Business-to-Business contracts within IT are often associated with high risks, and most contracts traditionally have very comprehensive limitation of liability clauses (LLC). LLC is important in it-contracts and is used for balancing the risks between parties and for the allocating risks ex-ante. These clauses can be drafted in high self-interest and deprive a customer of his fundamental rights. LLC is frequently subject to tough negotiations in it-development projects and can be non-negotiable in software licenses. The freedom of the contract allows companies to draft the contract in the way they want it. The aim of this thesis is to determine the state of Danish Law to freedom of the contract according to LLC. The focus is on software licenses and it-development projects. The thesis particularly examines incorporation, interpretation and validity of LLC. Further types of potential damages identified: direct and consequential damages; reviewed limitation to the maximum amount; liquidated damages and losses of data. Furthermore the thesis derives the Danish market standards for the LLC in it-contracts. The economical part of the thesis includes economic analysis of LLC to research the reasons for these clauses in it-contracts and how limited liability affects the incentives of the parties, helps to allocate risk and affects the administrative costs of resolving the conflict in the courts. Steven Shavells theory is applied to determine the efficiency of the limited liability clause. Efficient clauses are those, which maximise the parties’ joint utility ex-ante. Focus is on Kaldor-Hick-efficiency. The most efficient LLC for direct and consequential losses, limitation to the maximum amount derived and the efficiency of LL by gross negligence is analyzed. Further the impact of reputation and trust in elimination suppliers’ moral hazard is analyzed.
|Educations||MSc in Commercial Law, (Graduate Programme) Final Thesis|
|Number of pages||86|