Limitation of liability clauses: what has changed for businesses and insurers following the recent Supreme Court judgement No. 949/2026?

Limitation of liability clauses are common in contracts between businesses and professionals. They allow the parties to agree in advance on the maximum amount for which the service provider will be liable if something goes wrong, or the time limit within which the client may make a claim. Law firms, consultancy firms, audit firms, engineering firms and technology providers often include them in their engagement letters and framework agreements.

For the insurance sector, these clauses are of particular importance. Where the professional holds professional indemnity insurance, the injured party may make a claim directly against the insurer by way of a direct action under Article 76 of the Insurance Contracts Act. In the event of a claim, the validity of the cap agreed in the service contract may determine how much the professional must pay in compensation and, within the limits of the policy, how much the insurer must cover.

The recent Supreme Court (Civil Chamber) Judgment No. 949/2026 of 18 June (ECLI:ES:TS:2026:2767) illustrates the extent to which parties are free to agree on these limits. In a dispute concerning a solicitor’s conduct at a judicial auction, the Court deemed the one-year time limit for bringing a claim to be valid and declared the compensation cap linked to the fees to be null and void. In assessing that cap, it examined who was authorised to set its amount, what conduct it covered and what effect it had on the balance of the contract.

I – What has the Supreme Court ruled regarding the limits on liability?

The case pitted a foundation against the law firm it had commissioned to act in the judicial auction of a building of which it was already a co-owner of more than 91 per cent. The lawyer had been instructed by the board of trustees to bid up to €6,996,396.97, but ceased bidding and the property was awarded to the other co-owner for €6,172,000. The courts of first instance found that there had been a breach of the mandate and set the damages at €523,688.83, ordering the lawyer, the firm and the professional indemnity insurers to pay jointly and severally in their respective proportions.

The framework service contract signed between the parties included two restrictions. The first required claims to be made within one year of the work’s completion. The second limited compensation to the fees received for the part of the service that had given rise to liability. The Supreme Court examined each restriction separately:

• A negotiated clause is not beyond judicial review. Even if the contract is not a standard-form contract and was not entered into with consumers, the court may examine whether the agreement complies with the law, good faith, contractual good faith and the prohibition on the abuse of rights, including the frustration of the purpose of the contract or an unjustified and disproportionate alteration of the contractual balance.
• The burofax submitted in good time was sufficient to fulfil the clause. The contract required a claim to be made within one year, without specifying that a lawsuit had to be brought. Therefore, the Supreme Court held that the foundation’s out-of-court claim satisfied the terms of the agreement: the decisive issue was whether a claim had been made in good time through any of the channels permitted by the clause.
• The time limit is valid. A period of one year from the completion of the work is considered reasonable and does not render the client’s right to claim meaningless.
• The time limit even applied to breaches committed with intent. The clause applied regardless of the conduct that had caused the damage; consequently, its wording allowed the time limit to be invoked even in the event of a deliberate breach. This conflicts with Article 1102 of the Civil Code, which declares null and void any waiver of the right to claim liability arising from wilful misconduct. For this reason, the Supreme Court considered that extending the cap to cover breaches committed with wilful misconduct was one of the grounds for declaring the clause null and void.
• The result undermined the protection offered by the contract. Applying the cap would have reduced the compensation from €523,688.83 to €4,185, approximately 0.80 per cent of the quantified loss. The Court assessed this difference alongside the significance and technical complexity of the services provided. In those circumstances, the cap could substantially alter the balance of the contract and render the possibility of obtaining effective redress meaningless.

The Supreme Court dismissed the law firm’s appeal. It thus confirmed the ineffectiveness of the cap and upheld the order for compensation, which also applied to the insurers on the terms set out in the lower court’s judgment, with the compensation to be shared amongst them and the relevant excesses applied. For future contracts, the judgment encourages an examination of how the limit is calculated, who can influence its amount, and what effect it would have in the event of a particularly serious breach.

II – Practical implications for businesses and insurers

The clause that was declared void appeared in the professional services contract. In the case of an insurance policy, the analysis is different. The Insurance Contracts Act allows civil liability cover to operate within legal and contractual limits.

Furthermore, Article 3 requires that clauses limiting the insured’s rights be specifically highlighted and expressly accepted in writing. To determine whether this requirement applies, a distinction must be made between clauses defining the covered risk and those restricting the insured’s rights once a claim covered by the policy has arisen. What matters is the content and effect of the clause within the policy as a whole.

In practice, the judgement is relevant to three common situations.

• When contracting a professional service. If the assignment may have significant financial consequences, it is advisable to check what amount would result from the cap in different scenarios. A limit relating to the fees for a specific task may be much lower than expected. It is also important to specify when the assignment ends, what the claim must contain and how its receipt can be proven.
• When taking out or renewing insurance. For the insured company, it is useful to compare the liability it assumes towards its clients with the sum insured, the excesses and the policy’s time-related conditions. For the insurer, a limitation included in the insured party’s contract may influence the risk assessment. If the cap proves ineffective, the professional’s liability may exceed the amount initially estimated, and it will be necessary to determine which part is covered under the policy and by law.
• When a claim has already been made. It is advisable to review the contract, the policy and the correspondence exchanged from the outset. A registered letter sent within the time limit specified in the service contract and the notification of the claim to the insurer serve different purposes. When the injured party brings a direct action under Article 76 of the Insurance Contracts Act, it is also necessary to analyse what defences the insurer may raise and what the scope of the cover is.

III. Conclusion

In a single claim, the amount of the loss, the validity of the contractual limit and the scope of the cover may all be subject to dispute. Sorting out these issues from the outset allows for a more accurate assessment of how much can be claimed, from whom and with what documentation.

Therefore, if your company has had a liability limit invoked against it to reduce compensation, if you have received a claim relating to a professional service, or if you need to assess the cover for an insurance claim, you can contact the civil and commercial litigation team at Ayuela Jiménez. We can review the contract, the insurance policy and any correspondence to determine which limits may apply in your case and help you file a claim, defend yourself against one or negotiate a settlement.