Limit of Liability clause can actually work

Terracon was recently sued in federal court by Thrash Commercial Contractors.

Terracon was the testing lab for large fill masses being placed for a Mississippi site and apparently the testing frequency was inadequate and the General Contractor was forced by the Owner (a government agency) to remove the upper 6 feet of fill and re-install, and remove some concrete footings that were already constructed on the fill.  A study had been performed to evaluate the fill and the conclusion was that parts of the fill were not properly compacted.  Thrash sued Terracon for $300,000 in damages.  Of course the Contractor claimed Terracon had poor oversight, and Terracon claimed the Contractor did not properly schedule inspections.

The case ultimately turned to the limit of liability clause in Terracon's contract.  The testing lab fee was $14,900, and the limit of liability was $50,000.  So Terracon fell back on this position and would not pay the $300,000.  The court recognized the following:

(1) Was the contractor free to negotiate for a higher L.O.L.?  YES !  Terracon had a statement stating the client could negotiate a higher L.O.L. for an additional fee.  The contractor did not negotiate (ask) for such an increase.

(2) Was the amount of the L.O.L. reasonable relative to the fee?  For a $14k fee, $50k in liability was deemed reasonable.

(3) Were there any conflicting provisions in the contract?  The indemnity clauses protected Terracon from any negligence or omissions by the Contractor.

(4) Did the Terracon contract seek to indemnify even for its own errors?  No.

So Contractor had no case on all 4 counts and lost the case for anything more than potentially $50k in damages (not the $300k sought).

I have since reworded our company's contract language :)