A Grant Agreement documents funding terms for projects or research initiatives. This playbook explores performance milestones, reporting requirements, and clawback conditions.
Why This Matters: Limiting liability reduces catastrophic financial exposure and aligns risk tolerance, and well-defined caps and carve-outs ensure parties understand potential obligations.
Negotiation strategy
If you're the Grantor:
Negotiate for a liability cap that reflects the transaction's value and risk. Ensure carve-outs for gross negligence and willful misconduct are included to protect against significant breaches.
If you're the Grantee:
Aim to limit liability to a reasonable cap and exclude consequential damages. Ensure mutual indemnification is clear and fair to avoid disproportionate responsibility.
Essential elements
1
Liability Cap
Monetary limit on damages.
2
Exclusion of Damages
Excludes indirect and special damages.
3
Carve-Outs
Exceptions for fundamental breaches.
Action framework
ACCEPT
Propose edits if the liability cap is too high or carve-outs are insufficient.
EDIT
Reject if liability terms expose to excessive risk without adequate protection.
ADD
Add language for mutual indemnification if missing.
PRO TIP
Always align liability caps with industry standards and specific transaction risks.
Example clauses
FAVORABLE
Balanced Liability Cap
"The total liability of each party under this Agreement, whether in contract, tort (including negligence), or otherwise, shall not exceed the amount of [insert agreed cap amount]. This limitation shall apply to all claims, damages, and losses arising out of or in connection with this Agreement."
NEUTRAL
Standard Exclusion of Damages
"Neither party shall be liable to the other for any indirect, incidental, special, consequential, or punitive damages, including but not limited to loss of profits, revenue, or business, arising out of or in connection with this Agreement, even if such party has been advised of the possibility of such damages."
UNFAVORABLE
Lack of Carve-Outs
"The limitations and exclusions of liability set forth herein shall apply to all damages, without exception."
Fallbacks
High-Risk Projects
In high-risk projects, ensure liability caps are sufficient to cover potential losses and consider additional insurance requirements.
Cross-Border Transactions
For cross-border deals, account for varying legal standards and ensure liability terms are enforceable in all relevant jurisdictions.
Technology Agreements
In tech agreements, focus on IP infringement carve-outs and ensure liability terms cover data breaches adequately.
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WEEK 3
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WEEK 4
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