Comments on: Limitation of Liability http://www.licensinghandbook.com/2008/04/28/limitation-of-liability/ The companion site to the Software Licensing Handbook Wed, 06 Jan 2010 00:13:18 +0000 hourly 1 http://wordpress.org/?v=3.3 By: chrislemens http://www.licensinghandbook.com/2008/04/28/limitation-of-liability/comment-page-1/#comment-60 chrislemens Wed, 30 Apr 2008 16:06:19 +0000 http://www.licensinghandbook.com/2008/04/28/limitation-of-liability/#comment-60 The problem with using the language "gross negligence and willful [or intentional misconduct" is that it really does not mean exactly what it says. Suppose the vendor performs some routine act that breaches the agreement and causes purely economic losses it might cause to the customer. (So, there is no personal injury or property damage at stake.) For example, let's say that it removes a piece of functionality that is important to the customer. Questions: a. Is it gross negligence? Maybe, if the action was taken without any care whatsoever, which is one of the traditional formulations for gross negligence. What evidence would the customer-plainitff introduce? It might be testimony from a product manager saying that the feature was too expensive to maintain and that he didn't consider the customer's interests at all. Is that what's intended? I doubt it. b. Is it willful or intentional misconduct? If it breaches the agreement, then it seems like misconduct to me. Was the action carried out intentionally? If so, it seems like it iw willful or intentional. Is that what's intended? I doubt it. I think the intention here is to carve out the following things: 1. liability in tort for gross negligence; 2. liability for intentional torts; and 3. liability for acts done with the intention of harming the other party. Generally, neither side has any problem with these carve-outs, but junior deal-doers often feel uncomfortable making the change. I suspect that's because they don't know what is intended to be covered by the "gross negligence and willful misconduct" carve-out. The problem with using the language “gross negligence and willful [or intentional misconduct” is that it really does not mean exactly what it says. Suppose the vendor performs some routine act that breaches the agreement and causes purely economic losses it might cause to the customer. (So, there is no personal injury or property damage at stake.) For example, let’s say that it removes a piece of functionality that is important to the customer. Questions:

a. Is it gross negligence? Maybe, if the action was taken without any care whatsoever, which is one of the traditional formulations for gross negligence. What evidence would the customer-plainitff introduce? It might be testimony from a product manager saying that the feature was too expensive to maintain and that he didn’t consider the customer’s interests at all. Is that what’s intended? I doubt it.

b. Is it willful or intentional misconduct? If it breaches the agreement, then it seems like misconduct to me. Was the action carried out intentionally? If so, it seems like it iw willful or intentional. Is that what’s intended? I doubt it.

I think the intention here is to carve out the following things:
1. liability in tort for gross negligence;
2. liability for intentional torts; and
3. liability for acts done with the intention of harming the other party.
Generally, neither side has any problem with these carve-outs, but junior deal-doers often feel uncomfortable making the change. I suspect that’s because they don’t know what is intended to be covered by the “gross negligence and willful misconduct” carve-out.

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