Minnesota

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Enforceability of Limitation of Liability Clauses

Limitations of Liability

Minnesota courts uphold limitations of liability.  The Minnesota Supreme Court has consistently held that “contracting parties can by agreement limit their liability in damages to a specified amount” absent willful and wanton negligence, intentional misconduct, or fraud.  Morgan Co. v. Minn. Mining & Mfg. Co., 246 N.W.2d 443, 448 (Minn. 1976).  Parties to sales contracts may also contractually limit or modify remedies and warranties, Minn. Stat. Ann. §§ 336.2-316, 336.2-719 (West 2021), but any limitation of remedy must not be unconscionable.  Id. § 336.2-719(3).  Minnesota courts consider repair and/or replacement remedies and consequential damage exclusions as discrete and independent contractual provisions.  Int’l Fin. Servs. Inc. v. Franz, 534 N.W.2d 261, 267 (Minn. 1995).  Therefore, courts will enforce a consequential damage exclusion even if there is a failure of the limited remedy’s essential purpose.  Id.; see also Valley Paving, Inc. v. Dexter & Chaney, Inc., No.  C2-00-361, 2000 WL 1182800, at *4 (Minn. Ct. App. Aug. 22, 2000) (stating that where one remedy fails of its essential purpose, other clauses in the contract limiting remedies remain enforceable).

Exculpatory Clauses

Minnesota courts enforce exculpatory clauses as long as they are unambiguous and do not release a party from liability for intentional, willful, or wanton acts.  Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783, 789 (Minn. 2005); see also Dewitt v. London Rd. Rental Ctr., Inc., 910 N.W.2d 412, 417-18 (Minn. 2018).  Exculpatory clauses must not run afoul of public policy considerations.  Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923-24 (Minn. 1982).  An exculpatory clause contravenes public policy when the negligence claimed is induced by the contract.  Indep. Sch. Dist. No. 877 v. Loberg Plumbing & Heating Co., 123 N.W.2d 793, 798-99 (Minn. 1963).  While enforceable, Minnesota courts disfavor exculpatory clauses and will strictly construe them against the benefited party.  Id. at 923. 

It remains unclear whether a clause that exculpates intentional misconduct voids the entire exculpatory clause, or only the portion that attempts to exculpate intentional misconduct.  Compare Nimis v. St. Paul Turners, 521 N.W.2d 54, 57-58 (Minn. Ct. App. 1994) (voiding entire exculpatory clause that released all claims by negligence “or otherwise”), with Ball v. Waldoch Sports, Inc., No. C0-03-227, 2003 WL 22039946, at *5 (Minn. Ct. App. Sept. 2, 2003) (invalidating only the disputed portion of the exculpatory clause), with Scoreboard Sportswear, Inc. v. WelshCo, LLC, No. A09-0038, 2009 WL 2852886 (Minn. Ct. App. Sept. 8, 2009) (enforcing exculpatory clause even though it included “or otherwise” language, finding that such language did not create an ambiguity as to whether provision released party for intentional acts). 

Indemnity Agreements

Minnesota law voids indemnification clauses in building and construction contracts except to the extent that (1) the underlying injury or damage is attributable to the negligent or otherwise wrongful act or omission, including breach of a specific contractual duty, of the promisor’s independent contractors, agents, employees, or delegates; or (2) an owner, a responsible party, or a governmental entity agrees to indemnify a contractor directly or through another contractor with respect to strict liability under environmental laws.  Minn. Stat. Ann. § 337.02 (West 2021).  Section 337.05 provides that Section 337.02 does not affect agreements requiring one party to provide insurance covering another party’s negligence. 

Enforceability of Waiver of Consequential Damages Clauses

Minnesota courts have not directly addressed the enforcement of contractual waivers of consequential damages in the construction context, but it appears that they may enforce such clauses because they have enforced contractual limitations of liability in other contexts.  Generally, Minnesota courts hold that “contracting parties can by agreement limit their liability in damages to a specified amount” absent willful and wanton negligence, intentional misconduct, or fraud and misrepresentation.  Morgan Co. v. Minn. Mining & Mfg. Co., 246 N.W.2d 443, 448 (Minn. 1976).  This result is consistent with the Minnesota Supreme Court’s holding that “when a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction.”  Travertine Corp. v. Lexington-Silverwood, Ltd. P’ship, 683 N.W.2d 267, 271 (Minn. 2004).

In the context of transactions for the sale of goods, the Minnesota Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances.  See Minn. Stat. Ann. §§ 336.2-711 – 336.2-714, 336.2-715(2).  However, Minnesota code section 336.2-719 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 purpose.  See Jacobs v. Rosemount Dodge-Winnebago S., 310 N.W.2d 71, 77–78 (Minn. 1981) (noting, in a contract for the sale of goods, that parties may limit their damages for breach unless the limitation would “deprive a party of reasonable protection against breach”); Craft Tool & Die Co. v. Payne, 385 N.W.2d 24, 27 (Minn. Ct. App. 1986) (holding that under Minnesota Uniform Commercial Code, “[c]onsequential damages may be limited or excluded if the terms are reasonable”); Muzzy v. E.I. du Pont de Nemours & Co., 1993 WL 761991, at *2 (Minn. Dist. Ct. Nov. 2, 1993) (“Consequential damages may be limited unless it would be unconscionable.  Limitation of consequential damages for personal injury in the case of consumer goods is prima facie unconscionable. Disclaimers are not favored by the Courts and are, therefore, strictly construed against the manufacturer or seller, especially when they are included in printed form contracts.”).

Application of Economic Loss Doctrine

Minnesota courts strictly interpret contracts.  When interpreting a contract, the court’s goal is “to determine and enforce the intent of the parties.”  Staffing Specifix, Inc. v. TempWorks Management Services, Inc., 913 N.W.2d 687, 691 (Minn. 2018) (quoting Motorsports Racing Plus, inc. v. Arctic Cat Sales, Inc., 666 N.W.2d 320, 323 (Minn. 2003)).  For written instruments, “the intent of the parties is determined from the plain language of the instrument itself.”  Savela v. City of Duluth, 806 N.W.2d 793, 796 (Minn. 2011) (quoting Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004)).  Moreover, “when a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction.”  Travertine Corp., 683 N.W.2d at 271.  In fact, “[i]f a contract is unambiguous, the ‘contract language must be given its plain and ordinary meaning, and shall be enforced by courts even if the result is harsh.’”  Denelsbec, v. Wells Fargo & Co., 666 N.W.2d 339, 346-47 (Minn. 2003) (quoting Minneapolis Pub. Hous. Auth. v. Lor, 591 N.W.2d 700, 704 (Minn. 1999).  Minnesota courts hold that contract terms are ambiguous if they are susceptible to more than one reasonable interpretation; however, the terms will not be considered ambiguous simply because the parties’ interpretations differ.  Staffing Specifix, Inc. 913 N.W.2d at 692.  If a court determines that the contract is ambiguous, it may admit parol or extrinsic evidence of the parties’ intent.  Id.  Minnesota courts follow the general rule of construing ambiguous terms of a contract against the contract drafter, but this rule is only considered if there are ambiguous terms or the intent of the contract is doubtful after consideration of extrinsic or parol evidence as to intent.  Id. at 693-94. 

Enforceability of No Damages for Delay Clauses

No damages for delay clauses are unenforceable in public works contracts  pursuant to Minn. Stat. § 15.411(2):  “Any clause in a public works contract that waives, releases, or extinguishes the rights of a contractor to seek recovery for costs or damages, or seek an equitable adjustment, for delays, disruption, or acceleration in performing the contract is void and unenforceable if the delay, disruption, or acceleration is caused by acts of the contracting public entity or persons acting on behalf of the public entity for which the public entity is legally responsible.”  No Minnesota court has considered the enforceability of no-damages-for-delay clauses beyond the public context.

Strict Interpretation of Contract

Minnesota courts strictly interpret contracts.  When interpreting a contract, the court’s goal is “to determine and enforce the intent of the parties.”  Travertine Corp. v. Lexington-Silverwood, Ltd. P’ship, 683 N.W. 2d 267, 271 (Minn. 2004).  For written instruments, “the intent of the parties is determined from the plain language of the instrument itself.”  Id.  Moreover, “when a contractual provision is clear and unambiguous, courts should not rewrite, modify, or limit its effect by a strained construction.”  Id.  In fact, “[i]f a contract is unambiguous, the ‘contract language must be given its plain and ordinary meaning, and shall be enforced by courts even if the result is harsh.’”  Denelsbec, v. Wells Fargo & Co., 666 N.W. 2d 339, 346-47 (Minn. 2003) (quoting Minneapolis Pub. Hous. Auth. v. Lor, 591 N.W. 2d 700, 704 (Minn. 1999).  Minnesota courts hold that contract terms are ambiguous if they are susceptible to more than one reasonable interpretation; however, the terms will not be considered ambiguous simply because the parties’ interpretations differ.  Staffing Specifix, Inc. v. TempWorks Management Services, Inc., 913 N.W. 2d 687, 692 (Minn. 2018).  If a court determines that the contract is ambiguous, it may admit parol or extrinsic evidence of the parties’ intent.  Id.  Minnesota courts follow the general rule of construing ambiguous terms of a contract against the contract drafter, but this rule is only considered if there are ambiguous terms or the intent of the contract is doubtful after consideration of extrinsic or parol evidence as to intent.  Id. at 693-94.

Prompt Payment Requirements (Public/Private)

Minnesota Public – Minn. Stat. §§ 15.71-74 (2022) (excludes federally funded projects); Minn. Stat. §§ 16A.124-.1245 (2022) (state agencies); Minn. Stat. § 471.425 (2022) (localities) (owner to prime “monthly” unless otherwise agreed; state agencies to vendors within 30 days of receipt of invoice; state agency must require prime to pay sub within 10 days of receipt from state; localities per contract or 35-45 days after later of receipt of invoice or receipt of services or goods; prime to sub 10 days from payment; interest at 1.5% per month for local gov. contracts).

Minnesota Private – Minn. Stat. § 337.10 (2021) (owner to prime monthly as work progresses unless contract states otherwise; prime to sub/sub to lower tier 10 days after payment; interest at 1.5% per month; attorneys’ fees collectable by prevailing party in civil action if requested).

False Claims Statute

Minn. Stat. Ann. §§ 15C.01-15C.16; § 609.465 – The Minnesota False Claims Act contains several similarities to the FCA. Minnesota’s Act provides for civil monetary penalties in the amounts set forth in the FCA, as adjusted by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (28 U.S.C. § 2461), plus three times the amount of damages that the state or political subdivision sustains, the ability of both private individuals and the attorney general to initiate legal action, and protections against employer retaliation.  Id. § 15C.02, 15C.145.

Minnesota’s Act grants its attorney general power and discretion to investigate claims.  Id. § 15C.04.  It also states that “mere negligence, inadvertence, or mistake with respect to activities involving a false or fraudulent claim” will not render a person liable under the statute.  Id. § 15C.02(d).

In addition, Minnesota’s criminal code provides that an individual who presents a false claim with intent to defraud and knowledge of its falsity is “guilty of an attempt to commit theft of public funds and may be sentenced accordingly.”  Id. § 609.465.

Licensing Requirements for Construction Managers

Minnesota statutes do not provide for construction manager licensing.  The State of Minnesota does not license general contractors unless they are residential building contractors, residential remodelers, manufactured home installers, or residential roofers as defined under Minn. Stat. Ann. § 326B or are certain types of specialty contractors such as electricians, plumbers, and pipefitters.  See id. § 326B.802; id. § 326B.805

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