196 Misc.2d 922, 768 N.Y.S.2d 759, 2003 N.Y. Slip Op. 23655
 View New York Official Reports version
 
Supreme Court, Nassau County, New York.
Vincenzo CIRILLO and Concetta Cirillo, Plaintiffs,
v.
SLOMIN'S INC., Defendant.
June 15, 2003.

Homeowners brought action for fraud, negligence, and breach of warranty in connection with the installation and operation of an alarm system against security system company. On company's motion to dismiss, the Supreme Court, Nassau County, Winslow, J., held that: (1) alleged false representations by company's representative were sufficient to support claim for fraud; (2) representative of company had an affirmative duty, apart from duties imposed under contract, to tell homeowners that security system would not operate if the telephone lines were cut; (3) disclaimers in contract did not preclude homeowners from going forward with proof of fraud; (4) exculpatory clauses in contract precluded claims based on ordinary negligence; (5) losses resulting from deactivation of security system were not purely economic as a matter of law; and (6) clauses in contracts limiting company's liability under any circumstances to $250 were unenforceable against claims of gross negligence or intentional misconduct.
Motion granted in part, denied in part.

 
West Headnotes

[1] KeyCite Notes Link to KeyCite Notes

Key Number graphic307A Pretrial Procedure
  Key Number graphic307AIII Dismissal
    Key Number graphic307AIII(B) Involuntary Dismissal
      Key Number graphic307AIII(B)6 Proceedings and Effect
        Key Number graphic307Ak679 k. Construction of Pleadings. Most Cited Cases

In ruling upon a motion to dismiss, the Court must accept the facts alleged as true and accord plaintiffs the benefit of every possible favorable inference. McKinney's CPLR 3211.

[2] KeyCite Notes Link to KeyCite Notes

Key Number graphic307A Pretrial Procedure
  Key Number graphic307AIII Dismissal
    Key Number graphic307AIII(B) Involuntary Dismissal
      Key Number graphic307AIII(B)6 Proceedings and Effect
        Key Number graphic307Ak680 k. Fact Questions. Most Cited Cases

Key Number graphic307A Pretrial Procedure KeyCite Notes Link to KeyCite Notes
  Key Number graphic307AIII Dismissal
    Key Number graphic307AIII(B) Involuntary Dismissal
      Key Number graphic307AIII(B)6 Proceedings and Effect
        Key Number graphic307Ak681 k. Matters Considered in General. Most Cited Cases

In ruling upon a motion to dismiss the Court may not address the merits of the complaint or any of its factual allegations, but must determine only whether the alleged facts fit within any cognizable legal theory. McKinney's CPLR 3211.

[3] KeyCite Notes Link to KeyCite Notes

Key Number graphic307A Pretrial Procedure
  Key Number graphic307AIII Dismissal
    Key Number graphic307AIII(B) Involuntary Dismissal
      Key Number graphic307AIII(B)6 Proceedings and Effect
        Key Number graphic307Ak682 Evidence
          Key Number graphic307Ak684 k. Sufficiency and Effect. Most Cited Cases
            (Formerly 307Ak622)

Dismissal is warranted only if the documentary evidence conclusively establishes a defense to the asserted claims as a matter of law; the criterion is whether the proponent of a pleading has a cause of action, not whether he has stated one. McKinney's CPLR 3211.

[4] KeyCite Notes Link to KeyCite Notes

Key Number graphic184 Fraud
  Key Number graphic184I Deception Constituting Fraud, and Liability Therefor
    Key Number graphic184k2 Elements of Actual Fraud
      Key Number graphic184k3 k. In General. Most Cited Cases

To establish a prima facie case of fraud, the plaintiff must show that: (1) the defendant made a material representation of fact that was false; (2) the defendant knew that the representation was false and made it with intent to deceive (scienter); (3) the plaintiff justifiably relied upon defendant's misrepresentation; and (4) the plaintiff suffered some loss or harm as a result of such reliance.

[5] KeyCite Notes Link to KeyCite Notes

Key Number graphic302 Pleading
  Key Number graphic302I Form and Allegations in General
    Key Number graphic302k18 k. Certainty, Definiteness, and Particularity. Most Cited Cases

Rule providing that, in an action for fraud, "the circumstances constituting the wrong shall be stated in detail," requires only that the misconduct complained of be set forth in sufficient detail to clearly inform a defendant with respect to the incidents complained of and is not to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud. McKinney's CPLR 3016(b).

 [6] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1405 k. Tort Liability in General. Most Cited Cases
        (Formerly 372k463)

Alleged representation by security company representative that home security system would transmit an alarm signal to the central monitoring station even if the telephone lines were cut was sufficient to support a claim for fraud brought by homeowners against security company, given that security company's moving papers conceded that the system was not designed to work in such circumstance. McKinney's CPLR 3016(b).

[7] KeyCite Notes Link to KeyCite Notes

Key Number graphic184 Fraud
  Key Number graphic184II Actions
    Key Number graphic184II(A) Rights of Action and Defenses
      Key Number graphic184k32 k. Effect of Existence of Remedy by Action on Contract. Most Cited Cases

To maintain a fraud action in a contractual setting, a plaintiff must allege: (1) a legal duty separate and apart from the contractual duty to perform; (2) a fraudulent representation collateral or extraneous to the contract; or (3) special damages proximately caused by the fraudulent representation that are not recoverable under the contract measure of damages.

[8] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1405 k. Tort Liability in General. Most Cited Cases
        (Formerly 372k463)

Representative of security system company had an affirmative duty, apart from duties imposed under contract, to tell homeowners that security system would not operate if the telephone lines were cut, supporting homeowner's cause of action for fraud based on the allegation that representative stated that the system would operate if the telephone lines were cut; security system company had superior knowledge regarding the capabilities of its own alarm system, which knowledge was unavailable to homeowners through ordinary inspection, and which was material to the homeowners' decision to enter into the contracts with company or to forego alternatives that might have provided more effective or complete protection.

[9] KeyCite Notes Link to KeyCite Notes

Key Number graphic184 Fraud
  Key Number graphic184I Deception Constituting Fraud, and Liability Therefor
    Key Number graphic184k15 Fraudulent Concealment
      Key Number graphic184k17 k. Duty to Disclose Facts. Most Cited Cases

A seller with superior knowledge has a duty to disclose facts, not available to the purchaser, that would affect the purchaser's conduct in the transaction; the duty to disclose arises where nondisclosure would lead the person to whom it was or should have been made to forego action that might otherwise have been taken for the protection of that person.

[10] KeyCite Notes Link to KeyCite Notes

Key Number graphic184 Fraud
  Key Number graphic184II Actions
    Key Number graphic184II(A) Rights of Action and Defenses
      Key Number graphic184k32 k. Effect of Existence of Remedy by Action on Contract. Most Cited Cases

A fraud action is not precluded by virtue of its being interposed in a contractual setting, given that a distinct legal duty exists, apart from performance under the contract.

[11] KeyCite Notes Link to KeyCite Notes

Key Number graphic157 Evidence
  Key Number graphic157XI Parol or Extrinsic Evidence Affecting Writings
    Key Number graphic157XI(A) Contradicting, Varying, or Adding to Terms of Written Instrument
      Key Number graphic157k397 Contracts in General
        Key Number graphic157k397(1) k. In General. Most Cited Cases

Key Number graphic157 Evidence KeyCite Notes Link to KeyCite Notes
  Key Number graphic157XI Parol or Extrinsic Evidence Affecting Writings
    Key Number graphic157XI(B) Invalidating Written Instrument
      Key Number graphic157k434 Fraud
        Key Number graphic157k434(8) k. In Contracts in General. Most Cited Cases

The parol evidence rule and general merger clauses exclude extrinsic evidence to contradict or vary the terms of a written instrument in the context of a suit to enforce an oral representation; both are ineffectual to exclude evidence of fraudulent representations in an action to rescind a contract or to recover loss sustained as a result of fraudulent inducement. McKinney's General Obligations Law § 15-301.

[12] KeyCite Notes Link to KeyCite Notes

Key Number graphic302 Pleading
  Key Number graphic302I Form and Allegations in General
    Key Number graphic302k18 k. Certainty, Definiteness, and Particularity. Most Cited Cases

In the limited context of consumer sales transaction, if allegations in a plaintiff's claims state with particularity the oral representations relied upon, together with contextual facts, in sufficient detail to permit the court to gauge their inherent credibility, the plaintiff should be permitted to go forward with his proof, notwithstanding the existence of a specific disclaimer in the contract form.

[13] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1406 k. Limitation or Modification of Liability. Most Cited Cases
        (Formerly 372k463)

Homeowners would be permitted to go forward with proof of fraud in the inducement of consumer sales transaction with home security company based on alleged representations by made by company representative stating that security system would transmit an alarm signal even if telephone lines were cut, notwithstanding the existence of a specific disclaimer of reliance contained in the contract form; to reflexively disallow parol evidence on the basis of such disclaimer, would be to reward the ingenuity of draftsmen at the expense of sound public policy, and to invite sales agents, armed with impenetrable contracts, to lie to their customers.

[14] KeyCite Notes Link to KeyCite Notes

Key Number graphic343 Sales
  Key Number graphic343VI Warranties
    Key Number graphic343k265 Implied Warranty of Quality, Fitness, or Condition
      Key Number graphic343k267 k. Exclusion by Contract or Express Warranty or Refusal to Warrant. Most Cited Cases

Key Number graphic372 Telecommunications KeyCite Notes Link to KeyCite Notes
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1406 k. Limitation or Modification of Liability. Most Cited Cases
        (Formerly 372k463)

Language in security system agreement disclaiming liability for losses arising from "interruption of service due to telephone line failure" or the failure of any public or private carrier service which prevents the signals from reaching monitoring center did not negate homeowners' justifiable reliance, as a matter of law, upon company representative's alleged contrary statements that security system would transmit an alarm signal even if telephone lines were cut, given that the agreement did not clarify how the system could be compromised or circumvented.

[15] KeyCite Notes Link to KeyCite Notes

Key Number graphic95 Contracts
  Key Number graphic95I Requisites and Validity
    Key Number graphic95I(F) Legality of Object and of Consideration
      Key Number graphic95k114 k. Exemption from Liability. Most Cited Cases

Whereas an exculpatory clause is enforceable against claims of ordinary negligence, such clauses are unenforceable with respect to claims of reckless or intentional conduct, as a matter of public policy.

[16] KeyCite Notes Link to KeyCite Notes

Key Number graphic343 Sales
  Key Number graphic343VI Warranties
    Key Number graphic343k265 Implied Warranty of Quality, Fitness, or Condition
      Key Number graphic343k267 k. Exclusion by Contract or Express Warranty or Refusal to Warrant. Most Cited Cases

Key Number graphic372 Telecommunications KeyCite Notes Link to KeyCite Notes
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1406 k. Limitation or Modification of Liability. Most Cited Cases
        (Formerly 372k463)

Exculpatory clauses in contract for security system expressly disclaiming liability resulting from security company's negligent performance or failure to perform under the contract precluded claims brought by homeowners against security company based on ordinary negligence.

[17] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1405 k. Tort Liability in General. Most Cited Cases
        (Formerly 372k463)

Safety-insurance policy of tort law was applicable to negligence claim brought by homeowners against security system company, and thus losses resulting from deactivation of security system by burglar who cut telephone wires were not purely economic as a matter of law; the harm to homeowner was not just that the security system failed to perform as intended, but that the security of the home and the safety of its occupants were compromised.

[18] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1403 k. In General. Most Cited Cases
        (Formerly 372k463)

A burglar alarm system installed in a person's home, which is easily deactivated by a simple, well-known technique, may be considered an inherently dangerous product, requiring, at minimum, a full and clear disclosure to the homeowner of the system's limitations.

[19] KeyCite Notes Link to KeyCite Notes

Key Number graphic372 Telecommunications
  Key Number graphic372IX Special Services or Activities
    Key Number graphic372k1402 Alarm and Security Systems
      Key Number graphic372k1406 k. Limitation or Modification of Liability. Most Cited Cases
        (Formerly 372k463)

Clauses in contracts for home security system, limiting company's liability under any circumstances to $250, were unenforceable against claims of gross negligence or intentional misconduct brought by homeowners whose home was burglarized after the telephone lines were cut.
**761 *923 Krohn, Rosenblum, Hametz, Waldman & Watters, LLP (Ivan Hametz of counsel), for defendant.
Perez, Furey & Varvaro (Joseph Varvaro of counsel), for plaintiffs.


*924 F. DANA WINSLOW, Justice.
Defendant's motion to dismiss the complaint pursuant to CPLR § 3211 is determined as follows.
This is an action for fraud, negligence and breach of warranty in connection with the installation and operation of an alarm system by SLOMIN'S INC. ("SLOMIN'S") in the home of plaintiffs VINCENZO and CONCETTA CIRILLO. The SLOMIN'S system purchased by plaintiffs provided for central station monitoring, which contemplated the transmission of a signal from the alarm system via the telephone lines in the event of a break-in. On or about June 27, 1998, plaintiff **762 VINCENZO CIRILLO entered into four written contracts with SLOMIN'S: the Retail Installment Agreement (the "Installment Agreement"); Central Station Five-Year Monitoring Agreement (the "Monitoring Agreement"); Security System Service Plan (the "Service Plan"); and Addendum for Slomin's Wireless Key FOB System (the "Addendum", collectively, the "Contracts"). Plaintiffs allege that, in purchasing the alarm system and entering into the Contracts, they relied on the following representations made by SLOMIN'S sales agent Howard S. Goldberg ("Goldberg") and/or contained in the written promotional materials provided to plaintiffs prior to the execution of the Contracts:
• That plaintiffs were purchasing a "top of the line" alarm system, guaranteed to keep their home safe from intruders.
• That the said alarm system was "hooked" into a central monitoring station operated and maintained by defendant and that, in the event of intrusion, the alarm system would "go off" automatically.
• That response time, in the event of an emergency, would be less than five minutes.
• That the system was fail safe in that, if the phone wires in the junction box were cut, the alarm would automatically "trip," alerting the central monitoring station and the police would respond within minutes.
• That, to Goldberg's "knowledge," in the three years immediately preceding the installation of the said alarm system at Plaintiffs' home, there had not been any successful burglaries of homes that had a similar system installed by Defendant.
• *925 That the defendant, its employees, agents and servants, were experts in the installation, maintenance and operation of central station alarm systems, and that they were the "best" on Long Island, if not in the State of New York, in the installation, maintenance and operation of such stations.
On January 6, 2002, the plaintiffs' home was burglarized, at which time the home telephone lines were cut. Plaintiffs maintain that either the alarm system failed to transmit a signal or defendant's central monitoring agents failed to appreciate it. In either event, plaintiffs assert, the police were not notified until plaintiffs returned home and called them from a neighbor's telephone. Plaintiffs allege that they sustained substantial loss as a result of the burglary and the failure of SLOMIN'S to timely notify the police.
Plaintiffs commenced this action in April 2002, asserting claims of fraud, negligence and breach of warranty. Defendant now moves to dismiss pursuant to CPLR(a)(1) and (7) on the ground that all causes of action are barred by the express terms of the Contracts. In particular, defendant refers to the merger clauses, disclaimers of representations and warranties, exculpatory clauses and limitation of liability or liquidated damages clauses contained the Contracts.
[1] Link to KeyCite Notes[2] Link to KeyCite Notes[3] Link to KeyCite Notes In ruling upon a motion to dismiss, the Court must accept the facts alleged as true and accord plaintiffs the benefit of every possible favorable inference. Leon v. Martinez, 84 N.Y.2d 83, 614 N.Y.S.2d 972, 638 N.E.2d 511. The Complaint is to be construed liberally. The Court may not address the merits of the complaint or any of its factual allegations, but must determine only whether the alleged facts fit within any cognizable legal theory. Id.; P.T. Bank Central Asia v. ABN AMRO Bank N.V., 301 A.D.2d 373, 754 N.Y.S.2d 245. "Dismissal is warranted only if the documentary evidence conclusively establishes a defense to the asserted **763 claims as a matter of law ... [T]he criterion is whether the proponent of a pleading has a cause of action, not whether he has stated one." Leon v. Martinez, supra, at 88, 614 N.Y.S.2d 972, 638 N.E.2d 511; see also Steiner v. Lazzaro & Gregory, P.C., 271 A.D.2d 596, 706 N.Y.S.2d 157.
Courts generally refrain from disturbing arms-length transactions, and where the language of a contract is unambiguous, it is generally enforced according to its terms. Symbol Technologies, Inc. v. Datamax Corp., 274 A.D.2d 386, 710 N.Y.S.2d 613. The Contracts at issue here articulate an unambiguous intent to negate or limit *926 Slomin's liability in almost every circumstance, and, on their face, present a defense to plaintiff's claims. However, New York courts have long recognized certain circumstances, including but not limited to fraud, in which even the most flawlessly drafted contract provisions may be subject to judicial scrutiny, and even avoided, in the interest of justice or sound public policy. The question is whether such circumstances exist here.
I. FRAUD/MISREPRESENTATION.
[4] Link to KeyCite Notes The Courts shall first consider whether plaintiffs have a claim for fraud, and the legal effect upon such claim of the contractual provisions purporting to bar liability. To establish a prima facie case of fraud, the plaintiff must show that: (1) the defendant made a material representation of fact that was false; (2) the defendant knew that the representation was false and made it with intent to deceive (scienter); (3) the plaintiff justifiably relied upon defendant's misrepresentation; and (4) the plaintiff suffered some loss or harm as a result of such reliance. PT Bank Central Asia v. ABN AMRO Bank N.V., supra, at 250; Otto Roth & Co. v. Gourmet Pasta, Inc., 277 A.D.2d 293, 715 N.Y.S.2d 78; Giurdanella v. Giurdanella, 226 A.D.2d 342, 640 N.Y.S.2d 211.
[5] Link to KeyCite Notes Defendant asserts that plaintiffs' fraud claim is insufficiently plead. Specifically, defendant argues that plaintiffs have failed to allege scienter; i.e., that Goldberg, SLOMIN'S sales agent, knew that his statements were false and that he made them with intent to deceive. A fraud claim must be stated with sufficient particularity; that is, "the circumstances constituting the wrong shall be stated in detail." CPLR 3016(b). However, "neither CPLR 3016(b) nor any other rule of law requires a plaintiff to allege details of the asserted fraud that it may not know or that may be peculiarly within the defendant's knowledge at the pleading stage." PT Bank Central Asia v. ABN AMRO Bank N.V., supra, at 251. "CPLR 3016(b) 'requires only that the misconduct complained of be set forth in sufficient detail to clearly inform a defendant with respect to the incidents complained of and is not to be interpreted so strictly as to prevent an otherwise valid cause of action in situations where it may be impossible to state in detail the circumstances constituting a fraud.' " Id., quoting Lanzi v. Brooks, 43 N.Y.2d 778, 780, 402 N.Y.S.2d 384, 373 N.E.2d 278.
[6] Link to KeyCite Notes Here, plaintiffs' fraud claim is based upon the alleged representation by Goldberg that the system would transmit an alarm signal to the central monitoring station even if the telephone lines were cut. For purposes of this motion to dismiss, the Court must assume that Goldberg did, in fact, *927 make such representation. Given that SLOMIN'S moving papers concede that the system was not designed to work in such circumstances, Goldberg's alleged representation must have been false at the time it was made. Although plaintiff does not claim that Goldberg knew it was false, plaintiff need not speculate as to the extent of Goldberg's knowledge, as such facts are **764 peculiarly within defendant's knowledge at this stage of the proceedings. Further, knowledge of falsity is not indispensable, if fraud also includes reckless misstatement and "the pretense of knowledge when knowledge there is none." Ultramares Corp. v. Touche, 255 N.Y. 170, 174 N.E. 441 (Cardozo, Ch.J.). As plaintiff is entitled to the benefit of every favorable inference for purposes of this motion, it can be inferred from the context of the alleged statement that Goldberg intended to induce plaintiffs to purchase the SLOMIN'S alarm system and monitoring service, and that Goldberg, at minimum, assumed a pretense of knowledge in trying to conclude the sale. The Court concludes that the facts alleged in the complaint are sufficient to put defendants on notice of the misconduct complained of, and thus are sufficient to withstand dismissal on the basis of CPLR 3016(b).
Defendant also argues that plaintiffs are barred from asserting a fraud claim because the only fraud alleged relates to a breach of contract. See Page v. Muze, Inc., 270 A.D.2d 401, 705 N.Y.S.2d 383. The Court of Appeals has held that:
"[A] simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated. This legal duty must spring from circumstances extraneous to, and not constituting elements of, the contract, although it may be connected with and dependent upon the contract." Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co., 70 N.Y.2d 382, 521 N.Y.S.2d 653, 516 N.E.2d 190 (citations omitted).
[7] Link to KeyCite Notes To maintain a fraud action in a contractual setting, the plaintiff must allege: "(1) a legal duty separate and apart from the contractual duty to perform; (2) a fraudulent representation collateral or extraneous to the contract; or (3) special damages proximately caused by the fraudulent representation that are not recoverable under the contract measure of damages." Bell Sports, Inc. v. System Software Associates, Inc., 45 F.Supp.2d 220. [FN1]

 
FN1. In its memorandum of law, SLOMIN'S incorrectly cites Bell
Sports, supra, as holding that all three criteria must be satisfied in order to maintain a fraud action. The Court has reviewed the case and notes that the requirements are stated in the disjunctive, meaning that satisfaction of any one of them is sufficient to sustain the action.


[8] Link to KeyCite Notes *928 The Court determines that the alleged representations by Goldberg are neither collateral nor extraneous to the contract, insofar as they relate to and elaborate upon the nature of the system and service to be provided. However, it is the very essential nature of these representations, particularly the representation that the system would operate even if the telephone lines were cut, that persuades the Court that SLOMIN'S had a legal duty to plaintiffs, separate and apart from the contractual duty to provide the system and service it promised. The Court finds that SLOMIN'S had a legal duty to speak truthfully and accurately about the system it offered, and to disclose any material limitations in the system that would not be apparent to the purchaser. That is, SLOMIN'S had an affirmative duty to tell plaintiffs that the system would not operate if the telephone lines were cut.
[9] Link to KeyCite Notes In the context of fraudulent concealment case law, New York courts have acknowledged that a duty to disclose material information may arise absent a fiduciary relationship. "Under the 'special facts' doctrine, a duty to disclose arises 'where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair.' " Swersky v. Dreyer and Traub, 219 A.D.2d 321, 327, 643 N.Y.S.2d 33 (citations omitted). See also **765 George Cohen Agency, Inc. v. Donald S. Perlman Agency, Inc., 114 A.D.2d 930, 495 N.Y.S.2d 408, Young v. Keith, 112 A.D.2d 625, 492 N.Y.S.2d 489. A seller with superior knowledge has a duty to disclose facts, not available to the purchaser, that would affect the purchaser's conduct in the transaction. Striker v. Graham Pest Control Co., Inc., 179 A.D.2d 984, 578 N.Y.S.2d 719; Young v. Keith, supra. The duty to disclose arises where nondisclosure would "le[a]d the person to whom it was or should have been made to forego action that might otherwise have been taken for the protection of that person." Strasser v. Prudential Securities, Inc., 218 A.D.2d 526, 527, 630 N.Y.S.2d 80, quoting Caracci v. State of New York, 203 A.D.2d 842, 844, 611 N.Y.S.2d 344.
[10] Link to KeyCite Notes Upon the facts alleged in this case, the Court can infer that SLOMIN'S had superior knowledge regarding the capabilities of its own alarm system, which knowledge was unavailable to plaintiffs through ordinary inspection, and which was material to the plaintiffs' decision to enter into the Contracts with SLOMIN'S or to forego alternatives that might have provided more effective or complete protection. This superior knowledge gives rise to a duty to disclose which, in turn, supports a cause of action *929 for fraud in the event of its breach, either by non-disclosure or by misrepresentation. It remains incumbent upon plaintiffs to prove that this duty was breached. As shall be discussed hereafter, defendants maintain that the Contracts adequately disclose the system's limitations and negate any reliance upon Goldberg's representations. However, for purposes of the instant discussion, the Court determines that a fraud action is not precluded by virtue of its being interposed in a contractual setting, given that a distinct legal duty exists, apart from performance under the contract. Cf. Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 583 N.Y.S.2d 957, 593 N.E.2d 1365 (fire alarm company had duty of reasonable care independent of contractual obligations, arising from the nature of its services and its relationship with its customer, insofar as it performed a service "affected with significant public interest").
Defendant next argues that plaintiffs have effectively extinguished their fraud claim by continuing to subscribe to SLOMIN'S alarm plan as well as its heating and air conditioning plans. However, ratification of a transaction after discovery of a fraud may extinguish a right to rescission, but it does not extinguish a claim for monetary compensation for injuries resulting from the fraud. Clearview Concrete Products Corp. v. Gherardi, Inc., 88 A.D.2d 461, 453 N.Y.S.2d 750. Although in some circumstances, ratification will undercut a plaintiff's claim of reliance [see Id.; Champion Titanium Horseshoe, Inc. v. Wyman-Gordon Investment Castings, Inc., 925 F.Supp. 188], in this case, the fact that plaintiffs continue to do business with SLOMIN'S does not necessarily negate the claim that plaintiffs relied upon certain representations in choosing to do business with them initially. Plaintiffs may show that upon learning the true nature of the system, they chose to continue with SLOMIN'S out of economic or practical expedience, and/or they found other means to supplement their protection. That is not to say that they would have chosen SLOMIN'S in the first instance, had they known that the system could be easily deactivated. The Court determines that, in this case, reliance is not defeated by ratification, as a matter of law, but that plaintiffs have the burden to prove reliance in the context of such ratification.
The Court turns to the Contract provisions that purport to bar liability. Each Contract contains a provision substantially as follows:
**766 FULL AGREEMENT; SEVERABILITY. This agreement constitutes the full understanding of the parties and there are no oral Agreements, understandings *930 or representations between the parties. This Agreement may not be amended or modified except in writing signed by both parties. Should any provision of this Agreement be deemed void, the remaining parts shall not be affected.
[11] Link to KeyCite Notes Defendant argues that this merger clause, together with the parol evidence rule codified at G.O.L. § 15-301, bar any claim based upon alleged oral representations. However, the parol evidence rule and such general merger clauses exclude extrinsic evidence to contradict or vary the terms of a written instrument in the context of a suit to enforce an oral representation. Both are "ineffectual to exclude evidence of fraudulent representations" in an action to rescind a contract or to recover loss sustained as a result of fraudulent inducement. Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906.
Defendant further argues that the Contracts contain specific disclaimers that do not fall within the rule articulated in Sabo v. Delman, supra, and that, consequently, defeat plaintiffs' claim. The Sabo rule, that fraud in the inducement vitiates a contract, is subject to exception. If a "plaintiff has, in the plainest language announced and stipulated that it is not relying on any representations as to the very matter as to which it now claims it was defrauded[, s]uch a specific disclaimer destroys the allegations in plaintiff's complaint that the agreement was executed in reliance upon these contrary representations." Danann Realty Corp. v. Harris, 5 N.Y.2d 317, 320, 184 N.Y.S.2d 599, 157 N.E.2d 597. See also Citibank, N.A. v. Plapinger,