Contractors often attempt to limit their liability by including a limitations of liability clause in the contract. Plaintiffs attempt to avoid the limitations of liability by asserting that the clause is unconscionable under the Consumer Sales Practices Act. The Eleventh District Court of Appeals in Barto v. Boardman Home Inspection, Inc.(2015-Ohio-5210) found that such a clause is not unconscionable and limited damages to the amount agreed upon.
In Barto, a prospective homeowner retained defendant to do a home inspection. The inspector inspected the roof, which later leaked. As a result of the leak, the homeowner sued the defendant, alleging negligence in the inspection.
The defendant filed a motion for summary judgment on multiple claims. The court denied the motion on the CSPA claim, but determined that the limitations of liability clause in the contract was valid, limiting the damages to $350. The court made a finding that there was no just reason for delay, and the homeowners appealed.
The Court of Appeals relied upon a Ninth District case finding the limitation of liability clause to be conscionable. The standard to determine whether a contract clause is unconscionable is whether there is an absence of meaningful choice on the part of one of the parties together with contract terms that are unreasonably favorable to the other party.
In this case, the court found seven reasons to uphold the limitations of liability clause. First, the clause was set off as a separate paragraph in the agreement. Secondly, defendant reviewed and explained the clause to the plaintiff before she signed the contract. Third, plaintiff did not fully read the contract. Fourth, plaintiff conceded that the defendant did not try to rush her through reading the agreement. Fifth, plaintiff stated that she was not prevented from asking questions about it. Sixth, plaintiff conceded that defendant did not refuse to answer any questions. Lastly, the court found that there was no evidence that plaintiffs were deprived of an opportunity to negotiate more favorable terms, including the exclusion of a limited liability provision, or to hire another home inspector.
This case, and the case cited within, support the inclusion of a limitations of liability clause in many service contracts. In order to enforce the clause, it is incumbent upon the contractor to set forth a clause as a separate paragraph, preferably in large font and in capital letters. The contractor must review and explain the terms of the contract to the purchaser, while giving the purchaser sufficient time to read through the agreement. Any questions asked must be answered, and the purchaser must be given the opportunity to negotiate more favorable terms, including hiring another contractor.
If you have any questions with respect to this specific case, or the enforceability of limitations of liability clauses in various consumer services contracts, please call one of our Corporate & General Business or Commercial/Business Litigation Practice Group.
This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.
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