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Limitation Of Liability Clauses In Work Contracts May Not Be Enforceable

  • In Uncategorized
  • 2 July 2015

Businesses that provide maintenance or repair work upon homes, cars, boats, planes, household appliances or office products are fond of presenting the customer with a work order or estimate that contains provisions limiting their liability for personal injuries or economic damages if the repair work proves faulty or is negligently performed. These provisions are usually found on the back of the work order that the customer signs before work begins. The provisions usually state that in the event of product failure after repair, the repair company is limited to making further repairs or replacing faulty component parts but is immune from any personal injuries or consequential economic losses suffered by the customer. In the event that the customer is injured or suffers an economic loss due to faulty repair work on a product, the business that conducted the work will use the signed form as a defense to any claim for damages.

That defense can be defeated if the customer can demonstrate that the limitation of liability provisions were presented with an absence of meaningful choice and are unreasonably favorable to the repair company. This is generally known as the “unconscionability doctrine.” When that doctrine is invoked by an injured plaintiff, a judge may be required to examine the totality of the form contract provisions in the work order, as well as the circumstances of its formation, to determine whether the overall agreement was unreasonably one-sided.

Some of the evidence which is presented to the trial judge by the injured plaintiff includes:

  • Whether the limitation of liability terms were ever specifically pointed out to the customer or did they come as a surprise after the injury or damage occurred;
  • Were the limitation terms hidden in a pre-printed form in small type, preventing the customer from having an opportunity to notice them and discuss them with the repair company;
  • How much time the customer was given to review the form before signing it;
  • Whether the limitation of liability terms are completely one-sided.

Bailey & Partners is successfully prosecuting a claim for economic losses against an aircraft repair facility which attempted to shield itself from liability for faulty repairs to a charter business jet which was forced to make an emergency landing in Russia. The negligent repair work by the repair company caused the charter jet owner to incur hundreds of thousands of dollars in economic losses measured by the costs to repair the aircraft overseas and return it to California. The aircraft could not earn additional revenue while it was down for extensive new repairs. By presenting effective declarations and evidence on behalf of our client, the judge ruled that the limitation of liability provisions invoked by the repair company would not have been noticed by a reasonable business customer, were unfair and one-sided, and therefore were unenforceable.