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Client sent me "Terms and Conditions" to review. It wasn't their contract; they use the Standard Forms. Take a look at this, obviously written by an attorney, and tell me if you see any problem:
"LIMITATION OF LIABLITLY. If, despite the other provisions of this Agreement, we or our officers, directors, shareholders, members, partners, or employees ( “our representatives”) become liable for any personal injury, property damage, or other loss, damage, cost, expense, or liability arising out of or from this Agreement, including but not limited to any failure of the System to properly operate, our and our representatives’ aggregate liability will not exceed one-half of the amount paid by you under this Agreement for service during the six months before the event giving rise to the liability. Any amount paid by us under this Section will be deemed to be liquidated damages paid in complete satisfaction of the liability."
The Limitation of Liability provision is perhaps the most discussed protective provision addressed by the courts. Stands to reason that it should be taken very seriously by alarm companies and great care should be taken drafting the provision. The courts don't like enforcing it and will look for any loophole to avoid it's often harsh results, especially when the injured plaintiff presents a sympathetic case.
So what did you think of the provision? Well, isn't it a good thing that it extends to "Our officers, directors, shareholders, members, partners or employees"? Not really. It's just a waste of words and space, valuable space in the alarm contract since there is barely enough room for what is actually needed. Is there really a lawyer out there that thinks a corporation's officers, directors, shareholders or members face personal liability for the corporation's breach of the contract or it's negligence in failing to perform that contract? And if the alarm company is doing business as a partnership then it's partners don't even deserve protection. They should have incorporated.
The Limitation of Liability by its terms is effective for "liability arising out of or from this Agreement". What about liability arising outside of the Agreement? What about "extra contractual duty" which was what tagged an alarm company not too long ago for millions?
The Limitation of Liability applies to damages "arising out of ... the Agreement" and goes on to elaborate "including but not limited to any failure of the System to properly operate...". Guess what it doesn't include, because it doesn't specifically say it's included, negligence. While it does state "including but not limited to ..." it mentions "failure of the System to properly operate". How about failure of the alarm services, not the equipment? How about negligent performance or negligent failure to perform?
The provision does state the limitation is the aggregate of 6 months of what the subscriber paid before the event "giving rise to liability". Yet it is universally accepted that the limitation of liability should be accompanied by a right to increase the limit. While I don't necessarily agree that it should be an essential component of the provision, it is almost always included and it is often mentioned by the courts.
Finally, to top off the poor draftsmanship, the provision concludes with the payment should be deemed "liquidated damages". Well some states do recognize liquidated damages as being enforceable in alarm defense cases, though I think the better analysis would find that liquidated damages in an alarm defense case may be unenforceable since damages are often "not difficult or impossible" to calculate if loss were to occur, and arguably $250.00 is not a reasonable estimate of fair probable damages, unless you have an intrusion or fire alarm system in a wooden out house in the middle of nowhere. That, by the way, is where this contract belongs.
If you think your lawyer or any lawyer is going to put together a better contract than the Standard Form Agreements, for less money, you're wrong and the best you can hope for is that the lawyer copies one of my older forms, dresses it up, and over charges you for an outdated form. Anyway, that's my opinion, and by the way, I'm not having a particularly bad day.
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