When the customer refuses a limitation of liability: what to do first
When a customer refuses a proposed limitation of liability, do not renegotiate the number first. Confirm which obligations are already running under the contract, isolate the specific loss scenario the customer objects to, and separate statutory duties that survive any cap from the commercial ceiling itself. Only then return to the figure.
What the law fixes regardless of the clause
A limitation of liability clause sets a ceiling on the damages one party can claim from the other. It does not remove duties that a public law instrument places on the parties directly. Under Regulation (EU) 2024/1689 (AI Act), the obligations placed on providers and deployers of high-risk AI systems apply irrespective of what the contract says about damages. Under Directive (EU) 2022/2555 (NIS2), the risk-management and incident-reporting duties of an in-scope entity are not something a supplier or a customer can contract away either.
A customer who refuses a cap outright is often really asking whether these statutory duties sit inside the number, not whether the number itself is unfair. Naming the distinction usually moves the negotiation faster than arguing the figure again.
What changes in practice
Once the customer disputes the cap, the signature date usually slips. Two clocks keep running regardless of the dispute: any notice period already stated elsewhere in the draft, and the internal approval window your own signing authority set for this deal. Missing either clock does not stop the negotiation, but it does change who has to explain the delay to their own management.
What to do, in order
| Step | Who acts | Typical deadline |
|---|---|---|
| Restate in writing the commercial reason for the proposed cap | Account lead | Before the next negotiation call |
| Ask the customer to name the specific scenario they fear | Legal counsel | Within two business days |
| Model exposure with and without the cap for that scenario | Finance and legal jointly | Before the next draft is sent |
| Separate statutory duties from the commercial cap in the drafting | Legal counsel | Same revision |
| Offer a graduated cap or a named carve-out instead of an outright refusal | Legal counsel | At the renegotiation meeting |
| Escalate to both signing authorities if the gap remains | Authorised signatories, both sides | Before the approval window closes |
Who decides, and how
Inside the negotiation, the authorised signatories on each side decide, based on the exposure model built at step three. If the contract is signed with the clause still disputed and a loss later occurs, the forum is whatever the dispute-resolution clause in the contract names. In its absence, the courts of the contractual seat decide, applying the law the contract selects.
Two common scenarios
If the customer's objection concerns a data-breach scenario, the entity's own duties under NIS2 already limit what any cap can achieve. The negotiation should focus on the loss NIS2 does not already govern, not on the whole figure.
If the contract involves a tokenised deliverable — for example, an NFT minted as part of the delivery — a parallel dispute over ownership of that token can surface once liability is contested. See When the creator disputes the mint step by step for the adjacent procedure.
What this page does not resolve
This page does not set the specific liability number your contract should carry. That is a commercial decision, made by the parties, not a legal one. It also does not cover the separate question of what a lawful user of software is entitled to do under Directive 2009/24/EC — reproduction, error correction, and interoperability rights sit outside a liability negotiation and are not affected by a cap either way.
Sources and verification
This page was checked against Regulation (EU) 2024/1689 (AI Act) and Directive (EU) 2022/2555 (NIS2), both current at the review date stated below; Directive 2009/24/EC was checked for the boundary note above and is stable law with no pending amendment on this point.
This page does not determine what a specific due-diligence report can establish about a counterparty or a document in a given jurisdiction. For a live view of what a counterparty check in Ireland can establish, see Counterparty in Ireland and its limits explained.
For the equivalent view on a single document, see Document in Ireland step by step.
Readers who want to see how this team runs a negotiation like this day to day can read Working with this team in detail.
Related reading
When a proof of concept becomes production step by covers the adjacent moment when a pilot contract turns into a production one, and the liability question usually reopens at that point too.
If this dispute is live in your negotiation now: a partner responds within minutes during business hours, and the scope of the engagement is confirmed within one working day.
FAQ
What is the first step when the customer refuses a limitation of liability?
Separate the number from the underlying risk. Ask which specific loss scenario worries the customer, and check whether that scenario is already governed by a statutory duty — for example under the AI Act or NIS2 — before changing the cap itself.
Which deadline is already running?
At least two: any notice period stated elsewhere in the draft, and your own organisation's internal approval window for this deal. Both continue whether or not the liability clause is settled.
Who decides, and on what evidence?
The authorised signatories on each side decide, based on the exposure model built for the disputed scenario. If a loss occurs after signature, the forum named in the dispute-resolution clause decides; in its absence, the courts of the contractual seat do, applying the chosen law.