Pass through Indemnity Clause Drafting for Garment Wet Processing
Pass-through indemnity clauses require un-capped liability carve-outs and mandatory flow-down terms to bridge privity gaps across dyehouses and garment vendors.
Limitation of Liability Carve Out
Exclusion Parameter
Specific exceptions to a general cap on financial damages define the boundaries of risk allocation in production agreements. The limitation of liability carve out identifies certain breaches or harms where the standard ceiling on payouts does not apply.
Common Exceptions
Exceptions include indemnity for intellectual property infringement and gross negligence. If a mill uses patented technology without a license, the resulting legal costs are not limited by the general contract value cap. Such scenarios demonstrate the function of the limitation of liability carve out in protecting the buyer from third party claims.
Property Damage Inclusion
Incidents involving physical injury or environmental contamination at a processing facility often trigger these exclusions. Brands insist on these terms to ensure they are fully compensated for catastrophic events that exceed the price of the goods, including the costs of remedial actions, regulatory fines, legal fees and the potential loss of brand reputation following a publicised safety failure or a large ecological disaster caused by improper chemical discharge. These events are the primary targets of the limitation of liability carve out.
Negotiation Balance
Factories resist broad exceptions to keep their insurance premiums manageable and their business solvent. Agreement on the limitation of liability carve out is essential for closing the contract. Final contract language reflects the bargaining power of the buyer against the operational risk of the supplier.