limitation of liability

Limitation of liability is a legal concept that restricts the amount of compensation one party can recover from another in case of a loss or damage. This often appears in contracts, where parties agree that, if something goes wrong, the financial responsibility of one party will not exceed a specified amount. This protects businesses from potentially devastating claims and helps clarify risks upfront. However, it does not absolve a party from responsibility entirely; it simply caps the liability to a manageable level, ensuring both sides understand their potential exposure in various scenarios.