23 February 2026
Liability caps can be structured in many ways. The structure chosen matters as much as the figure itself. Poorly aligned or inconsistent drafting creates uncertainty and can unintentionally increase a party’s exposure. A simpler structure will generally ensure less ambiguity and fewer unintended results.
Single figure caps
English law contracts typically seek to specify a party’s aggregate – or total – liability, to ensure drafting certainty. The simplest and clearest way to achieve this is with a single, fixed figure that applies for the whole term of the contract. Sometimes the single cap can be a percentage of sums paid or payable under the contract. Linking the percentage to sums “paid” means the party’s liability grows with each paid invoice; whereas linking to sums “payable” is less clear as it captures both moneys paid and those that will become due. This increases ambiguity, particularly if an early claim is made, as the parties must determine what exactly they mean by “payable”.
Annual caps
An annual cap limits liability in each contract year, avoiding the risk of an early claim exhausting the cap. However, annual caps raise many challenges, such as how a year should be defined; when liability is assessed; and whether the cap is truly an aggregate total. The English courts have highlighted the tension that arises when a contract asserts that an annual cap, which by its nature renews each year, is also an aggregate cap, which is intended to be a fixed total.
Crucially, the courts have stressed that drafting should be consistent and considered. Hybrid drafting gathered from a range of sources is particularly dangerous. Combining in one clause wording suitable for a total cap with wording designed for a cap that renews for each claim, has led courts to struggle with interpretation and, in some cases, vastly increased exposure.
If you are negotiating or reviewing commercial contracts and want to ensure your liability caps reflect the commercial deal and operate as intended, seeking legal advice at an early stage can help prevent costly disputes later.
For further information or advice please get in touch with Becky Cooper, Senior Associate at Blaser Mills Law, on 01494 932614 or email becky.cooper@blasermills.co.uk.