Four key elements: caps on total liability, exceptions to cap, limitations on type of damages, and exceptions to limits.


In recent posts, I have postulated that commercial contracting is on the following path of evolution:

  1. Reliable data as to what is market for key contracting terms will become readily available as utility models, powered by large data sets and AI, become prevalent. See Post 225 (“Can contract analysis operate like a utility?”).
  2. Companies will look to remove friction from their businesses by aligning their contract terms (and negotiating practices) with market, with some companies offering better-than-market terms in an effort to achieve competitive advantage. See Post 211 (“Competition based on better commercial contract terms”).
  3. Moving to market terms will lead to contract standardization, less contract complexity, and significant returns to the companies that adopt this approach, benefitting the economy as a whole.  See Post 228 (“The cost of contract complexity”); Post 236 (“Case study: impact of AI and Big Data on low-risk contract negotiations”); Post 292 (“The emergence of data-driven contracting: notes from the field”).

The critical foundation for this evolution is that all parties to a negotiation have reasonable access to information regarding what constitutes market.  (For a discussion of the problems associated with information asymmetry, see the works of Joseph Stiglitz.)
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