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Glossary

LiabilityUpdated Sep 23, 2026

What Is Uncapped Liability in a Contract?

Uncapped liability means that for certain kinds of breach — often confidentiality, IP infringement or data protection — a party's liability is not limited by the contract's liability cap. These exceptions are known as carve-outs. The cap still applies to other claims; a claim that falls inside a carve-out is not held to that limit.

Analyze my contract — freeFull mechanics: What Are the Most Common Risky Contract Clauses? (2026)

Why it matters

A cap can look reassuring while the risks that matter most sit outside it. The list of carve-outs often decides the real exposure.

How common is it?

In the 510 public-company commercial contracts of the CUAD dataset (The Atticus Project, CC BY 4.0), 111 (21.8%) contain liability left uncapped for some breaches.

Among contract types with at least 20 contracts in the set, it shows up most in co-branding agreements (12 of 22), hosting agreements (9 of 20) and development agreements (10 of 29).

These are larger-company deals, not a sample of every contract — a reference point, not a rule. Full method: /data/cuad.

What to watch for

  • Carve-outs that cover most of what could go wrong in your deal.
  • Carve-outs that apply only to you, not to the other side.
  • Indemnities placed outside the cap by default.

A realistic example

A marketing agency's contract caps liability at fees paid — except for “any breach of data protection obligations.” A leaked mailing list leads to a claim far above the fee.

What to ask for

  1. The same carve-outs on both sides.
  2. A separate, higher cap for the carved-out claims instead of no cap at all.

Related terms: limitation of liability · indemnification · insurance clause

Related guide: Most common risky contract clauses

See how the uncapped liability reads in your contract — 👉 Analyze your contract free — your first analysis is free, no card, no deadline to use it.

Not legal advice. This is an educational definition of a common contract term. Details vary by jurisdiction — this page explains common U.S. usage. For high-stakes agreements, have a lawyer review the final version.