The Most Absurd Negotiation
One of the most absurd – but very common – negotiations that happens in an overall contract negotiation is the one around the limitations of liability.
It’s usually a lawyer-to-lawyer dialogue. The buyer’s lawyer says something like: we know your limitations of liability are 1x, but we want 5x. The seller’s lawyer replies with something like: we want to stick to 1x, or we will compromise at 2.5x.
And so on and so forth. The negotiation goes backwards and forwards until, eventually, a compromise (or concession) is reached.
Why is it absurd? It’s absurd because - typically – there is no reasoning justifying any of the positions. Why is 1x more justified than 2.5x, or more justified than 5x?
If you want to escape this absurdity, here’s the key (based on the seller’s point of view).
Risk is a price point
Let me repeat that.
Risk is a price point
A limitation of liability is a cap on your risk. It is (or should be) one of the factors that produce your price.
Therefore, if someone wants you to take one more risk (aka increase the cap on your liability), then the sensible (and not absurd) answer is:
Sure, no problem. By how much do you want me to increase the price?
More on this next week.
11th November 2025