Exception Dossier & Action Plan
Agreement: MSA-QD-45891 (Master Services Agreement)
Client: Quantum Dynamics Inc.
Exception Clause: 12.1 - Limitation of Liability

1. Executive Summary
A High-Risk exception has been identified in the proposed MSA with Quantum Dynamics. The client has redlined the Limitation of Liability clause (12.1), increasing InnovateCorp's potential liability from the standard 1x the preceding 12 months' fees to 3x that amount. This change represents a significant deviation from corporate policy (CP-FIN-078) and substantially increases financial risk exposure. The client justifies this request by citing the mission-critical nature of the services.
2. Negotiation History Summary
The client's legal counsel, Jane Doe, communicated that the proposed 3x liability cap is a mandatory requirement based on their internal corporate policy for critical infrastructure vendors. The InnovateCorp Deal Desk has confirmed this is a firm position from the client and has internally flagged it as a significant policy deviation requiring senior review.
3. Side-by-Side Term Comparison



Aspect
Standard InnovateCorp Term (Policy CP-FIN-078)
Proposed Quantum Dynamics Term
Delta




Liability Cap
Aggregate liability not to exceed total fees paid in the preceding 12 months (1x).
Aggregate liability not to exceed three times (3x) the total fees paid in the preceding 12 months.
+200% Increase in Liability Exposure


Applicability
Applies to actions in contract or tort.
No change.
N/A



4. Risk & Impact Analysis

Financial Risk: HIGH. The 3x multiplier creates a significant increase in potential financial liability in the event of a breach or service failure. Based on a projected annual contract value of $1.5M, this raises the liability cap from $1.5M to $4.5M.
Compliance Risk: HIGH. The proposed term is in direct violation of internal policy CP-FIN-078, which requires VP-level approval from both Legal and Finance for any liability cap exceeding 1x annual fees.
Precedent Risk: MEDIUM. Accepting this term without significant justification could set an undesirable precedent for future negotiations with other enterprise clients, weakening our standard contractual position.
Industry Benchmark: Analysis of comparable SaaS agreements for critical services within the technology sector shows an average liability cap of 1.0x to 1.5x annual fees. A 3x cap is in the 95th percentile and is considered an outlier.

5. Recommended Actions
Based on the analysis, the following actions are recommended for the contract reviewer.
Primary Recommendation:

Pursue a Counter-Offer (Action 2): This approach balances the client's stated needs with InnovateCorp's risk tolerance and is the most likely path to a successful resolution without requiring high-level executive exception.

Alternative Actions:


Hold Firm and Offer Fallback Language:

Action: Reject the 3x proposal and re-assert the standard 1x liability cap.
Justification: Communicate that our pricing and insurance models are predicated on this standard risk allocation.
Risk: Potential to stall negotiations or be perceived as inflexible.



Propose a Counter-Offer (Compromise):

Action: Propose a revised cap of 1.5x annual fees and suggest specific carve-outs for gross negligence or willful misconduct, which have uncapped liability.
Justification: Frame this as a significant concession that acknowledges their "mission-critical" designation while keeping risk within more manageable, benchmark-aligned parameters.



Escalate for High-Risk Approval:

Action: Prepare a business case outlining the strategic value of the deal, the client's firm stance, and the associated risks. Submit for formal review and approval to the VP of Sales, VP of Legal, and CFO.
Justification: To be used only if the client rejects the counter-offer and the deal is deemed "must-win".