MIAMI BUSINESS LITIGATION: DECEPTIVE EXCULPATORY CLAUSES MAY BE UNENFORCEABLE

An exculpatory clause is a contract provision that is often raised in business litigation. The purpose of an exculpatory clause is to relieve one party of liability if damages are caused during the execution of the contract. Exculpatory clauses are enforceable only where and to the extent that the intention to be relieved was made clear and unequivocal in the contract, and the wording must be so clear and understandable that an ordinary and knowledgeable party will know what he is contracting away. Fuentes v. Owen, 310 So.2d 458 (Fla. 3d DCA 1975). Peter Mavrick is a Miami business litigation lawyer, and also represents clients in business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

In the case of Orkin Exterminating Company v. Montagano, 359 So.2d 512 (Fla. 4th DCA 1978), Florida’s Fourth District Court of Appeal held that a homeowner was entitled to recover for termite damages from an exterminating company despite the fact that the homeowner had signed a contract containing an exculpatory clause limiting the exterminating company’s damages liability. The appellate court determined that the exculpatory clause was ambiguous on its face because it provided for two different guarantees (a “total protection” guarantee and a guarantee limited to retreatment only) and did not differentiate as to which guarantee was applicable. Florida courts in business litigation have frequently recognized that exculpatory clauses are not favored in the law. Florida courts strictly construe the clauses against the party claiming to be relieved of liability. Southworth & McGill, P.A. v. S. Bell Tel. & Tel. Co., 580 So. 2d 628 (Fla. 1st DCA 1991). Orkin Exterminating Company v. Montagano held that “because we do not look with favor on exculpatory clauses, we must require the draftsmen of all contracts which contain them to use clear and unequivocal language totally without a hint of deceptive come-on, or inconsistent, clauses.”

The Third District Court of Appeals in the case of Michel v. Merrill Stevens Dry Dock Co., 554 So. 2d 593, 595 (Fla. 3rd DCA 1989), relied on the ruling in Orkin Exterminating Company v. Montagano and found that Merrill Stevens’ exculpatory clause was ambiguous because the wording purported to absolve Merrill Stevens of all liability for its negligence and breach of contract in the first sentence of the clause, and yet, in the second sentence, stated that Merrill Stevens’ potential liability for negligence and/or breach of contract was not to exceed $300,000. The appellate court held that by limiting negligence and breach of contract claims to $300,000, Merrill Stevens tacitly acknowledged that such liability may have existed in addition to liability for gross negligence. The appellate court held that this provision may have potentially misled ship owners by affording them a false sense of protection in the event of negligence. Courts in business litigation look to the intent of the parties to interpret contract provisions. The inconsistent wording contained in the exculpatory clause which Merrill Stevens drafted did not clearly express exculpatory intent for breach of contract and therefore did not absolve Merrill Stevens from liability under these theories. The appellate court reversed the trial court’s summary judgment in favor of Merrill Stevens on the issue of liability for negligence and breach of contract.

“The underlying purpose of damages in actions premised on a breach of contract is to place the non-breaching party in the same position it would have occupied if the contract had not been breached.” Allapattah Servs., Inc. v. Exxon Corp., 61 F. Supp. 2d 1326 (S.D. Fla. 1999). Exculpatory clauses, however, have been held to be enforceable in business litigation. Florida courts have held that limitation provisions are enforceable “where and to the extent that such intention was made clear and unequivocal in the contract.” Fuentes v. Owen, 310 So. 2d 458, 459 (Fla. 3d DCA 1975).

The enforceability of an exculptatory clause can make a substantial difference in the outcome of a lawsuit. Proper examination of the intent expressed in the contract is critical. Peter Mavrick is a Miami business litigation attorney who also practices business litigation in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.