South-Western Legal Studies in Business

Home Inspector's Contract Limiting Liability Stricken as Unconscionable
Description Appeals court held that a home inspector’s contract that limited liability to a trivial sum, regardless of the basis of liability, was a contract of adhesion that was unconscionable and could not be enforced.
Topic Contracts
Key Words Unconscionability; Adhesion; Liability; Bargaining Position
C A S E   S U M M A R Y
Facts A couple bought a home. They hired CAL to perform a home inspection. The inspection agreement states that CAL’s liability for any matter related to the inspection cannot exceed 50 percent of the inspection fee. Since the fee was $385, liability was limited to $192.50. The inspection stated there were no problems with the home. After the couple moved in, they noticed a roof leak. A roofer said that the roof was defective because it had no flashing, something that should have been noticed by the inspector. The repair would cost between $8,000 and $10,000. The buyers sued CAL for breach of contract, fraud, negligence, and breach of warranty. CAL moved for a declaration that the limit of its liability was $192.50. The trial court held for CAL. The buyers appealed.

Reversed. The contract limiting the inspector’s liability to half the fee was a contract of adhesion. There were no negotiations. The contract was presented to the buyer on a standard, pre-printed form prepared by the inspector on a take-it-or-leave-it basis, without any opportunity for modification of terms. Since the inspector was an expert and the consumer had no experience in the area, there was grossly unequal bargaining status. Such exculpation clauses are particularly disfavored in contracts for professional services. The damage limit was so small as to effectively eliminate responsibility for the inspector, which is contrary to state public policy of encouraging reliable home inspections and to hold professionals to industry standards.

Citation Lucier v. Williams, --- A.2d --- (2004 WL 257036, App. Div., N.J., 2004)

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