Sponsor agreement liability cap

Hello,

Please could you advise what figure I should be putting in clause 8.8 (a) of the sponsor agreement. Does this relate to the amount of sponsorship that is being agreed? eg: £5,000? as below..

Thank you

Leoni

8.8     Neither party's liability in relation to any event or series of related events will exceed the greater of:

 (a)      £5,000; and

 (b)     the total amount paid and payable by the Sponsor to the Company under the Agreement during the four month period immediately preceding the event or events giving rise to the claim.

For background to this issue, see my previous answer here:

http://www.seqlegal.com/questions/liability-cap

Because the cap in the template is a general one covering any liability under the agreement, then Section 2(2) of UCTA may apply to it, and accordingly the cap should be reasonable if it is to be enforceable.

So, what is reasonable?

Where a contract price is a fixed amount, it is relatively common to set the liability cap by reference to that amount - either at the level of the price, or some multiple of the price. Where there are ongoing payments, then caps are often set at a level equal to the greater of (i) the anticipated payments over a given period; and (ii) the actual payments over same period preceding the claim.  Depending upon the specific circumstances of a contract, such a cap may be defensible.  However, in other circumstances it might be unreasonable, for example if the party protected by the cap has specifically covered the liability with an insurance policy.

Without a lot more background information, I'm not really in a position to comment on the enforceability of your proposed clause - because I cannot assess reasonableness.

Even when I'm drafting a contract for a particular client and know all the relevant background, I am rarely able to say that a cap will definitely be enforceable. Of course, even a potentially unenforceable cap in a B2B contract may be useful in the event of a dispute - as a negotiating tool.

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