In outsourcing, both parties may risk incurring punitive damages for their own actions or omissions. Under a 2005 U.S. Supreme Court decision, punitive damages cannot constitutionally exceed ten times the amount of the compensatory damages.

Prudent contract development suggests that an exclusion of punitive damages, as a reasonable commercial allocation of risk. However, willful and wanton misconduct or gross negligence might not be lawfully eligible for such an exclusion, depending on the laws of the local jurisdiction.