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Yoffredo v. Housemaster of America, Inc.

A-5650-96T3 (N.J. Super. App. Div. 1998) (Unpublished)

CONTRACTS; HOME INSPECTIONS; LIMITATION OF LIABILITY—A home inspection contract’s limitation of liability provision is ineffective in the presence of unequal bargaining power or where the provision does not expressly apply to the inspector’s negligence.

Home buyers contracted with a company to perform inspections for pest infestation and radon as well as a general home inspection. The contract contained a clause limiting the company’s liability to the amount of the inspection fee. A few months after moving in, the buyers discovered termite infestation and wood damage that could not have occurred in the few months since the inspection. The buyers brought suit against the inspection company and the trial judge held that the company’s inspection was done negligently and not in a workerlike manner. The judge construed the contract strictly against the company (which drafted it), and stated that it was a form contract that was signed after the inspection, without negotiation. The judge held that the limitation of liability clause did not limit the amount of damages available to the buyers. The only issue on appeal was whether damages were limited by the contract.

The Appellate Division first looked to cases that had considered the enforceability of limitation of liability clauses. Courts ordinarily will enforce clear contracts made between parties, even those with limitation of liability clauses, as long as there was equal bargaining power and the clause is not unconscionable. However, if there is unequal bargaining power or the limitation does not expressly include negligent acts by the party performing the services, the clause will not be enforced. New Jersey cases have even held that a clause which purports to limit a supplier from liability for its own negligence must do so expressly and in plain language. The Court construed the contract strictly against the company and found that the contract did not clearly state that the company’s liability was limited even when the inspection was negligently performed. The Court also found that the bargaining power was grossly disproportionate. The Appellate Division rejected the inspection company’s argument and affirmed the lower court judgment holding the company liable for more than the inspection fee.


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