In my opinion, the decision to have Schnuck Markets Inc. limitation clause capped at $500,000 makes perfect sense. The contemporary world faces the grave danger of cyber-attack owing to the increased reliance on systems and digitization of services. Limitation of liability is vital because, during a breach, there are many factors that come to play and a contractual partner may not have all at their span of control.
The extent of the losses to banks was far beyond the control by Schnuck Markets Inc. First Data Merchants breached the contract by withholding more money than what the contract allowed from payments made to Schnuck Markets Inc. Schnuck Markets Inc. bear limited liability to attacks and the exceptions do not apply because they involve factors that are beyond their contractual responsibilities.
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A significant change that needs to be taken is in the process of contract drafting. Merchant processing relationships involve sensitive factors on each party. The Schnuck Markets Inc. and First Data Merchants contract did not explicitly state the indemnities to contract partners on losses. First Data Merchants wanted Schnuck Markets Inc. to bear liability for damages that they had not agreed upon in the contract.
The case shows the need for extensive evaluation of the principles in a contract to ensure that in case of breach, all parties understand the extent of their liabilities. A planned organizational change on the side of First Data Merchants would be to insure their debit and credit cards services to ensure protection from acts such as cybercrime. If the company was insured, it would not have suffered the liability of paying the banks that had issued the cards.
