ConstructionPro Week, Volume: 2 - Issue: 3 - 01/18/2013

Is Tight Interpretation of Disclaimers Consistent with Intent of Contract?

By Bruce Jervis

 

Courts strive to limit the effect of delay damage disclaimers, or for that matter any exculpatory language, particularly when the contract was prepared by the party seeking to enforce the disclaimer. There was a recent example in California involving a supplier of shoring equipment.

 

The supplier’s pre-printed contract form contained a limitation of warranty on the “equipment provided” by the supplier. That limitation included a disclaimer of liability for liquidated damages or any other damages caused by delay; a so-called no-damage-for-delay clause.

 

The supplier failed to deliver the agreed amount of equipment in accordance with the construction schedule. This delayed the contractor’s completion of the overall project. When the contractor sued the supplier for delay damages, the supplier raised the disclaimer as a defense.

 

The court ruled that the contractor could recover from the supplier. The disclaimer limited the warranty on “equipment provided.” It did not apply to equipment not provided. It did not apply to delay caused by the failure to provide equipment in a timely manner.

 

Do you think this was a reasonable interpretation of the contract language, consistent with its intended meaning? Or, was it contrived and overly legalistic, designed to arrive at a desired result? Was the ruling fair, thwarting the supplier’s attempt to slip one-sided language into its boilerplate form? Or, did it deprive the supplier of a right for which it had bargained? I welcome your comments.

 

COMMENTS

This is not a reasonable interpertastion of ther contract language. The contract obviously intended to limit or prevent exactly the type of damages that the court awarded.
Posted by: Mark Altman - Friday, January 18, 2013 1:29 PM


Warranty is defined(in contract law) as a promise that something in furtherance of the contract is guaranteed by the seller.The disclaimer was expressely stated in relation to the warranty, so since the question of delay was expressely excluded under the warranty the Contractor could not reasonably be expected to recover from the supplier. Clearly the Contractor did not read or understand the contract and the ruling did deprive the supplier of a right for which it had bargained .


Posted by: Trevor Sylvester - Friday, January 18, 2013 1:43 PM


Trevor, Mark: Then why do courts "strive to limit the effect of delay damage disclaimers"? I'd like to know. This strikes me as rather important, since common commodity material supplier contracts are rarely "bargained" in any meaningful sense of the term, and for large purchases and/or custom products, I should think that the project schedule is an implicit part of the purchase order agreement, and a Seller's acknowledgement of a delivery date implicitly overrides the warranty disclaimer.
Posted by: Bob Polwarth - Friday, January 18, 2013 2:17 PM


It is hard to tell exactly what is happening. If the quantity of shoring to be provided at a specific time was contingent on availability of returned stock and the disclaimer was to inform and confirm the possibility of such a delay, then the contractor should be responsible for the risk they knowingly accepted. However, if the delay was due to non-performance by the supplier there should be no effective disclaimer for delay caused by failure to perform as agreed in the contract.
Posted by: Marshall Wilson - Thursday, January 24, 2013 9:31 PM


 









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