KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** limitation of liability enforced May 10, 2025 ************************* limitation of liability enforced ************************* A Federal District Court Judge sitting in California was tasked with deciding the enforceability of a limitation of liability provision pursuant to Delaware law. Transactional and corporate lawyers love using Delaware law, though I am sure, excpet for the multinational corporations, they don't know why. Anyway, that's for another article. The contract under dispute was a distribution agreement between a salf manufacturer and distributor. It has no relation to the security business but the limitation of liability clause issue is the same and one of the cases relied on by the Judge was an alarm case enforcing the limitation of liabililty to $250. First let me start with the limitation of liability must be very clearly drafted and presented in the contract in order to be considered for enforcement; it also has to be "reasonable", or "not unconcionable", which generally means reasonable when the contract was made. Kirschenbaum Contracts TM all contain a limitation of liability provision, and it is one of the provisions that we make very few changes to, despite many challenges by subscribers and their attorneys. Several quotes from the case, without citations, follow. Keep them in mind if you do not have a Kirschenbaum Contract TM or if you modified it in printed form are agree to modify it when negotiating with a new subscriber. The Court concludes that Delaware courts routinely decide the enforceability of limitation of liability clauses at the summary judgment stage. Under Delaware law, a contractual limit on damages is enforceable where, at the time of contracting, “damages are uncertain and the amount agreed upon is reasonable. Delaware courts apply the same standard to liquidated damages and damages limitations. Damages are uncertain when they are “incapable of accurate estimation.” Courts have found damages uncertain at the time of contracting when “a multitude of factors” influence the purpose behind a contract such that its “potential outcomes are boundless” and “damages would have been difficult to contemplate.” damages uncertain when a “wide range of problems ... could give rise to damages.”). Conversely, damages are not uncertain if they “are easily ascertainable" Court turns to whether the Damages Cap is reasonable as a matter of law. This requires that there be no material disputed facts bearing on reasonableness. Under Delaware law, a damages limitation cannot be found reasonable if the amount at issue is “unconscionable or not rationally related to any measure of damages a party might conceivably sustain.” “The question of a limitation's reasonableness is not strictly about the percentage of liability the limitation covers.” Rather the focus of this element is on “the rationality of the limitation in the greater context of the relationship.” Id. In analyzing reasonableness, courts also “look[ ] to factors including the length of the contract, the clarity of the language, the clarity of the disclaimed liability, and whether the clause was in boldface type.” And, the Court favorably referred to an alarm case against a central station, approving a decision granting "summary judgment as to the validity of a $250 limitation liability clause where plaintiff alleged $600,000 in damages". The case, if interested is, Keto5 Inc v Bariatrix Nutrition Corporation USDC C.D.Ca Wonder if your contracts are sufficient or get updated Standard Form Agreements and stop worrying. Tied up in knots over having to negotiate with your customers over contract terms? Join the K&K Concierge Program and let us handle the complex legal issues in the contracts. ************************* STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
