High risk

Consequential / Indirect / Punitive Damages Included

The contract extends your liability to consequential damages, typically the largest damage category in commercial disputes.

Show it
Look in the limitation of liability, damages, or indemnification section for phrases like "consequential damages", "indirect damages", "punitive damages", "lost profits", "loss of goodwill", "including consequential", or "direct and indirect damages". The absence of a damages-categories exclusion clause is also a strong signal - standard practice in well-drafted contracts is to explicitly exclude these categories.
Decode it
Consequential damages are typically the largest single damage category in commercial disputes. A brand's lost profits or lost goodwill claim can dwarf the engagement fee by orders of magnitude. Where the contract includes these categories AND is uncapped, worst-case exposure is functionally unlimited. Professional indemnity insurance typically EXCLUDES consequential damages, so the exposure sits on you personally. Materially worse when paired with broad indemnity scope and engagement with brands at scale.
Fix it
The single most important move is to explicitly EXCLUDE consequential, indirect, special, punitive, and exemplary damages mutually - both parties limited to direct damages only. Where the brand insists on inclusion, push for a low liability cap, for example at a level linked to the engagement fee, confirm insurance alignment, and reconsider whether the engagement is viable.

What it means

This contract expressly extends your liability to consequential, indirect, special, punitive, or exemplary damages, including things like the brand's lost profits, lost business opportunities, or lost goodwill. Standard practice in service contracts is to EXCLUDE these categories. An explicit inclusion clause means your worst-case exposure includes the brand's commercial impact from any dispute, which can be many times larger than the engagement fee.

Consequential damages cover knock-on losses, such as lost profits, which can be far larger than the fee. Where the contract includes these categories AND is uncapped, your worst-case exposure is functionally unlimited and may exceed your earning capacity for years. The clause is materially worse when paired with broad indemnity scope (more events triggering large claims) and engagement with brands at scale (where their lost profits calculation is substantial).

What to check before you sign

  • ·Are consequential, indirect, special, and punitive damages explicitly INCLUDED, EXCLUDED, or simply not addressed?
  • ·Where included, is there a cap that limits the practical exposure?
  • ·Does the inclusion extend to lost profits, lost revenue, lost business, or lost goodwill specifically?
  • ·Are statutory and enhanced damages also included (US-specific concern)?
  • ·Does your professional indemnity insurance cover consequential damages?
  • ·Is the brand's revenue scale large enough that consequential damages could be substantial?

How to fix it

  • Add explicit exclusion of consequential, indirect, special, punitive, and exemplary damages from creator liability. Single most important fix in the damages-categories area.

  • Limit the creator's liability to direct damages only, with all other categories excluded.

  • Where consequential damages must be preserved, cap aggregate liability, for example at a level linked to the engagement fee, to bound practical exposure.

  • Specifically carve out lost profits, lost revenue, and lost goodwill from consequential damages, even where other categories remain.

Negotiating it

A good opening

"Could we exclude consequential, indirect, special, punitive and exemplary damages for both sides, limiting each of us to direct damages only? "

When to walk away

Consequential damages inclusion combined with uncapped liability, broad indemnity scope, individual contracting, and refusal to even mutual-exclude is a strong walk-away signal. The structure creates personal financial exposure to the brand's full commercial loss in any dispute, which can materially exceed both the engagement fee and the creator's earning capacity.

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Educational guidance, not legal advice. For high-value or complex deals, get independent legal advice from a qualified professional.