - Significant imbalance
What is permitted:
- ✅ Capping total liability at a percentage of the contract value
- ✅ Excluding indirect damages (loss of profit, loss of revenue, loss of data)
- ✅ Defining differentiated caps by type of breach
What is prohibited (mandatory public policy nullity):
- ❌ Excluding liability for fraud (intentional fault - dol) - Art. 1231-3
- ❌ Excluding liability for gross negligence (faute lourde) - equated to fraud by case law
- ❌ Defeating the contract's essential obligation - Chronopost/Faurecia case law (Cass. com., 29 June 2010)
- ❌ Creating a significant imbalance - Art. L442-1 French Commercial Code
📋 Clause - Balanced limitation of liability
"The total cumulative liability of each Party shall not exceed [X]% of the annual Contract value (excluding VAT). This limitation shall not apply in the event of fraud, gross negligence, personal injury, or breach of confidentiality and personal data protection obligations. Under no circumstances shall either Party be liable for indirect damages (loss of profit, revenue, data or business opportunity)."