A liability cap is the most a seller can ever be made to pay back to the buyer if something they warranted in the share sale agreement turns out to be wrong.
Technically, it is the maximum aggregate amount the seller can be liable for under the warranties (and sometimes indemnities) in an Australian share sale or asset sale agreement.
The buyer wants the cap as high as possible. The seller wants it as low as defensible.
The cap itself is one number. What it actually means depends on the architecture around it: the basket (how much claims must total before the buyer can claim anything), the deductible (whether earlier claims come off the cap), the survival period (how long after completion claims can still be brought), and the definition of Material Adverse Effect.
Two caps of the same headline size can carry very different exposures depending on those four levers.
What you as a seller should push back on: off-market caps on general warranties, baskets so low they are functionally zero, off-market survival periods, and broad definitions of Material Adverse Effect that capture ordinary commercial variability.