Limitations and exclusions of liability in business to business contracts in Portugal

Portugal’s framework is statutory (Portuguese Civil Code) plus judicial controls. Between commercial parties, freedom of contract allows allocation, limitation, or exclusion of contractual liability, within mandatory limits of public policy and good faith.

A party’s standard terms may face additional scrutiny under the Standard Contractual Clauses: clauses causing significant imbalance or curtailing essential rights can be void (black/grey list and good faith controls). 

In practice, Portuguese courts accept negotiated B2B limitations/exclusions but strike down provisions that effectively neutralise liability, conflict with public policy, or reduce redress to merely symbolic levels; excessive penalty clauses are judicially reduced. The Portuguese Civil Code mechanisms above provide the basis for this scrutiny.

There are limitations that render certain clauses ineffective. A creditor can’t, in advance, waive the minimum rights granted to them by law when the debtor defaults (for example, to terminate the contract, claim damages and interest); such a prior waiver is invalid. 

Furthermore, even if the parties agree, it is not possible to exclude liability where this would breach duties imposed by public policy. Any agreement contrary to mandatory law and public policy is void. 

Simultaneously, the regime governing Standard Contractual Clauses expressly prohibits, among other things, the exclusion or limitation of liability for fraud or gross negligence and considers such clauses void, even in contracts between businesses. 

Therefore, it is not permitted to “shield” the debtor against serious misconduct or against duties that the law considers essential for confidence in commercial transactions.

The words “consequential”, “indirect” and “special” do not have a given meaning in Portuguese law, nor have the Portuguese courts elaborated or recognised such losses as a specific category of loss. Nevertheless, scholars define indirect loss as loss that is indirectly caused by the breach. It is an issue of causation. As such, loss is not directly caused by the breach, it is in principle not recoverable in damages.

Specifically, under Articles 562 and 564 of the Portuguese Civil Code, a party causing loss or damage to another has the obligation to compensate the injured party for damage suffered (“danos emergentes”) and loss of profits (“lucros cessantes”) that the non-defaulting party probably would not have suffered if the breach of the contract had not occurred. 

The parties may, however, to a certain extent, define the “scope” of recoverable damages (e.g. exclude “indirect damages”), provided they respect three limits:

• good faith and the balance of the contract: the protection of the creditor can’t be rendered meaningless;
• a prior waiver of the creditor’s minimum rights in the event of breach or default is invalid;
• public policy obligations can’t be set aside. 

Generally, compensation covers only those damages that are a reasonable consequence of the breach and aims to restore the situation as if the contract had been performed. Thus, an exclusion of ‘indirect’ damages is, in abstract, valid between businesses, but cannot serve to neutralise liability for serious breaches nor to prevent the creditor from obtaining minimum compensation consistent with the risk assumed in the contract.

The Portuguese Civil Code recognises that not only actual losses but also lost opportunities (e.g. “loss of profit”) may be compensated if there is an adequate causal link with the breach. 

In B2B contracts, the parties may agree that these items (e.g. loss of profit, loss of revenue, loss of data, loss of clientele/goodwill, anticipated savings) are excluded. Such an exclusion is, as a rule, valid, provided that it does not cover situations of fraud or gross negligence, does not constitute a prior waiver of the creditor’s minimum rights in the event of breach or default, and does not contravene public policy.

Liability caps are, as a rule, respected as an expression of private autonomy. They often function as a penalty clause setting a limit on compensation. Two aspects to consider:

• the court may reduce a cap that is manifestly excessive in view of the risk and the obligations involved; and
• the cap is invalid where it conflicts with legal prohibitions (for example, it cannot conceal fraud or gross negligence, override public policy obligations, or constitute an advance waiver of the creditor’s minimum rights in the event of breach or default). 

In Portugal, the concept is valid provided it does not undermine the creditor’s minimum protection. If the exclusive remedy fails to fulfil its essential purpose (e.g. the contractually provided remedy never resolves the defect within a reasonable time), the courts tend to reopen the general remedies: termination, price reduction and compensation for breach or default. 

Furthermore, the exclusive remedy may not deprive a party of their minimum rights, nor may it contravene public policy and, if it amounts to a disproportionate penalty, it may be reduced.

Portuguese law recognises broad freedom of contract, allowing parties to shape remedies by agreement, including by channelling claims to a single contractual remedy (e.g., a liquidated damages clause or an indemnification mechanism).  This follows the Portuguese Civil Code’s principle of contractual freedom.

The Code also expressly allows parties to limit or exclude contractual liability in advance, provided the limitation does not cover breaches of duties imposed by rules of public policy.

Where the “exclusive remedy” is implemented through a penalty/liquidated damages clause (cláusula penal), the Code confirms its substitutive function, unless the parties agree otherwise, and gives courts power to reduce a manifestly excessive penalty.

The Portuguese Supreme Court has repeatedly accepted limitation of liability clauses in principle, conditioning validity on compliance with public policy rules and rejecting clauses that effectively neutralise the debtor’s responsibility. 

It is important to distinguish between: 

• Limitation: statutory time limits for exercising rights; that is, the limitation period cannot be altered by contract, neither shortened nor extended.
• Lapse: time limits for performing an act may be created or adjusted by agreement where the matter is at the parties’ discretion, provided that the legal regime is respected.

Thus, the parties may, for example, agree that technical complaints must be submitted within a determined timeframe (contractual expiry), but they must not stipulate that “all actions lapse after 1 year” if the law provides for a different time limit. The expiry period is only suspended or interrupted in the cases provided for by law, unlike the limitation period, which has its own rules regarding interruption and suspension.

Even in B2B contracts, there are public interest rules that take precedence, including clauses contrary to mandatory law and public policy. The aim is to protect liquidity in the supply chain and prevent abuse of bargaining power. 

These nullities apply automatically, without the need to prove fault, and reflect a public policy of punctuality in payments between companies. Rules on safety, health, the environment and data protection are also typical ‘public policy areas’, which may render ineffective exclusions that seek to circumvent liabilities imposed by mandatory sector-specific regulations.

Under EU Regulation Rome I, a limitation or exclusion of liability clause is generally governed by the parties’ chosen law, but its effect can be curtailed by overriding mandatory rules and protected‑party regimes. Under Portuguese substantive law, such clauses are broadly admissible in B2B contracts, subject to public policy and good‑faith limits and controls on advance waivers and penalty clauses in the Portuguese Civil Code, plus policing of a party’s standard terms and mandatory consumer remedies. 

• If Portuguese law governs but the supply occurs abroad, Portuguese validity tests apply, yet a court may still give effect to internationally mandatory rules of the place of performance (Rome I, Article 9(3)) and to mandatory international carriage conventions (e.g., CMR, Montreal, maritime regimes). In practice, a limitation clause that is enforceable domestically can be displaced by foreign safety/liability minima or by convention caps applicable to performance. In addition, and as an example, INCOTERMS help locate delivery and risk transfer (which can inform Article 9(3) analysis) but do not themselves validate exclusions that fail under Portuguese law or overriding rules.
• If a foreign law governs but the supply occurs in Portugal, the foreign lex contractus usually controls validity and interpretation; however, Portuguese/EU “lois de police” apply regardless of that choice (Rome I, Article 9(2)). This commonly includes the abusive‑clauses controls for standard terms, non‑derogable consumer remedies for lack of conformity of goods/digital content, and product‑liability baselines, as well as any applicable transport convention in a Portuguese proceeding.