Liability

What Is Liability? Liability refers to the state of being legally responsible for something. In business and contract law, liability determines who bears the financial and legal consequences when something goes wrong. Understanding liability is crucial for managing risk in any business relationship or transaction. ## Types of Liability - **Contractual liability** arises from breaching the terms of an agreement - **Tort liability** arises from negligent or intentional acts causing harm - **Strict liability** applies regardless of fault in certain product liability and hazardous activity cases - **Joint and several liability** allows a plaintiff to recover the full amount from any one of multiple defendants - **Vicarious liability** holds one party responsible for the actions of another (e.g., employer for employee) ## Limiting Liability Businesses commonly manage liability exposure through limitation of liability clauses in contracts, liability waivers, insurance policies, and the use of limited liability entities such as LLCs and corporations. However, certain types of liability, such as those arising from gross negligence or intentional misconduct, generally cannot be contractually limited.