This column will discuss some of the issues that come up when drafting a waiver of consequential damages provision. The waiver is classic boilerplate that a potential breaching party negotiates to limit its liability to the non-breaching party. The most common example involves a seller that negotiates the buyer’s waiver to minimize the seller’s exposure for breach of representation or other liability. It doesn’t matter whether the seller is selling goods, services or intangibles, selling an entire company, or carving-out and selling a division of the company—chances are, the seller is going to want the buyer to give some kind of waiver.
In some cases, the parties negotiate a two-way provision if the buyer also has potential liability that it would like to minimize. For example, the buyer of goods may want the seller’s waiver to help limit the buyer’s liability for misuse of goods, provision of faulty specifications, failure to follow instructions, infringement of intellectual property rights or the failure to purchase minimum quantities.
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