A maximum price or an upper limit on the total amount of a party's obligation.

For example, in an intercreditor agreement, second lien lenders may negotiate a cap on the amount of first lien debt that is entitled to be paid out of the proceeds of collateral ahead of the second lien debt. As another example, in an acquisition agreement, a seller may try to limit the indemnification obligations it has by using a cap to limit the buyer's maximum total recovery to a stated dollar amount.