ABSTRACT
While finalizing the terms and conditions related to a Purchase Order, Vendors raise objections in respect of the Total Liability clause if the clause demands Vendors to assume unlimited liabilities on certain non-compliances, which may or may not occur during the execution phase. To resolve the issues, it is recommended to categorize the liability events as below and allocate a certain percentage of liability: for breach of obligations under category A, a Vendor faces no limit on liability, for Category B, 0% liability, and for Category C, 150% liability. A few examples are cited for each category as below:
Category A: infringement, breach of civil code/NDA, third party claim.
Category B: Loss of profit of Contractor
Category C: Damage to Purchaser’s property caused by Vendor.
