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Contracts and commercial terms | Last updated: 16 July 2026
Contracts and commercial terms Contract

Damages clause

The scope of the loss, the upper limit and how indirect losses are regulated.

The direct cost of a translation error is as much as the fee for the job; its indirect consequences, however, may be a lost tender or a delayed product launch. The damages provision draws a line between these two levels. Where no line is drawn, the risk of a small job becomes disproportionate.

The function of the provision

The scope and the limit of the loss are determined. Both parties know their risk. The function is protective.

Direct loss

The expenses incurred in remedying the error are direct loss. The scope is clear. The definition is made.

Indirect loss

Loss of profit and loss of business are indirect loss. They may be left out of scope. The article is written.

Excluding indirect loss

In many contracts indirect loss is out of scope. This arrangement is common. The reason is proportionality.

Upper limit

An upper limit is placed on total liability. The limit is usually tied to the fee for the job. The measure is set.

Calculating the limit

What the upper limit is calculated on is written down. It may be the fee for the job concerned or the total for the period. The preference is stated.

Proportionality

It is not reasonable for a small job to carry unlimited risk. The provision is set up proportionately. Balance is observed.

Exceptions to the limit

Cases of intent and gross negligence may be kept outside the limit. The exception is written down. The scope is determined.

Breach of confidentiality

Data and confidentiality breaches may be regulated separately. These losses are of a different nature. The distinction is kept.

Relationship with insurance

If there is professional indemnity insurance, its cover is asked about. The policy does not meet every situation. Information is obtained.

Proof of loss

How the loss is to be proved may be written down. A vague claim cannot be managed. The procedure is defined.

Notification period

The period within which the loss is to be notified is determined. A claim without a time limit is not accepted. A date is set.

Duty to mitigate loss

The party suffering the loss is obliged to mitigate it. This principle may be written in. Balance is preserved.

Priority of correction

The opportunity to correct is given first. Damages are not the first resort. The order is written down.

Loss arising from the source text

The service provider is not liable for problems that originate in the source. If notification was made, the limit applies. The record is shown.

The effect of client changes

No liability arises from a text changed by the client after delivery. The limit is written clearly. A record is kept.

Third-party claims

Who will meet claims from third parties is determined. The article is written in detail. The scope becomes clear.

Reciprocity

The provision is set up for both parties. One-way liability is unbalanced. The principle is preserved.

The commercial effect of the article

A contract that demands unlimited liability causes qualified suppliers to withdraw from quoting; a reasonable upper limit, by making the risk manageable, opens the way to better service. That is why the article is a commercial decision. The measure is set deliberately.

Limits of legal information

What is described here is for information purposes and does not replace a legal opinion. Liability provisions are assessed by a lawyer. The limit is stated.

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