Limitation of Liability Cap and Exclusion of Consequential Damages

What it is

The agreement states that neither party may recover lost profits, business interruption losses, replacement service costs, or other consequential, punitive, or indirect damages from the other, and that total aggregate liability is capped at fees paid or payable under the applicable Service Order in the 12 months preceding the claim.

Why it matters (compliance & governance perspective)

This provision establishes a mutual cap on aggregate liability equal to 12 months of fees under the applicable Service Order and excludes recovery of consequential and indirect damages by either party. For Customers processing high-value data or running business-critical workloads on the platform, the practical recovery ceiling may be substantially lower than potential operational losses in the event of a service failure or data breach.

Consumer impact (what this means for users)

Under this clause, Customer's total recoverable damages from Modal for any claim are limited to the fees paid under the applicable Service Order in the preceding 12 months, and Customer cannot recover lost profits, business interruption losses, or other consequential damages. The mutual nature of the cap means Modal's recovery from Customer is subject to the same ceiling.

Institutional analysis (regulatory & governance intelligence)

(1) REGULATORY LANDSCAPE: Liability limitation clauses in B2B SaaS agreements are generally enforceable under US and English law, though they may be subject to reasonableness review in certain EU member state jurisdictions. GDPR does not directly regulate contractual liability caps between processors and controllers, though data protection authorities may take into account indemnification and liability structures when assessing whether a Data Processing Agreement provides adequate protections for data subjects. The enforceability of consequential damages waivers may be limited in specific jurisdictions or for specific categories of loss. (2) GOVERNANCE EXPOSURE: Medium. The 12-month fee-based cap may represent a significant disproportion between recoverable damages and actual business losses for Customers running mission-critical workloads, particularly where service failures cause downstream customer losses that cannot be recovered. This is a standard commercial structure but its practical impact varies significantly with the size of the fee commitment relative to operational risk. (3) JURISDICTION FLAGS: Some EU member states impose restrictions on liability exclusions for gross negligence or willful misconduct. UK law similarly limits the enforceability of exclusion clauses under the Unfair Contract Terms Act 1977 in certain contexts. Customers should assess whether local law in their jurisdiction imposes mandatory minimum liability standards that may affect the enforceability of this provision. (4) CONTRACT AND VENDOR IMPLICATIONS: Procurement teams negotiating Service Orders with significant minimum commitments should assess whether the 12-month fee cap is proportionate to the operational and data risk exposure of the specific deployment. Where the liability cap is insufficient, parties may negotiate separate insurance or indemnity arrangements outside this agreement structure. (5) COMPLIANCE CONSIDERATIONS: Legal teams should confirm whether the liability cap applies to claims arising from data breaches or data protection failures, and whether any carveouts for willful misconduct, fraud, or death and personal injury apply under California law or other applicable law, as the agreement does not explicitly address these carveouts.

Applicable agencies

Provision details

Other risks in this policy

• 48-Hour Personal Data Breach Notification Requirement high
• Aggregate Liability Cap at 12-Month Fees high
• Customer Data Geographic Processing Restriction high
• Customer Indemnifies Modal for Customer Data Claims high
• Customer Internal Business Use Only high
• Customer Solely Responsible for Validating AI Output high