Enforceability of Limitation of Liability Clauses
Author: Saloni Shah and Joanna Kopcyzk
Limitations on Liability
Maine courts generally allow parties to a contract to allocate risks as they see fit in commercial settings. Me. Rev. Stat. Ann. tit. 11, §§ 2-316, 2-719(1)-(3) (West 2022); see also Lincoln Pulp & Paper Co. v. Dravo Corp., 445 F. Supp. 507, 516-17 (D. Me. 1977) (permitting a seller of heat and chemical recovery boiler to limit its liability for breach of an express one-year warranty to repair or replace any defective parts and to exclude consequential damages); Hall v. Acadia Ins. Co., 801 A.2d 993, 995 (Me. 2002) (upholding limitation of liability provision in insurance policy).
Maine courts enforce exculpatory clauses but strictly construe them. Brower v. ADT LLC, No. 2:15-cv-00337, 2016 WL 4919884, at *9-10 (D. Me. Sept. 14, 2016) (upholding exculpatory clause in service contract); Reed & Reed, Inc. v. Weeks Maine, Inc., No. 02-195, 2004 WL 256335, at *7 (D. Me. Jan. 9, 2004) (upholding provision clearly releasing a party from “any and all claims whatsoever arising out of . . . the work”); Doyle v. Bowdoin Coll., 403 A.2d 1206, 1207-08 (Me. 1979). Parties must therefore “expressly spell out ‘with the greatest particularity the intention of the parties contractually to extinguish negligence liability.’” Id. Exculpatory clauses may not shield parties from liability for willful or wanton misconduct. Reliance Nat’l Indem. v. Knowles Indus. Servs. Corp., 868 A.2d 220, 226 (Me. 2005) (citing Lloyd v. Sugarloaf Mountain Corp., 833 A.2d 1, 7 (Me. 2003)).
Maine does not have an anti-indemnity statute for construction contracts. Maine courts, however, strictly construe contracts that provide for a party to be indemnified for losses resulting from that party’s own negligence. Emery Waterhouse Co. v. Lea, 467 A.2d 986, 993 (Me. 1983) (“It is only where the contract on its face by its very terms clearly and unequivocally reflects a mutual intention on the part of the parties to provide indemnity for loss caused by negligence of the party to be indemnified that liability for such damages will be fastened on the indemnitor.”); see also McGraw v. S.D. Warren Co., 656 A.2d 1222, 1223-24 (Me. 1995) (holding that construction contract did not expressly provide that contractor was to indemnify owner against owner’s negligence, thereby precluding owner from seeking indemnification in lawsuit brought by contractor’s employees against owner); Burns & Roe, Inc. v. Cent. Me. Power Co., 659 F. Supp. 141, 144 (D. Me. 1987) (finding that contract between engineering firm and power company did not contain an “explicit statement clearly manifesting an intent to indemnify against the indemnitee’s own negligence”).
Enforceability of Waiver of Consequential Damages Clauses
Maine courts have not directly addressed the enforcement of contractual waivers of consequential damages in the construction context. Generally, Maine courts recognize the importance of enforcing the plain language of contracts. See, e.g., Barr v. Dyke, 49 A.3d 1280, 1289 (Me. 2012) (citation omitted) (“If each party communicated to the other a ‘distinct and common intention,’ the contract will be enforceable.”). Maine courts have also recognized the enforceability of limitation of liability clauses in certain contexts. See Brower v. ADT LLC, No. 2:15-CV-00337-JAW, 2016 WL 4919884, at *10 (D. Me. Sept. 14, 2016) (“Given these factors, and given the overwhelming weight of authority upholding limitation of liability clauses in alarm-services contracts, the Court holds that the contract is not a contract of adhesion.”). Maine courts also recognize construction contracts as vehicles for parties to agree upon the allocation of risks between them. See, e.g., Acadia Ins. Co. v. Buck Const. Co., 756 A.2d 515, 518–19 (Me. 2000) (“It is not unusual for parties to a building contract to choose to allocate risks associated with the construction and to divide the responsibility for procuring the insurance against those risks.”). Moreover, “[a]lthough releases of liability are ‘traditionally disfavored,’ in Maine that disfavor has resulted in strict interpretation rather than prohibition.” Lloyd v. Bourassa, 2002 WL 31236112, at *3 (Me. Super. 2002) (citation omitted).
In the context of transactions for the sale of goods, the Maine Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances. See Me. Rev. Stat. tit. 11, §§ 2-711 – 2-714, 2-715(2). However, Maine code section 2-719 of title 11 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 purpose. See Lincoln Pulp & Paper Co., Inc. v. Dravo Corp., 445 F. Supp. 507, 516–17 (D. Me. 1977) (upholding exclusion of consequential damages clause in boiler manufacturer’s warranty). In Lincoln, the contractual provision at issue clearly excluded liability for consequential damages arising from breach of contract or breach of warranty. Id. The court also concluded that the provision was “sufficiently clear” to protect a party from liability for consequential damages arising from its own negligence. Id. “Maine has not yet considered the precise language in a commercial contract necessary to insulate a party from consequential damages arising from its own negligence.” Id. at 516–17. See also J.S. McCarthy Co., Inc. v. Brausse Diecutting & Converting Equip., Inc., 2005 WL 946318, at *6 (D. Me. Apr. 22, 2005) (“It is also well-established that contracting parties may limit in this fashion both warranties and the remedies that would otherwise be available for breach of warranty.”).
Application of Economic Loss Doctrine
Maine courts recognize the economic loss doctrine for products liability cases. See Oceanside at Pine Point Condominium Owner Ass’n v. Peachtree Doors, Inc., 659 A.2d 267, 270 (Me. 1995); see also Fireman’s Fund Ins. Co. v. Childs, 52 F. Supp. 2d 139, 142 (D. Me. 1999) (“In adherence to this doctrine, courts do not permit tort recovery for a defective product’s damage to itself or, in other words, where the injury suffered is merely the failure of the product to work properly rather than personal injury or resulting injury to other property.”). Maine courts are split as to whether the doctrine bars tort recovery when the parties are not in direct privity. See Fletch’s Sandblasting & Painting, Inc. v. Fay, Spofford, and Thorndike LLC, No. 2:15-cv-76-DBH, 2019 WL 847731, at *2 n. 4 (D. Maine Feb. 21, 2019) (citing cases).
Maine’s state courts have not yet extended the reach of the economic loss rule beyond products liability cases. See Banknorth, N.A. v. BJ’s Wholesale Club, Inc., 394 F. Supp. 2d 283, 287 (D. Me. 2005) (“Although Maine has adopted the economic loss doctrine in products liability cases … the Law Court has not yet elucidated its reach beyond the realm of products.”). Some federal courts in Maine have extended the doctrine to bar negligence and negligent misrepresentation claims connected with a professional service contract such as engineering and design services. Fletch’s, 2019 WL 847731, at *3; Maine Rubber Intern. v. Env’t Mgmt. Group, Inc., 298 F. Supp. 2d 13, 137–8 (D. Me. 2004). Another federal court in Maine expressed uncertainty as to whether the doctrine extends to construction disputes and declined to rule on the matter. See Thick Tech Sys., Inc. v. Methuen Constr. Co., Inc., No. 2:15-CV-76-DBH, 2017 WL 2683956, at *2 (D. Me. June 21, 2017) (“The Law Court has had no occasion to address the economic loss doctrine since 1995. I am not at all certain how or whether it applies in this dispute between a subcontractor on a construction project and the engineer the owner hired to design and engineer the work.”).
Maritime Law – Federal courts have also applied the economic loss rule to cases governed by maritime law. See, e.g., Am. Marine Tech, Inc. v. World Group Yachting, Inc., No. 19-cv-60636-BLOOM/Valle, 2019 WL 5103786, at *3 (S.D. Fla. Oct. 11, 2019); St. Clair Marine Salvage, Inc. v. M/Y BLUE MARLIN, 2014 WL 2480587, at *4 (E.D. Mich. Jun. 3, 2014). The maritime economic loss doctrine has been expanded to consumer transactions and service contracts. St. Clair, 2014 WL 2480587, at *4.
Enforceability of No Damages for Delay Clauses
Under Maine law, clauses limiting a contractor’s remedy for delays to an extension of time are enforceable. Yonkers Cont. Co. v. Maine Turnpike Auth., 208 F. Supp. 517, 521 (D. Me. 1962) (noting that other jurisdictions uphold no-damages-for-delay clauses).
Strict Interpretation of Contract
Maine courts strictly interpret contracts, and when interpreting a contract, will first determine whether the contractual language is ambiguous. Reliance Nat’l Indem. v. Knowles Indus. Servs., Corp., 868 A.2d 220, 228 (Me. 2005). A contract is ambiguous if it is “reasonably susceptible of different interpretations.” Am. Prot. Ins. Co. v. Acadia Ins. Co., 814 A.2d 989, 993 (Me. 2003) (quoting Portland Valve Inc. v. Rockwood Sys. Corp., 460 A.2d 1383, 1387 (Me. 1983)). If a court determines that a contract is ambiguous, “its interpretation is a question of fact for the factfinder.” Id. (quoting Acadia Ins. Co v. Buck Constr. Co., 756 A.2d 515, 517 (Me. 2000)). If, however, the contract is unambiguous, then its interpretation is a question of law to be determined by the court, and the provision is given its plain, ordinary, and generally accepted meaning. Villas by the Sea Owners Ass’n v. Garrity, 748 A.2d 457, 461 (Me. 2000). The interpretation of an unambiguous contract “must be determined from the plain meaning of the language used and from the four corners of the instrument without resort to extrinsic evidence.” Eastwick v. Cate Street Capital, Inc., 171 A.3d 1152, 1156 (Me. 2017) (quoting Portland Valve Inc. v. Rockwood Sys. Corp., 460 A.2d 1383, 1387 (Me. 1983)). The mere fact that the parties have differing views of what the agreement means does not render said agreement ambiguous. Id. (quoting Champagne v. Victory Homes, Inc., 897 A.3d 803, 806 (Me. 2006)). When interpreting the contract, Maine courts will look at the whole instrument and construe said provisions so as to not render any of its provisions meaningless. Am. Prot. Ins. Co., 814 A.2d at 993. If terms of the contract are determined to be ambiguous, extrinsic evidence may be admitted to demonstrate the intention of the parties. Guilford Transp. Industries v. Public Utilities Comm’n, 746 A.2d 910, 914 (Me. 2000). However, such consideration of extrinsic evidence for ambiguities is subject to Maine’s long-standing recognition that ambiguities are to be interpreted against the drafter. Champagne, 897 A.2d at 806; see also Barrett v. McDonald Investments, Inc., 870 A.2d 146, 149 (Me. 2005).
Prompt Payment Requirements (Public/Private)
Maine Public –Me. Stat. tit. 10, §§ 1111–1120 (2022) (owner to prime per contract or 20 days after invoice or end of billing period, whichever is later; final payment to prime within 30 days after final acceptance; prime to sub per contract or 7 days after receipt of each progress/final payment or invoice, whichever is later; owner shall pay contractor interest on any unpaid balance due beginning on the 21st day, at an interest rate equal to that specified in Title 14, § 1602-C; contractor or subcontractor shall pay its subcontractor or material supplier interest on any unpaid balance due beginning the day after payment is due; owners, prime contractors, and subcontractors subject to 1% per month penalty for amount found to be wrongfully withheld from payment; substantially prevailing party entitled to recover reasonable attorney’s fees and expenses in any proceeding to recover payment). (This chapter does not apply to contracts entered into by the Department of Transportation. Me. Stat. tit. 10, § 1112 (2022)).
Maine Private – Me. Stat. tit. 10, §§ 1111–1120 (2022) (owner to prime as agreed or 20 days after invoice or end of billing period, whichever is later; final payment to prime within 30 days after final acceptance; prime to sub as agreed or 7 days after receipt of each progress payment or invoice, whichever is later; owner shall pay contractor interest on any unpaid balance due beginning on the 21st day, at an interest rate equal to that specified in Title 14, § 1602-C; contractor or subcontractor shall pay its subcontractor or material supplier interest on any unpaid balance due beginning the day after payment is due).
False Claims Statute
Many states have enacted false claims statutes modeled on the federal False Claims Act (referenced as the “FCA” throughout this survey). 31 U.S.C. §§ 3729-3733. State analogues to the FCA aim to address claims involving state and local governments instead of the federal government. This summary identifies the FCA’s state analogues for construction claims. It does not address false claims statutes for other subjects, such as health care claims, applications for public assistance, or insurance claims.
The FCA defines “claim” as any request or demand for money or property where the government will provide or reimburse any portion of that money or property. Id. § 3729(b)(2). The FCA imposes civil liability for any of seven separate acts including: 1) knowingly presenting a false claim for payment; 2) knowingly making a false record or statement to obtain approval of a claim; 3) conspiring to obtain approval of a false claim; 4) knowingly delivering less than the amount of money or property owed to the government; 5) delivering a receipt for government property without knowledge of the receipt’s veracity and with intent to defraud; 6) knowingly purchasing or receiving public property from a government employee or member of the Armed Forces illegally; and 7) knowingly making or using a false record or statement to decrease a payment obligation to the government. Id. § 3729(a)(1).
A person found guilty of any of the above acts is liable to the government for: 1) a civil penalty between $5,000 and $10,000, as adjusted by inflation; 2) three times the amount of damage sustained by the government; and 3) the costs of a civil action brought to recover damages sustained by the government. Id. § 3729(a)(1-3). The FCA, however, allows mitigation of the penalty if the violator cooperates with the government’s investigation. Courts may reduce the violator’s liability to two times the amount of damage sustained by the government when the violator: 1) provides all of the information known about that violation to the investigative team within 30 days of gaining such knowledge; 2) provides the information without actual knowledge of the investigation and before the government files charges; and 3) fully cooperates with the government’s investigation. Id. § 3729(a)(2).
Maine – N/A
Licensing Requirements for Construction Managers
Maine does not require construction managers or general building contractors to be licensed. However, Maine does require licensure for other construction professionals including architects (Me. Rev. Stat. Ann. tit. 32, § 220, electricians (§ 1201), engineers (§ 1351), and plumbers (§ 3501)). Construction managers and contractors may subject to licensing requirements at the local level. Local licensing requirements vary by municipality.