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Anti-Indemnification Statute Doesn't Negate Limitation-of-Liability Clauses

Monday, September 03, 2012 05:51 am

 

Limitation of Liability -- Consequential Damages

Thrash Commercial Contractors, Inc. v. Terracon Consultants, Inc., 2012 U.S. Dist. Lexis 87338 (S.D. Miss June 25, 2012)

A state statute against indemnification clauses in construction contracts won't necessarily nullify a limitation-of-liability clause. Contract parties are not entitled to insulate themselves from all liability, but they may negotiate to limit their liability.

Thrash Commercial Contractors, Inc. (Thrash) was the general contractor on a Mississippi Bureau of Buildings and Grounds project to renovate the Naval Reserve Records Center in Jackson. Thrash hired Terracon Consultants, Inc. (Terracon) to perform the required lab tests of fill material to ensure that Thrash was complying with project specifications. According to Thrash, Terracon did not test the soil in accordance with the specs, and therefore the fill Thrash placed did not meet the required soil density level. Thrash filed a breach of contract action against Terracon seeking $300,000 to cover expenses allegedly incurred due to Terracon's failure.

Terracon countered that the subcontract's limitation-of-liability provision capped Thrash's recovery at just $50,000. Thrash contended the clause was unenforceable under Mississippi law.

Both parties understood the limit to liability

First, Thrash claimed the limitation-of-liability clause was unenforceable because it was "not negotiable." In Mississippi, [c]lauses that limit liability ... are not to be enforced unless the limitation is fairly and honestly negotiated and understood by both parties." Pitts v. Watkins, 905 So. 2d 553 (Miss. 2005) (quoting Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 754 (Miss. 2003)). However, Thrash offered no evidence that it had attempted to negotiate with Terracon regarding the clause. The subcontract plainly stated that upon Thrash's written request, Terracon could negotiate a higher limitation of liability for an additional fee; Thrash made no such request. Plus, the clause appeared in bold, capitalized print, and Thrash made no claim that the clause had [...]

 
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