The contractual ceiling on damages either party can recover under the TSA. Almost always present. Almost always negotiated. Sets the practical risk envelope of every dispute that follows.
A TSA liability cap defines the maximum aggregate damages either the seller (as provider) or the buyer (as recipient) can recover under the agreement, regardless of the underlying cause. Caps are typically expressed as a multiple of fees paid under the TSA over a defined lookback period, commonly the trailing 12 months.
Most TSAs land between 1x and 3x trailing 12-month fees. Larger caps appear when services are mission-critical, when data protection exposure is high, or when the buyer has leverage from a competitive TSA process. Lower caps appear when sellers price aggressively at cost plus a small markup.
Standard carve-outs sit outside the cap and are typically uncapped or capped at a higher number. They commonly include: gross negligence, willful misconduct, fraud, breach of confidentiality, breach of data protection and security obligations, and infringement of third-party intellectual property.
The cap interacts with service credits, indemnification, and insurance. A buyer that pushes the cap up without also tightening the carve-outs and the credit mechanism may pay for protection it can never claim. The strongest buyer-side posture combines a meaningful cap with a robust set of carve-outs and a credit mechanism that does not count toward the cap.
One tactic, one benchmark, or one pattern from a recent buyer-side engagement. Short. Signal heavy. Free.
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