What Does "Limitation of Liability" Mean in My Contract?

A limitation of liability clause caps the amount of money you can recover from the builder if something goes wrong — often limiting damages to the original purchase price or the cost of repair.

The Short Answer

A limitation of liability clause restricts the types or amounts of damages you can recover from the builder. Even if the builder is clearly at fault, the clause may cap your recovery at a fraction of your actual losses.

Common Limitations

Capping total damages at the purchase price of the home, excluding consequential damages (temporary housing costs while your home is being repaired, lost wages, etc.), excluding punitive damages (damages meant to punish particularly bad behavior), and limiting recovery to the cost of repairing the specific defect.

Why It Matters

If your home has a major structural defect that costs $100,000 to repair plus $20,000 in temporary housing while the work is done, a limitation of liability clause might limit your recovery to just the repair cost — or less.

Without the ability to recover consequential or punitive damages, builders face reduced financial consequences for cutting corners or ignoring known defects.

Is It Enforceable?

In many states, limitation of liability clauses are enforceable if they are clearly written and conspicuous. However, some states limit the ability of builders to cap liability for certain types of defects (especially structural issues).

A court may refuse to enforce a limitation clause if it finds the result would be unconscionable under the circumstances.

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