Academic journal article Journal of Accountancy

Court Enforces Limitation-of-Liability Provision

Academic journal article Journal of Accountancy

Court Enforces Limitation-of-Liability Provision

Article excerpt

The Oregon Court of Appeals upheld the validity of limitation-of-liability provisions in a contract for professional services. Although this case involved an engineer, its rationale could be applied to an accountant's service contract.

The case began when plaintiff Richard C. Estey contracted with MacKenzie Engineering Inc. (MEI) to conduct a "limited visual review" of a house Estey intended to purchase. The one-page service contract set out the estimated contract sum of $200 and contained this clause: "The liability of MEI and the liability of its employees are limited to the contract sum."

Estey subsequently purchased the house and later discovered numerous defects. He sued the engineering firm for negligence, negligent misrepresentation and breach of contract in the performance of professional services and alleged $340,000 in damages.

MEI filed a motion for summary judgment, which the trial court granted.

Estey appealed, and the appellate court ruled for the defendant (MEI) noting, however, that limitations of liability--while not automatically void--were not favored by courts, and conceding that the parties did not specifically bargain for the clause involved in this case. …

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