Define: Hedge Clause

A hedge clause, also known as an exculpatory clause or limitation of liability clause, is a provision commonly found in contracts, agreements, or legal documents that aims to limit or exclude liability or responsibility for certain actions, events, or risks. Hedge clauses are often used by parties to protect themselves from potential legal claims, damages, or losses arising from the performance or non-performance of contractual obligations. These clauses typically specify the extent to which one party can be held liable or responsible for certain outcomes, damages, or breaches of contract, and may include language that limits liability to a specific dollar amount, excludes liability for certain types of damages, or waives liability altogether under certain circumstances. Hedge clauses are subject to legal scrutiny and may be enforceable only to the extent that they are deemed reasonable, fair, and not contrary to public policy or applicable laws. Courts will carefully review hedge clauses to determine their validity and enforceability in light of the specific circumstances and legal principles governing the contract or agreement.

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This glossary post was last updated: 29th March 2024.