To manage contract risk a cap on your liability is central. Otherwise, you have little understanding of how much a contract could cost you in the event of a breach.
At the same time, the other party has an interest in not limiting the liability to mitigate their risk of the deal turning sour.
It is easy to understand why the liability cap is one of the most negotiated clauses.
The result of how the liability cap is formed will ultimately depend on the bargaining power (and perhaps size) of the parties.
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