Limiting Exposure With a Limitation of Liability Clause
Gregory J. Reigel asks and answers the question: Can you really limit your liability simply by including certain language in your agreements?
He finds the answer in a recent Texas Supreme Court ruling in Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC. In that case, plaintiff aircraft purchasers sued Bombardier, alleging that the engines installed on the plane they bought were not new equipment. A jury found in favor of the plaintiffs and awarded $2.7 million in actual damages and $5.4 million in punitives.
On appeal, Bombardier relied on a limitation of liability clause in the purchase agreement. The state Supreme Court ruling shows that “where sophisticated parties have bargained for a limitation of liability clause in an arms-length transaction, courts are likely going to enforce that clause to limit the damages that may be recovered,” Reigel writes.