District of Columbia

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Enforceability of Limitation of Liability Clauses

Limitations of Liability

District of Columbia courts generally enforce limitation of liability clauses.  In re Fort Totten Metrorail Cases Arising Out of the Events of June 22, 2009, 808 F. Supp. 2d 154, 160 (D.D.C. 2011) (examining limitation of liability clause in contract between transit authority and software developer for traffic monitoring system); D’Ambrosio v. Colonnade Council of Unit Owners, 717 A.2d 356, 359 (D.C. 1998) (discussing validity of limitation of liability clauses in condominium bylaws); Bargaintown of D.C., Inc. v. Fed. Eng’g Co., 309 A.2d 56, 56 (D.C. 1973) (upholding limitation of liability clause in burglar alarm service contract); United States Conference of Mayors, v. Great-West Life & Annuity Ins. Co., No. 16-00660, 2017 WL 6271268, at *5 (D.D.C. Dec. 8, 2017) (acknowledging enforceability of limitation of liability clauses but finding contract in question did not clearly limit liability).  Such clauses will not be enforced, however, if there is bad faith, intentional or willful misconduct, or gross negligence.  See, e.g., Carleton v. Winter, 901 A.2d 174, 181-82 (D.C. 2006) (“Courts do not enforce agreements to exempt parties from tort liability if the liability results from that party’s own gross negligence, recklessness, or intentional conduct.”).  District of Columbia law also provides for limitations of liability in sales contracts, as long as the limitation serves its essential purpose and is not unconscionable.  D.C. Code Ann. § 28:2-719(1)-(3) (West 2021).

Exculpatory Clauses

District of Columbia courts “generally permit exculpatory clauses so long as they do not purport to waive liability for gross negligence, fraud or other willful wrongful conduct.”  Hedgepeth v. Whitman Walker Clinic, 22 A.3d 789, 802 n.18 (D.C. 2011).  Thus, exculpatory provisions must not violate the public policy.  Godette v. Estate of Cox, 592 A.2d 1028, 1034 (D.C. 1991).  For this reason, a party may not exculpate himself from gross negligence.  Carleton v. Winter, 901 A.2d 174, 181 (D.C. 2006). 

Indemnity Agreements

The District of Columbia does not have an anti-indemnity statute and its courts generally recognize indemnification provisions if the parties to plainly state their intentions.  Holt v. Walsh Group, 316 F. Supp. 3d 274, 280 (D.D.C. 2018) (enforcing an indemnification clause requiring a subcontractor to indemnify a contractor for a personal injury action brought against the contractor); N.P.P. Contractors, Inc. v. John Canning & Co., 715 A.2d 139, 142 (D.C. 1998) (enforcing indemnification clause requiring subcontractor to indemnify contractor for damages caused by contractor’s own negligence); District of Columbia v. Royal, 465 A.2d 367, 369 (D.C. 1983) (refusing to enforce an indemnity provision that would have shifted the District’s responsibility for its negligence to its contractors). 

Enforceability of Waiver of Consequential Damages Clauses

District of Columbia courts have not directly addressed the enforcement of waiver of consequential damages clauses in the construction context.  Generally, District of Columbia courts recognize that parties are free to enter into whatever contractual agreements they wish, and that freedom of contract should be curtailed by the courts only when such contracts, or contractual provisions, run contrary to public policy.  See, e.g., Wisconsin Ave. Assocs., Inc. v. 2720 Wisconsin Ave. Co-op. Ass’n, Inc., 441 A.2d 956, 964 (D.C. 1982) (“Although courts properly are reluctant to interfere with the freedom to contract, it may become necessary to refuse to enforce contractual provisions which operate contrary to public policy.”);  Bargaintown of D.C., Inc. v. Fed. Eng’g Co., 309 A.2d 56, 57 (D.C. 1973) (upholding limitation of liability clause in burglar alarm service contract).

In the context of transactions for the sale of goods, the District of Columbia Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances.  See D.C. Code Ann. §§ 28:2-711 – 28:2-714, 28:2-715(2).  However, D.C. code section 28:2-719 permits the buyer and the seller to contract to limit or exclude consequential damages unless the contractually specified limitation or exclusion is unconscionable or where the circumstances cause the contractually specified limited or exclusive remedy to fail of its essential purposeSee Potomac Plaza Terraces, Inc. v. QSC Prods., Inc., 868 F. Supp. 346, 353 (D.D.C. 1994) (explaining that pursuant to D.C. Code §§ 28:2-719(3) and 28:2-302(1), the “first test applied to a clause excluding liability for consequential damages is whether it is unconscionable”).  To establish unconscionability, a party must show the “absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.”  Id. at 353 n.10 (citations and quotation marks omitted).  Further, a finding of bad faith may preclude the enforcement of a provision limiting consequential damages.  Id. at 353. 

Application of Economic Loss Doctrine

 The economic loss doctrine in the District of Columbia bars recovery of purely economic losses in negligence, subject to only one limited exception where a special relationship exists creating an independent duty in tort.  Aguilar v. RP MRP Washington Harbour, LLC, 98 A.3d 979, 985–86 (D.C. 2014); see also Jefferson v. Collins, No. CV 12-239 (RBW), 2016 WL 5374076, at *4 (D.D.C. Sept. 26, 2016).  Recently, the District of Columbia Court of Appeals refined its ruling in Aguilar.  The court held in Whitt v. American Property Construction, P.C., 157 A.3d 196 (D.C. 2017), that the “special relationship” exception to the economic loss doctrine applied in the context of a business owner who sued the general contractor and gas company performing work on a nearby construction project unrelated to the plaintiff’s business for losses to her business due to construction activities.  The court in Whitt held a “special relationship” existed given extensive construction activities over a prolonged period, and the fact that the provisions of the construction permit obtained by defendants specifically protected the plaintiff from the effects of the defendants’ conduct.  Id. at 206.

Enforceability of No Damages for Delay Clauses

No damages for delay clauses are generally enforceable in the District of Columbia unless the delay is one:  (1) not contemplated by the parties;  (2) amounting to abandonment of the contract; (3) caused by bad faith; or (4) amounting to active interference.  Blake Constr. Co. v. C.J. Coakley Co., 431 A.2d 569, 578-79 (D.C. 1981).  In Blake, a contractor’s failure to properly sequence work and supervise another subcontractor who damaged the work was found to amount to “active interference.”  Id.

 

Strict Interpretation of Contract

District of Columbia courts “adhere to an ‘objective’ law of contracts, meaning that the written language embodying the terms of an agreement will govern the rights and liabilities of the parties regardless of the intent of the parties at the time they entered into the contract.”  Hartford Fin. Services Group, Inc. v. Hand, 30 A.3d 180, 187 n. 12 (D.C. 2011) (citing May v. Continental Cas. Co., 936 A.2d 747, 750-51 (D.C. 2011)).  However, where ambiguity exists and the written language is susceptible to more than one meaning or is not clear and definite, courts will consider the intent of the parties and may look to evidence outside the contract itself.  Id.; see also Aziken v. Dist. of Columbia, 70 A.3d 213, 219 (D.C. 2013).  Courts will not render a contract ambiguous based on the mere fact that the parties do not agree on the proper construction.  Aziken, 70 A.3d at 219; see also Jacobson Holman, PLLC v. Gentner, 244 A.3d 690, 696 (D.C. 2021) (citing Aziken, 70 A.3d at 219).  Should the contract be rendered ambiguous, the first step in interpreting the contract is to determine what a reasonable person in the position of the parties would have thought the disputed language meant. Tsintolas Realty Co. v. Mendez, 984 A.2d 181, 190 (D.C. 2009) (quoting Intercountry Constr. Corp. v. District of Columbia, 443 A.2d 29, 32 (D.C. 1982)).  The meaning must be ascertained in light of all the circumstances surrounding the parties at the time the contract was made.  Intercounty Constr. Corp., 443 A.2d at 32.  The writing must be interpreted as a whole, giving a reasonable, lawful, and effective meaning to all its terms.  Vicki Bagley Realty, Inc. v. Laufer, 482 A.2d 359, 366 (D.C.1984).  If the document is facially unambiguous, its language should be relied upon as providing the best objective manifestation of the parties’ intent. Debnam v. Crane Co., 976 A.2d 193, 197 (D.C. 2009) (citing Bolling Federal Credit Union v. Cumis Ins. Society, Inc., 475 A.2d 382, 385 (D.C.1984)).  Extrinsic evidence of the parties’ subjective intent may be resorted to only if the document is ambiguous. Id. (citing 1010 Potomac Assocs. v. Grocery Mfrs. Of Am., Inc., 485 A.2d 199, 205-06 (D.C. 1984)). However, extrinsic evidence may be considered to determine the circumstances surrounding the making of the contract, so that one may ascertain what a reasonable person in the position of the parties would have thought the words meant. Id.; see also District of Columbia Dept. of Housing & Comm. Dev. v. Pitts, 370 A.2d 1377, 1380 (D.C. 1977).  District of Columbia courts will only resort to the secondary standard of strict interpretation against the contract drafter when other rules of contract interpretation, such as the substantial intent of the parties, has failed to give definite meaning.  Id. at 1379-80.

Prompt Payment Requirements (Public/Private)

District of Columbia Public – D.C. Code §§ 2-221.01 to 2-221.06 (2021) (owner to prime 30 days, excluding legal holidays, after receipt of invoice, unless otherwise agreed; within 15 days after invoice received, notify of any defect in invoice or goods; prime to sub 7 days after payment; interest at rate not less than 1% and determined by mayoral regulation).

District of Columbia Private – D.C. Code §§ 27-131 to 27-136 (2022) (applies to contracts entered into on or after October 1, 2013) (owner to prime within 15 days of receipt of invoice if not specified in contract or within 7 days of date specified if a date is specified in contract; prime to sub within 7 days after payment; interest rate of 1.5% per month)

False Claims Statute

D.C. Code Ann. §§ 2-381.01 to 2-381.10 – The District of Columbia False Claims Act is substantially similar to the FCA.  In addition to the enumerated acts creating liability under the FCA, the District’s Act imposes liability on those persons who: (1) benefit from an inadvertent submission of a false claim to the District, subsequently discover the falsity of the claim, and fail to disclose the false claim; or (2) benefit from an inadvertent payment or overpayment by the District of monies not due and knowingly fail to repay the overage.  D.C. Code § 2-381.02(a)(8), (9).  If a prohibited act is committed by two or more persons, the District’s Act provides for joint and several liability.  D.C. Code § 2-381.02(c). 

Licensing Requirements for Construction Managers

District of Columbia regulations require construction managers to obtain a particularized license.  D.C. Code Ann. § 47-2851.03d.  As defined by the D.C. Municipal Regulations, the term “construction management” includes any person who is contracted to supervise and coordinate the work of design professionals or multiple general contractors.  D.C. Mun. Regs. tit. 17, § 3999.  Typically, the types of services provided by a construction manager include coordination, supervision, cost management, scheduling, estimating, design review, and contractor selection activities.  Id.  The District of Columbia grants five different classes of licenses based on the value of the projects that the construction manager oversees.  Id. § 3901.  Additionally, the District requires that all agreements between a property owner and a construction manager be reduced to a writing.  See id. § 3905.

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