Customer Compensation Limit

The Customer Compensation Limit is a common liability limitation clause in foreign trade contracts, referring to the maximum amount a supplier must compensate a customer for losses incurred due to repair issues (such as repair delays, improper repairs, defective spare parts, etc.) during maintenance, after-sales service, or the warranty period. Usage scenarios include equipment export, engineering contracting, and after-sales maintenance agreements, especially for high-value, long-cycle products. Notes: This limit is usually capped at the total contract price, repair costs, or a fixed amount, and it must be clarified whether indirect losses and loss of profit are included; it should be used in conjunction with liability insurance and exemption clauses, and should not be confused with the 'Liability Cap'—the latter is broader and covers the entire contract performance liability, whereas the Customer Compensation Limit applies only to the repair phase. Additionally, the enforceability of liability limitations varies across jurisdictions, so it is advisable to specify the applicable law. Unlike a 'retention money' or 'warranty deposit,' the compensation limit is a liability cap, not a reserved payment.