Limitation of Liability Clause - Essay Example

Business Law of the of Business Law ‘Limitation of liability clause’ is a term usually employed to constrain the breaching liability to anything lesser than what could be recoverable otherwise (Huebsch, 2012). The news article regarding this clause was obtained from the Camilleri and Clarke associates. The article discusses that several court cases have preserved the legal status of this clause. One such case referred to in the article was decided in 1991 in California in which a developer named Mark Borough California, Inc. litigated against consulting engineers. These engineers designed an artificial lake but its liner failed and therefore a $5 million amount was claimed against the engineers. So the engineers took the position that the contractual agreement involved the limitation of liability clause that restricted their liability to their fee earned on the project i.e., $67,640 and the trial court accorded with the engineers.

Succeeding cases endorsing ‘LOL’ include Valhal Corp. v. Sullivan Associates, Inc., Union Oil Company of California v. John Brown E&C,., and R1 Associates, Inc., v. Goldberg-Zoino & Associates, Inc. Although such cases also exist where the claim was overturned by the court, for instance, Ricciardi v. Frank. This case was settled in New York City in which a house owner litigated for the failure in problem identification in the water encroachment in the basement. The LOL clause constrained the liability of engineers in this case to only an amount of $375 but in this case, the clause was ruled to be as invalid as it didn’t entail the option for the house owner to buy complete protection and the clause was provided in the inspection report after the inspection had been done (Fishman, 2011).

The article provided ways to increase the chances of enforcement of this clause. It has been presented that if the clause has been inserted by parties having equal strength to bargain, and its drafting has been clarified, it will lead to enforcement unless the state law contrary to this clause exists or it has been decided that the clause enforcement had been unconscionable. The article recommends negotiation of the LOL clause between the two parties. The limitation offered on the liability should be equitable. The article offered all the details involved to ensure enforcement of the clause from the drafting of the contract to the incidents of litigations involving the LOL clause.