Wedner v. Fidelity Security Systems, Inc., 307 A.2d 429

Pensylvania Superior Court

1973

Chapter

20

Title

Contract Remedies

Page

838

Topic

Agree Remedies

Quick Notes

Contracting parties can by agreement limit their liability in damages to a specified amount, either at the time of making their principal contract, or subsequently thereto

Book Name

Contracts Cases, Discussions, and Problems.  Blum Bushaw, Second Edition.  ISBN:  978-0-7355-7069-6.

Issue

o         Whether there was any reasona why the limitation on liability should not be given?  No.

Procedure

Trial #1

o         Non-Jury, Non-Suit, New Trial Granted

Trial #2

o         Non-Jury, although he found the contract had been negligently breached, the appellant was only entitled to liquidated damages in the amount of $ 312.00 by the terms of the contract.

Appellant

o         Affirmed

Facts

Rules

Reason

Pl Wedner

Df Fidelity Sec. Systems

What happened?

o         This action involved a contract for a burglar alarm system.

o         There was a burglary involving the loss of $46,180.00 in furs.

First Trial nonsuit outcome

o         Nonsuit - A judgment against a plaintiff for failure to prosecute the case or to introduce sufficient evidence.

o         It was first tried by Judge Silvestri without a jury and a nonsuit resulted.

o         The nonsuit was removed and a new trial granted.

New Trial Liquidated damages

o         It was then tried by Judge McLean without a jury and although he found the contract had been negligently breached, the appellant was only entitled to liquidated damages in the amount of $ 312.00 by the terms of the contract.

Appellant Court

o         Affirmed

Liquidated Recovery

o         The appellant suffered a loss of $ 46,180.00 due to the appellee's wrongful failure to perform under a burglary protection service contract, but because of a contract provision he was allowed recovery of only $ 312.00.

Contract Provisions

o         The contract provided that the appellee, FEPS, was not to be liable for any loss or damages to the goods of the appellant and then continued: "If there shall, notwithstanding the above provisions, at any time arise any liability on the part of FEPS by virtue of this agreement, whether due to the negligence of FEPS or otherwise, such liability is and shall be limited to a sum equal in amount to the yearly service charge hereunder, which sum shall be paid and received by the Subscriber as liquidated damages."

Wedner Args

o         The appellant contends that this is an unreasonable forecast of the probable damages resulting from a breach of the contract.

Giving Effect to (Penalty or Liquidation Clause)

o         There is a well settled general principle that courts will not give effect to a provision in a contract which is a penalty, but will give effect to a provision in a contract which is deemed a liquidated damages provision

339 Protection of Obligor in Cases of Adverse Claims

o         Where a claim adverse to that of an assignee subjects the obligor to a substantial risk beyond that imposed on him by his contract, the obligor will be granted such relief as is equitable in the circumstances.

o         Contracting parties can by agreement limit their liability in damages to a specified amount, either at the time of making their principal contract, or subsequently thereto.

o         Liability is and shall be limited to the yearly service charge of $312 are anything but a limitation of liability and not really a liquidated damages clause.

Liquidated Wording Language

o         Little bearing

o         The name given to the clause by the parties "is but of slight weight, and the controlling elements are the intention of the parties and the special circumstances of the case.

Keys to Language

o         Not ambiguous wording the meaning of the words are clear.

o         Fix limit of liability - $312.

Court Limitations on Liability Clause

o         The parties agree that they said what they meant.

o         Both parties and their counsel participated in stating the terms of the contract.

o         The seller says that it has performed but, if it has not done so in the respect complained of, the buyer has agreed that he shall have no right to recover damages.

Consequential Damages Rule

o         2-719 (3), which provides: "Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.

o         Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not."

o         The common law exception as to public utilities.

o         Expanded to bank.

Quick Rules

Injury

o        Cannot Limit consequential damages and is unconscionable.

Commercial

o        Can limit damages

Exceptions

o        Utilities and Banks

Public Policy

o        This Court has consistently decided that it is against public policy to permit a common carrier to limit its liability for its own negligence.

Courts Reasoning About Outcome

o         In this case there was a private arrangement.

o         The appellant had a choice as to how to protect his property

o         He had a choice to obtain insurance.

o         Both parties are experience and established business persons.

o         The Pl had 20 years of this type of burglary alarm protection with the Df - competitor.

o         The Pl is not a sheep keeping company with the wolves.

Affirm

Rules

339 Protection of Obligor in Cases of Adverse Claims

o         Where a claim adverse to that of an assignee subjects the obligor to a substantial risk beyond that imposed on him by his contract, the obligor will be granted such relief as is equitable in the circumstances.

o         Contracting parties can by agreement limit their liability in damages to a specified amount, either at the time of making their principal contract, or subsequently thereto.

o         Liability is and shall be limited to the yearly service charge of $312 are anything but a limitation of liability and not really a liquidated damages clause.

356 Liquidated Damages and Penalties

1.         Damages for breach by either party may be liquidated in the agreement but only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss.

o        A term fixing unreasonably large liquidated damages is unenforceable on grounds of public policy as a penalty.

2.         A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the bond is unenforceable on grounds of public policy to the extent that the amount exceeds the loss caused by such non-occurrence.

Consequential Damages Rule

o         2-719 (3), which provides: "Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable.

o         Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not."

o         The common law exception as to public utilities.

o         Expanded to bank.

Quick Rules

Injury

o        Cannot Limit consequential damages and is unconscionable.

Commercial

o        Can limit damages

Exceptions

o        Utilities and Banks

Public Policy

o        This Court has consistently decided that it is against public policy to permit a common carrier to limit its liability for its own negligence.

Class Notes