When Chinese counterparties encounter a standard limitation of liability clause in a cross-border contract, they will typically take the position that such clauses are unenforceable under Chinese law. This is the standard Chinese party position on the validity of many boilerplate contract provisions. The position should not be accepted at face value and in fact is a strong indication that the clause is valid. This certainly is the case with a limitation of liability clause.
Of course, the question of the validity of limitation of liability or exculpatory clauses under Chinese law can be avoided entirely through the selection of foreign governing law, but this is not possible as a practical matter in all transactions. Although parties to a cross-border contract have always been free to select foreign governing law and international arbitration, it has been increasingly common for Chinese counterparties to insist on Chinese law as the governing law...