In information technology agreements, vendors typically try to limit the amount of recoverable damages to the price of the product or, in the case of a long term agreement to acquire services, to the amount paid during some portion of the contract (e.g., 12 months of fees). Vendors also typically try to limit their liability to the buyer’s direct damages. In other words, consequential, incidental and other damages are excluded. Often each of these limitations includes a list of exceptions, some of which are fairly easily agreed upon and others that are more controversial.
Vendors impose these limitations on the buyer’s right to recover because they are not willing to act as an insurer for all of the buyer’s potential risks associated with the products and/or services, nor can they afford to do so for all of their customers. Vendors are more willing, however, to agree to unlimited (or at least greater) liability for risks over which they have greater control.
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