Cap Definition and Legal Meaning

On this page, you'll find the legal definition and meaning of Cap, written in plain English, along with examples of how it is used.

What is Cap?

(n) Cap is the utmost limit up to which a charge, penalty or claim etc can be made on a particular issue . It is commonly used to represent the limit of interest which can be charged in a flexible rate of interest promissory note

History and Meaning of Cap

The term "cap" has been used for centuries as a way to establish limits or boundaries. In the legal context, a cap refers to the maximum amount of money that can be charged, claimed, or awarded for a particular issue. Caps are often put in place to limit liability or to provide predictability in legal proceedings.

For example, in medical malpractice cases, some states have established caps on the amount of damages that can be awarded to plaintiffs. This means that even if a jury believes that a plaintiff is entitled to a larger award, they are only able to award up to the established cap.

Caps can also refer to the limit of interest that can be charged in a flexible rate of interest promissory note. This provides protection to borrowers by ensuring that the interest rate cannot exceed a certain amount, even if market conditions change.

Examples of Cap

  • A state may put a cap on the amount of damages that can be awarded in personal injury cases, limiting the amount a plaintiff can receive even if their losses exceed that amount.
  • A credit card company may establish a cap on the amount of reward points that cardholders can earn in a year, limiting the potential benefits of using the card.
  • An insurance policy may have a cap on the total amount that they will pay out for damages, regardless of the extent of the losses.
  • A promissory note may have a cap on the prevailing interest rate, limiting the amount of interest that can accrue over the course of the loan.

Legal Terms Similar to Cap

  • Limitation of Liability: A clause that limits the amount of damages that can be awarded in a legal case.
  • Damages: The amount of money awarded to a plaintiff in a legal case to compensate for losses.
  • Interest Rate Cap: A limit on the amount of interest that can be charged on a loan.
  • Punitive Damages: A type of damages that are awarded in addition to compensatory damages to punish the defendant for their behavior.