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Limitation of Liability Clause Explained

This page is general information, not legal advice.

A limitation of liability clause caps what one party must pay if a contract goes wrong, and often excludes whole types of loss, such as lost profits or data. Most platform terms and freelance contracts have one, so ask: who does the cap protect, how low is it, and does it apply to both sides?

Below are real Upwork and Fiverr examples and a generic client-contract clause, with why each may hurt you and what to ask for.

How to read a liability clause

Look for three things:

  • The cap. A fixed amount or fees paid over a set period.
  • Excluded damages. Words like "indirect", "consequential", "lost profits" or "loss of data".
  • Who is covered. One party, both, or only the platform and its partners.

Example 1: Upwork's liability cap

The liability of Upwork, our affiliates, our licensors, and our third-party service providers to any User for any claim arising out of or in connection with this Agreement or the other Terms of Service will not exceed the lesser of: (a) $2,500 or (b) any fees retained by Upwork with respect to service contracts on which User was involved as Client or Freelancer during the six-month period preceding the date of the claim.

Source: https://www.upwork.com/legal, retrieved 2026-10-29.

Why it works against you

"The lesser of" means the lower figure applies. If Upwork kept few or no fees on your contracts in the six months before a claim, the cap may be tiny, however large your loss. The same section excludes "loss of data, production, profit, or business opportunities" (Source: https://www.upwork.com/legal, retrieved 2026-10-29). For freelancers, these often matter most.

What to ask for instead

You can't usually negotiate platform terms, but you can limit exposure: keep your own copies of files, contracts and messages, don't rely on the platform for anything you can't afford to lose, and make sure your direct client agreement has a fair, two-way cap. Our Upwork Terms of Service guide covers the platform's other terms.

Sample wording to propose:

Each party's total liability under this agreement is limited to the total fees paid or payable under it. This limit applies equally to both parties.

Example 2: Fiverr's broad exclusion

PROVIDED THAT WE HAVE ACTED WITH REASONABLE PROFESSIONAL DILIGENCE, IN NO EVENT WILL FIVERR, ITS AFFILIATES OR THEIR LICENSORS, SERVICE PROVIDERS, EMPLOYEES, AGENTS, OFFICERS OR DIRECTORS BE LIABLE FOR DAMAGES OF ANY KIND, UNDER ANY LEGAL THEORY, ARISING OUT OF OR IN CONNECTION WITH YOUR USE, OR INABILITY TO USE, THE SITE ... INCLUDING ANY DIRECT, INDIRECT, SPECIAL, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES ... EVEN IF FORESEEABLE.

Source: https://www.fiverr.com/legal-portal/legal-terms/terms-of-service, retrieved 2026-10-29.

Why it works against you

This clause has no cap and tries to exclude "DAMAGES OF ANY KIND", even direct damages (your ordinary loss). It applies only if Fiverr acted with "reasonable professional diligence", which may itself be disputed. Fiverr also sends disputes to arbitration, with a 30-day opt-out window. See our guide to mandatory arbitration clauses.

What to ask for instead

You can't edit Fiverr's terms, but buyers and sellers can agree specific commitments in a Custom Offer or gig description. Put the scope, deliverables and fix for a bad delivery in writing. See our Fiverr Terms of Service guide.

Sample wording to propose:

If a delivery does not match the agreed brief, Seller will revise it at no extra cost or refund the fee for that delivery.

Example 3: Fiverr's Commercial Use License disclaimer

There is no warranty, express or implied, with the purchase of this delivery, including with respect to fitness for a particular purpose. Neither the Seller nor Fiverr will be liable for any claims, or incidental, consequential or other damages arising out of this license, the delivery or your use of the delivery.

Source: https://www.fiverr.com/legal-portal/legal-terms/terms-of-service, retrieved 2026-10-29.

Why it works against you

A buyer paying extra for commercial use gets no warranty, and claims against both seller and Fiverr are ruled out. If the work later harms the buyer's business, they may have little recourse. Sellers should read it too, since their gig promises may sit alongside it.

What to ask for instead

Buyers can ask the seller to confirm in writing that the work is original and theirs to license.

Sample wording to propose:

Seller confirms the delivered work is original and that Seller holds the rights needed to grant this license. If either statement proves untrue, Seller will refund the order fee.

Example 4: A one-sided cap in a client contract

Generic wording, not from any specific contract:

Client's total liability under this Agreement shall not exceed the fees paid in the preceding month. Contractor shall indemnify Client against all losses arising from the Services, without limitation.

Why it works against you

The client's liability is capped; yours is not. Add an open-ended indemnity and one mistake could cost far more than your fee. It's a common pattern; see our freelance contract red flags and influencer brand deal red flags guides.

What to ask for instead

Ask for a mutual cap tied to total contract value, matching damage exclusions, and an indemnity limited to losses you actually caused.

Sample wording to propose:

Neither party's total liability, including under any indemnity, will exceed the total fees paid or payable under this Agreement. Neither party is liable for the other's indirect or consequential losses.

If a clause is unclear or much is at stake, ask a qualified lawyer before signing.

Scan your own document free

ScanMyTerms reads your contract in about a minute and flags clauses like these, including one-sided caps and uncapped indemnities, showing the exact wording and what to ask for instead. The free preview shows the risk count and first two findings; the full report is a one-time $5 per document. Check your freelance contract here. For platform terms, use the terms of service checker.

This page is general information, not legal advice.

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