CIPS L5M3 Exam - Topic 2 Question 59 Discussion

Actual exam question for CIPS's L5M3 exam

Question #: 59
Topic #: 2

[All L5M3 Questions]

What is the purpose of a limitation on liability clause?

Ait provides an accurate pre-estimate of potential loss

Bit caps a company's exposure to risk

Cit allows a party to claim on insurance if something goes wrong

Dit passes the responsibility to the other party

Show Suggested Answer

Suggested Answer: B

A limitation of liability caps a company's exposure to risk. In SOME cases this may mean that the responsibility passes to the other party- but not always. For this reason option 2 is correct and 4 isn't. Option 1 is the definition of liquidated damages and 3 is just a made-up answer. See p.20 for more information on Liability

by Penney at Nov 23, 2025, 01:37 AM

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Kimberely

1 month ago

Overall, B is the safest choice. Limits liability effectively.

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Scarlet

1 month ago

I feel like D shifts responsibility too much. Not fair.

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Sabrina

2 months ago

But C is interesting. Claiming on insurance could help.

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Fairy

2 months ago

A could be right too. Accurate pre-estimate is important.

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Mickie

2 months ago

I agree, B makes sense. Protects the company.

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Ozell

2 months ago

I think it's B. It caps a company's exposure to risk.

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Alaine

2 months ago

I thought it was just for insurance claims, interesting!

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Alesia

2 months ago

Wait, does it really pass responsibility to the other party?

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Lang

3 months ago

Totally agree, that's the main point!

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Ashton

3 months ago

It caps a company's exposure to risk.

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Romana

3 months ago

Option B all the way. Gotta protect that bottom line, am I right?

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Celestina

4 months ago

Option D is the way to go - pass that responsibility to someone else and let them deal with it!

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Jose

4 months ago

Option B, because I don't want my company to be on the hook for everything that goes wrong.

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Glory

4 months ago

I'm going with Option B. Capping risk is the name of the game in the business world.

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Pansy

4 months ago

Limitation on liability clause? More like limitation on my sanity when dealing with this stuff!

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Stephaine

4 months ago

I feel like option C might be relevant too, but I can't recall if insurance claims are directly tied to liability limitations.

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Barrie

4 months ago

I practiced a similar question where we discussed how these clauses can shift responsibility. I wonder if that relates to option D?

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Salena

5 months ago

I'm not entirely sure, but I remember something about it being a way to estimate potential losses. Maybe that's option A?

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Wai

5 months ago

I think the limitation on liability clause is mainly about capping a company's exposure to risk, so I would lean towards option B.

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Jacob

5 months ago

This is a tricky one. I'm leaning towards B, but I'm not 100% sure. I'll make sure to read the question and answers thoroughly before selecting my final answer.

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Sabrina

5 months ago

I'm pretty confident that the purpose is to cap the company's exposure to risk. The other options don't seem to fully capture what a limitation on liability clause is meant to do.

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Hui

5 months ago

Option B is the correct answer. It caps a company's exposure to risk.

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Harrison

6 months ago

Okay, I've got it! The limitation on liability clause is there to limit the company's liability if something goes wrong. So B is the correct answer.

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Eliseo

6 months ago

A limitation on liability clause is all about risk management.

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Theola

6 months ago

Hmm, I'm a bit confused. I'm not sure if it's about pre-estimating potential loss or passing responsibility to the other party. I'll have to think this through carefully.

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