Limitation of Liability Language in Fire Alarm Contract    

April 9, 2013



Question

Ken,

Thought this question and your answer might be good for your Legal Email Newsletter

We have a client who is unhappy with our LIMITATION OF LIABILITY language in our fire alarm service agreement. (see below) We have tried to make the case that this language is standard in the industry. Because they have had experience with another vendor who has no such language they are challenging that assertion. We have shown two other samples of agreements (both from TYCO affiliates) that reflect the same language. My question is twofold - Do you believe that this represents best practices for our industry and how would you make the argument to show that this is similar to industry standards?

 

1.               LIMITATION OF LIABILITY.

A.        COMPANY will have no liability for any indirect, incidental, consequential, special, or punitive damages including, but not limited to, loss of production, loss of income or loss of profits arising out of acts or omissions of COMPANY or its subcontractors, even if notice was given of the possibility of such damages and even if such damages were reasonably foreseeable.  COMPANY will not be liable, for any reason, whether under this Agreement or otherwise, for any loss, cost, expense or damage suffered by Customer or any third-party resulting directly or indirectly, from the use or loss of use of the Fire Prevention Systems or other Fire and Safety Security Systems or due to loss of life or damage to property.

B.        In no event will COMPANY?s liability for Customer?s damages (including its attorneys? fees) for any act, omission, or other failure of COMPANY to perform hereunder at any particular facility be in excess of COMPANY?s fees for that facility for the three (3) months directly prior to the date Customer claims COMPANY so failed to perform or the date of the act or omission at the specific facility. 

 

2.               TIME LIMITATION. All claims, actions or proceedings, legal or equitable against COMPANY or its subcontractors must be commenced in court within one (1) year after the cause of action has accrued or the act, omission or event occurred from which the claim, action or proceeding arises, whichever is earlier, without judicial extension of time permitted, and all claims, actions or proceeding brought after this time will be barred.  

 I would be interested in your take on this.

Regards

David E. Becker, SET, President

Fire Equipment Service Company (FESCO)              

Louisville, KY

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Answer

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    I do not consider your Limitation of Liability provision to be standard at all.  I think it invites objection from your subscriber.  It uses terminology which I doubt you or your subscriber actually understand.  For example, can you tell me how this is to be interpreted: "indirect, incidental, consequential, special, or punitive damages including, but not limited to, loss of production, loss of income or loss of profits"?  On closer review, I don't believe your Limitation of Liability accomplishes what you hope it does, limit your liability for your breach of contract and your negligent performance.  You would be wise to purchase the Fire All in One.  That contract has the "standard" language in the alarm industry.  What makes it "standard"?  More alarm companies use that contract than any other, and the provisions from the Kirschenbaum TM contracts are the most copied by those who don't mind violating trademark and copyright laws.  The "standard" forms are written in language that is easily understood by both you and your subscriber.  While your subscriber may not like some of the provisions at least those provisions will be understood and you should be able to justify them beyond pointing out that they are truly "standard" in the industry.  

    Your Time Limitation is also poorly drafted.  It's too wordy, redundant and the phrase "whichever is earlier" makes no sense in the context of the provision.

    Sorry if I've been a little rough on you, but I just don't understand why you would not use the best product available [a Kirschenbaum TM contract] for your most important business asset, your contracts.  You can order the form you should be using for commercial fire, the Fire All in One at www.alarmcontracts.com.  For residential, the Residential All in One covers fire.  Don't risk your business going up in flames !!


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