Limiting liability

Prohibition on exclusions and limitations

What liabilities cannot be excluded or limited by a supplier in a contract?

Commercial parties are generally free to agree on the extent of exclusion of liability between the parties.

However, certain Swedish laws, for instance the Product Liability Act or employment law, may grant a right to a third party, in this case the consumer or employee, that cannot be limited or assigned by a contract between the parties. The parties are free to include clauses in their contract to regulate how such claims and associated costs are to be distributed between the parties.

It should be noted that some limitations of liability under exceptional circumstances, for example when very extensive or when the event giving rise to the liability is caused with intent or by gross negligence, can be deemed as unconscionable and can be modified or set aside through section 36 of the Contracts Act.

Financial caps

Are there any statutory controls on using financial caps to limit liability for breach of contract?

There are no general rules prohibiting or preventing the use of financial caps between commercial parties. However, such a financial cap must be considered reasonable within the terms of the individual contract or risk being modified or set aside through application of section 36 of the Contracts Act. In general, Swedish courts are restrictive of such applications in contracts between commercial parties.

Indemnities

Are there any statutory controls on indemnities used to cover liability risks in contracts?

There are no general statutory controls on indemnities in Sweden; however, an indemnification clause must be considered fair in its application in the contract. Should the indemnification clause be found unreasonable, a Swedish court might modify or set aside the clause in accordance with section 36 of the Contracts Act.

Liquidated damages

Are liquidated damages clauses enforceable and commonly used in your jurisdiction?

Yes. Clauses regulating liquidated damages are recognised and enforceable in Sweden. Such clauses are a common occurrence in commercial contracts in Sweden, especially in situations where the damage caused by a breach of contract may be hard to quantify.