Liability, Warranties and Indemnities
Objectives
- Understand warranties and indemnities
- Read limitation of liability clauses
- Explain risk allocation
Explanation
A warranty is a contractual promise that a fact is true (e.g., the software works as described). An indemnity is a promise to compensate the other party for specific losses. A limitation of liability clause caps the amount payable. Note: under Costa Rican law, liability for wilful misconduct (dolo) cannot be excluded in advance.
warranty
A contractual assurance that something is true or will perform.
“The seller warrants the equipment is new.”
to indemnify
To compensate someone for loss or damage.
“The provider shall indemnify the client for third-party claims.”
cap
A maximum limit.
“Liability is capped at the fees paid.”
consequential loss
Indirect loss, such as lost profits.
“Consequential loss is excluded.”
wilful misconduct
Intentional wrongful behaviour (dolo).
“The cap does not apply to wilful misconduct.”