An Advertising Agency Agreement governs creative and media services provided by an agency to a client. This playbook discusses ownership of deliverables, approval processes, and termination rights.
Why This Matters: Uncapped liability can threaten financial stability and deter risk-taking. Proper limitations control exposure and inform insurance requirements.
Negotiation strategy
If you're the Client:
Negotiate a liability cap that reflects the value of the contract and aligns with your risk tolerance. Ensure exclusions for consequential damages are comprehensive.
If you're the Agency:
Advocate for a liability cap that limits exposure to manageable levels. Include waivers for consequential losses to protect against indirect claims.
Essential elements
1
Liability Cap
Monetary limit on liability.
2
Exclusion of Damages
Excludes indirect and special damages.
3
Waiver of Losses
Waives claims for consequential losses.
Action framework
ACCEPT
Propose edits if the liability cap is too low or exclusions are missing.
EDIT
Reject if the clause exposes to unlimited liability without exceptions.
ADD
Add language for critical breach recovery if absent.
PRO TIP
Always align the liability cap with the contract's value and potential risks.
Example clauses
FAVORABLE
Balanced Liability Cap
"The total liability of either party under this Agreement shall not exceed the amount paid by the Client to the Agency under this Agreement during the twelve (12) months preceding the event giving rise to the liability."
NEUTRAL
Standard Exclusion Clause
"Neither party shall be liable to the other for any indirect, incidental, special, punitive, or consequential damages, including but not limited to loss of profits, revenue, or business opportunities, arising out of or in connection with this Agreement, even if advised of the possibility of such damages."
UNFAVORABLE
Unlimited Liability Exposure
"The liability of either party shall not be limited in any manner under this Agreement."
Fallbacks
High-Value Contracts
For contracts exceeding $1 million, consider increasing the liability cap proportionally to the contract value and ensure exclusions reflect the increased risk.
International Agreements
Verify compliance with local laws and regulations, and consider potential conflicts of law affecting enforceability when parties are from different jurisdictions.
Critical Breach Recovery
Include provisions for recovery in cases of gross negligence, willful misconduct, or fraud, ensuring these are not subject to standard limitations.
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