Does A Contract Provision That Precludes The Recovery Of Any Damages Render The Entire Contract Illusory? The Eleventh Circuit Court Of Appeal Has Asked The Florida Supreme Court To Decide
The Eleventh Circuit Court of Appeal was faced with an otherwise relatively unremarkable dispute involving an alleged breach of a software services contract. What made the case remarkable was the inclusion of a provision in the relevant contract that precluded the recovery of any and all damages. That’s right: the contract stated that the plaintiff could not recover any damages in the event of a breach. See Pier 1 Cruise Experts v. Revelex Corp., 929 F.3d 1334 (11th Cir. July 11, 2019). The relevant exculpatory language of the contract stated the following:
Revelex shall not be liable … for any direct, special, indirect, incidental, consequential, punitive, exemplary or any other damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise), including but not limited to loss of profits, data, or goodwill, regardless of whether Revelex knew or should have known of the possibility of such damages…. Customer waives any and all claims, now known or later discovered, that it may have against Revelex and its licensors and vendors arising out of this agreement and the services.
After disposing of several preliminary issues presented as part of the appeal, the Eleventh Circuit began its discussion of whether such a one-sided and all-inclusive exculpatory provision in a contract should be enforced:
Which brings us to the biggie: How to handle the Service Agreement’s exculpatory clause? That question tees up two subsidiary issues, which we’ll address in turn: First, when and under what circumstances are exculpatory clauses enforceable as a general matter? And second, what is the effect of the particular—and particularly broad—exculpatory clause at issue in this case?
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The much tougher question, to which we now turn—and which we will certify to the Florida Supreme Court—is whether the exculpatory clause is enforceable here. We see three possibilities, all of which find some support in Florida law and (or really but) have dramatically different consequences for this case. First, there is Revelex’s position: The clause should simply be enforced according to its terms to bar all of Pier 1’s claims. Second, there is Pier 1’s (and the district court’s) position: Read for all it’s worth, the exculpatory clause immunizes Revelex from essentially all liability and thereby renders the entire Service Agreement illusory and void ab initio. Finally, there is an in-between position: To avoid the illusoriness problem, the clause should be construed to bar only negligence claims, not breach-of-contract claims. We will explore each possibility briefly before formally certifying the question to the Florida Supreme Court.
After generally discussing each of these issues, the Eleventh Circuit certified the following question to the Florida Supreme Court:
We certify to the Florida Supreme Court the following question, in whatever form that court chooses to address it:
Is a contractual “exculpatory clause” that purports to insulate one of the signatories from “any … damages regardless of kind or type … whether in contract, tort (including negligence), or otherwise” enforceable? Or, alternatively, does the clause confer such sweeping immunity that it renders the entire contract in which it appears illusory? Or, finally, might the clause plausibly be construed so as to bar some but not all claims and thus save the contract from invalidation?
Regardless of how the Florida Supreme Court responds to this certified question, the Eleventh Circuit’s discussion of the issue, and indeed its decision to certify the question, illustrates what can happen when a party to a contract gets overly aggressive with limitation-of-remedy provisions. Even if the other party to the contract does not challenge such provisions prior to contract execution, it is worthwhile to consider whether the provisions are reasonable. To not consider that question is to ignore the potential for a court to strike the provision in its entirety or, perhaps worse, strike the entire contract.
Matthew J. Meyer, Esq.
Ansa Assuncao, LLP
100 South Ashley Drive, Suite 1740
Tampa, Florida 33602