Whether your limitation of liability and damages contract provisions are upheld in court will depend on whether your conduct is deemd to be willful or grossly negligent– behavior that goes beyond mere negligence. Courts are all over the map on what this means and it largely depends on the facts. But there are four easy things you can do to help tip the scales of justice in your favor.
First, the obvious: Avoid willful and grossly negligent behavior. In practice, at a minimum that means hiring diligent people and training them well; developing standards for your employees and adequately supervising them to ensure the standards are followed; and staying abreast of, and following, the law and code requirements. If you can come to court with the ability to show you did your best, even though something went wrong, you will be much better off.
Second, and equally obvious: Keep a copy of the customer’s signed contract in a safe place. Better yet, keep a paper and an electronic copy. And if your contract has a place for a company representative to sign, make sure to have him or her sign it. The contract can usually be enforced without the company’s signature where the company has been providing service as if there was a contract, but it can be a big distraction from an otherwise good case.
Third, be mindful of to whom your contract applies. As an example, say you have an unmarried couple living together and only one of them signs the contract for their home’s alarm system. Both of them are then killed in a house fire and a claim is made that the deaths were caused because the alarm did not timely sound. Does the alarm contract and its limitation apply to both people, or just the one who signed the contract? That is an open question in many jurisdictions. So your best practice is to have all adult occupants sign the contract, if you can.
Finally, make sure your contract is up-to-date. Laws change and court decisions regularly affect how these contracts are interpreted. For example, are you in compliance with your state’s automatic renewal statute, if it has one? Have you included provisions about lead paint or VoIP in your contract? Make sure your company’s contract is current, and applicable to your state, not just a cookie-cutter form, or it could be unenforceable or missing a helpful provision.
