The Limits of Limitation of Liability Clauses

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Limitation of liability clauses ("LOLs") have been used for years to effectively limit the potential liability of design professionals, contractors, and others. What are the requirements for a valid limitation of liability clause? In Texas, courts mandate compliance with "fair notice" requirements, which include conspicuousness of the clause.

Nevertheless, even a valid limitation of liability clause that meets the conspicuousness requirements is not iron-clad. The Texas Deceptive Trade Practices Act ("DTPA") creates an exception to these clauses. Knowing the potential limitations on limitation of liability clauses is a key to effective contract drafting that minimizes these holes in enforcement.

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