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PLAYBOOK TEMPLATES

Operating Agreement

An Operating Agreement governs internal management and ownership rights of a limited liability company. This playbook highlights voting procedures, capital contributions, and dissolution mechanics.

Limitation of Liability

Why This Matters: Undefined liability can lead to significant unbudgeted losses and deter counterparties from engagement.

Negotiation strategy

If you're the Company:

Ensure the liability cap is reasonable and includes carve-outs for intentional misconduct and IP indemnities. This protects against unbounded financial exposure.

If you're the Members:

Negotiate for higher liability caps if the project involves high-risk activities or significant IP components. Ensure carve-outs are clearly defined.

Essential elements

1

Liability Cap

Maximum financial exposure limit.
2

Carve-Outs

Exceptions to liability limitations.
3

Indemnity Obligations

Protection against third-party claims.

Action framework

ACCEPT

Propose edits if liability caps are too low or carve-outs are missing.

EDIT

Reject if the clause exposes to unbounded liability without carve-outs.

ADD

Add language for specific carve-outs or higher caps for high-risk projects.

PRO TIP

Always align liability terms with the company's risk management strategy.

Example clauses

FAVORABLE

Standard Limitation of Liability Clause

"Except as otherwise provided in this Agreement, neither party shall be liable to the other for any indirect, incidental, consequential, special, or punitive damages, including but not limited to loss of profits, revenue, or data, whether in an action in contract, tort (including but not limited to negligence), or otherwise, even if the party has been advised of the possibility of such damages. The total liability of either party for any claim arising out of or in connection with this Agreement shall not exceed the amounts paid or payable by the Client under this Agreement during the twelve (12) months preceding the event giving rise to such liability."
NEUTRAL

Basic Liability Clause

"Liability is limited to direct damages only, not exceeding the contract value."
UNFAVORABLE

Unlimited Liability Clause

"Each party shall be liable for all damages, without limitation."

Fallbacks

High-Risk Transactions

If the transaction involves high-risk activities or significant IP components, further analysis is required to ensure liability terms are commensurate with the risk level.

Technology Agreements

In technology agreements, ensure liability caps cover potential data breaches and IP infringements.

International Contracts

Consider jurisdictional differences in liability laws when drafting international contracts.
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