Can a Florida Contract Waive Liability for Special, Indirect, Punitive, and Consequential Damages?
- By : Cbh
- Category : Clauses from Contracts, Contracts
According to a new case from the First District, yes. But be careful relying too heavily on this case of first impression, which may go a little too far without enough authorities.
While this is a construction case, these issues apply to ALL business contracts.
The case is Keystone Airpark Authority v. Pipeline Contractors, Inc, Hanover Insurance Company, and Passero Associates.
The underlying facts involve a fairly typical construction scenario: landowner contracts with general contractor and then hires engineer to supervise. The engineer is not necessarily on site every day and, from what I can tell in the opinion, the exact parameters of the contractual responsibility of supervision is not laid out in detail (in my practice, this is also typical — which is a mistake). The contractor allegedly did not put down concrete and asphalt correctly. The landowner sued both the contractor and engineer.
Quick side note — why did the landowner sue both? One, likely to prevent a defendant from blaming a non-party and with hopes of getting a faster settlement. Two, likely the damages exceeded the insurance of one or both defendants.
The engineer claimed that the contract limited damages to the price of the engineering fees and that all other damages were waived. They further argued that the allegations do not involve direct or general damages so that nothing was owed. We do not have the contract language which limits the direct damages to consider. However, here is the special damages waiver language:
“[Engineer] shall have no liability for indirect, special, incidental, punitive, or consequential damages of any kind.”
Bravo for a concise sentence. But I suspect few lawyers could actually give you a definition of what those words actually mean. Fortunately, this opinion gives some definitions for us to consider.
General Damages – naturally and necessarily flow or result from the injuries alleged; arising in the usual course of events; direct, natural, logical, and necessary consequences of the injury.”
Special Damages – may be reasonably supposed to have been in contemplation of the parties at the time they made the contract; peculiar to the party against whom the breach was committed and would not be expected to occur regularly; only if actual notice were given to the carrier… proximate and usual consequence of the carrier’s action.
Consequential Damages – do not arise within the scope of the immediate buyer-seller transaction but rather stem from losses incurred by the non-breaching party in its dealings with third parties which were a proximate result… and reasonably foreseeable; it stems from relationships with third parties while still reasonably foreseeable at the time of contracting.
Confused yet? The court parsed the situation as follows: the claim does not involve special damages because it was likely to occur in the usual course of business and it was not particular to this landowner. The court also said “the damages were not the direct or necessary consequence of Passero’s alleged failure to properly supervise the construction work.” The thinking is that the contractor could have successfully completed the job without supervision. The court also said that the need for repair did not arise within the scope of the immediate transaction. The court then gives a string cite, without analysis, why these are consequential damages. Without reviewing those cases, and since we don’t have the benefit in the opinion of real detailed explanation of both sides, I question whether the court might be over-simplifying the issue and then over-thinking that a failure to supervise claim doesn’t lead to direct damages when supervision is at issue. Perhaps an en banc or Florida Supreme Court review will clean this up.
To that end, and candidly, without much fanfare, the First District certified this as a question of great public importance. I would be curious how many three page opinions conclude with that certification?
Bottom line: consider this simple language in your contracts although there is some question how well this case would be an authority when there is some inequity of the parties (e.g., a consumer – corporation contract).
Non-lawyers: does your standard purchase orders and contracts have jury waivers, liability waivers, and warranty waivers? Were they copied from somewhere else, not recently reviewed, or “just a form we’ve been using”? These are tricky areas. Your contract deals and liability turn on whether these are up to date. A lawyer who litigates as well as writes contracts is your best bet. Review of your contracts and some updating should only run in the hundreds of dollars. Contact a few knowledgeable lawyers in your area. Ask them to explain these types of damages and the latest on waivers and warranties. If they stumble, move on until you find capable, business-minded counsel.
Image credit – Far Cry 5 airfield from YouTube