The first is the limitation on direct damages. At the least, the buyer's counsel should draw this limitation to the client's attention, as this is a significant risk which the buyer, if considered, will be unwilling to accept. Where this provision is negotiated, the seller may consider allowing direct damages, but limit them to a cap as to the maximum damages permissible. In fact, many sellers now include in their standard clause, liability for direct damages to a maximum cap. The purpose of so doing is to attempt to avoid the total invalidation of the limitation of liability clause.
Most sellers try to use the cost of the goods as the cap.
However, where the cost of the goods is insignificant, this may subsequently be found to be unconscionable. Other contracts seek to limit direct damages to the cost of the goods or the cost of services provided within the prior twelve month period. Beware this cap in software service contracts, where the bulk of the cost of services are provided upon installation. Twelve months later, the value of the direct damages will be dramatically less. Where the buyer does agree to a cap on the direct damages, it should ensure that the cap is not inclusive of legal fees.