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Enforceability of Limitation of Liability Clauses

Limitations of Liability

Clauses limiting liability “are given strict scrutiny” by Mississippi courts and “are not to be enforced unless the limitation is fairly and honestly negotiated and understood by both parties.”  Pitts v. Watkins, 905 So. 2d 553, 556-57 (Miss. 2005) (quoting Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 754 (Miss. 2003)) (rejecting limitation of liability in home inspection contract which limited remedy to $265 when the defendant’s negligence caused the homeowners to incur $30,000 to $40,000 in damages, which was an unconscionable result); Palmer v. Orkin Exterminating Co., Inc., 871 F. Supp. 912, 913 (S.D. Miss. 1994) (enforcing limitation of liability clause in agreement between exterminator and homeowner which limited homeowner’s remedy for breach of contract to retreatment).  Pursuant to Miss. Code Ann. §§ 75-2-316, 75-2-718, 75-2-719 (West 2022), parties to sales contracts may limit or modify remedies and warranties.  This includes liquidated damages where Mississippi law requires that any such liquidated damages agreed upon in a contract be “reasonable in light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or no feasibility of otherwise obtaining an adequate remedy.”  Id. § 75-2-718(1).  Parties may not exclude or limit consequential damages in an unconscionable manner.  Id. § 75-2-719(3). 

Exculpatory Clauses

The Supreme Court of Mississippi has held that the law “does not look with favor on contracts intended to exculpate a party from the liability of his or her own negligence although, with some exceptions, they are enforceable.”  Turnbough v. Ladner, 754 So. 2d 467, 469 (Miss. 1999).  Exculpatory clauses must contain clear and unmistakable language and must describe the extent to which a party intends to be released from liability.  Id.  Parties should also avoid using broad, general “waiver of negligence” provisions as they will be strictly construed against the party relying on them.  Id.; Sw. Miss. Reg’l Med. Ctr. v. PST Servs., Inc., No. 5:16-cv-28, 2016 WL 6407959, at *5 (S.D. Miss. Oct. 28, 2016) (stating that exculpatory or limitation of liability clauses can be valid and binding, must require a meeting of the minds and must be explicit, prominent, clear and unambiguous).

Indemnity Agreements

Mississippi law invalidates indemnification agreements contained in both public and private contracts for construction, alteration, repair or maintenance of buildings, structures, highway bridges, viaducts, water, sewer or as distributions systems, or other work dealing with construction, moving, demolition or excavation connected therewith which purport to indemnify another person from that person’s own negligence.  Miss. Code Ann. § 31-5-41 (West 2022).  Section 31-5-41 does not apply to construction bonds or insurance contracts.  Id.  Nor does it apply to a clause limiting the remedy available to a contractor for delays since such a clause is not considered a “hold-harmless” clause subject to Mississippi’s anti-indemnity statute.  PYCA Indus., Inc. v. Harrison-Cty. Waste Water Mgmt. Dist., 177 F.3d 351, 364-65 (5th Cir. 1999).  A contract must also be a “construction contract” to fall within the ambit of Section 31-5-41.  Thus, a contract to attach equipment to telephone poles which merely grants a license falls outside the scope of the statute.  Lorenzen v. S. Cent. Bell Tel. Co., 546 F. Supp. 694, 697 (S.D. Miss. 1982).  Additionally, a contract to supply welders for construction of an oil rig was not considered “other work dealing with construction” within the meaning of the statute and therefore the statute did not apply to a supplier’s agreement to indemnify a construction contractor and hold it harmless for injury to the supplier’s employee.  The court found that the supplier performed no work, but merely provided contract welders to work at the direction of the contractor.  Eagle Pac. Ins. Co. v. Quintanilla, 923 So. 2d 266, 269-71 (Miss. Ct. App. 2006).

The Mississippi Supreme Court, like most courts, would likely view a limitation of liability clause as beyond the purview of Section 31-5-41.  Thrash Commercial Contractors, Inc. v. Terracon Consultants, Inc., 889 F. Supp. 2d 868, 878-80 (S.D. Miss. 2012).

Enforceability of Waiver of Consequential Damages Clauses

Mississippi courts enforce contractual waivers of consequential damages in the construction context.  In Thrash Commercial Contractors, Inc. v. Terracon Consultants, Inc., 889 F.Supp.2d 868, 882 (S.D. Miss. 2012), the court ruled that the geotechnical engineer’s subcontract’s limitation of liability and waiver of consequential damages provision was enforceable.  See also Swampfox Oilfield Servs., LLC v. Blackjack Oil Co., Inc., 281 So.3d 287, 296–97 (Miss. Ct. App. 2019) (emphasis in original) (upholding unambiguous waiver of consequential damages clause in oil drilling contract and noting, in apparent dicta, that the waiver provision was not “one-sided,” but rather a “mutual” waiver between “two commercial entities that extensively negotiated their contract”).

Generally, clauses that limit liability may be enforced, but “are given strict scrutiny” by Mississippi courts and “are not to be enforced unless the limitation is fairly and honestly negotiated and understood by both parties.”  Pitts v. Watkins, 905 So. 2d 553, 556–57 (Miss. 2005) (quoting Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So. 2d 748, 754 (Miss. 2003)) (rejecting limitation of liability in home inspection contract and limiting remedy to $265, where the defendant’s negligence caused the homeowners to incur $30,000 to $40,000 in damages, which was found to be an unconscionable result); Palmer v. Orkin Exterminating Co., Inc., 871 F. Supp. 912, 913 (S.D. Miss. 1994) (enforcing limitation-of-liability clause in agreement between exterminator and homeowner that limited the homeowner’s remedy for breach of contract to retreatment).  However, while clauses limiting liability are generally enforceable in Mississippi, the Mississippi Supreme Court has held that, under certain circumstances, a clause limiting liability (including a waiver of consequential damages) can be deemed “substantively unconscionable” where it leaves one party without a meaningful choice.  Pitts, 905 So. 2d at 556–57.

Notably, under the Mississippi Constitution, Art.4, §100, and in accordance with Op. Atty. Gen. No. 2002-0606, Chamberlin, October 18, 2002, no party or entity may release an obligation or liability owed to the State or political subdivision.  Thus, by way of example, a county may not enter into a contract that requires it to waive consequential or special, or punitive damages of any type, or that limits damages to a contract price or to some certain amount.

In the context of transactions for the sale of goods, the Mississippi Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances.  See Miss. Code. Ann. §§ 75-2-711 – 75-2-714, 75-2-715(2).  However, Mississippi code section 75-2-719 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.  Mississippi does not allow limitations of remedies that would deprive the buyer of a remedy to which the buyer may be entitled for a breach of an implied warranty of merchantability or fitness for a particular purpose in a sale of consumer goods to a consumer.  Miss. Code Ann. § 75-2-719(4).

Application of Economic Loss Doctrine

The Supreme Court of Mississippi has never addressed the economic loss doctrine.  The Mississippi Court of Appeals has applied the doctrine, however, in the context of products liability claims.  State Farm Mut. Auto. Ins. Co. v. Ford Motor Co., 736 So. 2d 384, 387 (Miss. Ct. App. 1999) (“[The plaintiffs’] strict liability and negligence claims are barred under the economic loss doctrine as the only damage sustained was to the product itself”).  Additionally, Mississippi’s products liability statute bars claims for “commercial damage to the product itself.”  Miss. Code Ann. § 11-1-63.  The State Farm court noted that its adoption of the economic loss doctrine was “consistent with Mississippi’s products liability statute.”  State Farm, 736 So. 2d at 387.

It remains unclear whether Mississippi courts apply the economic loss rule to fraud claims.  See City of Clevevland v. Siemens Indus., Inc., No. 4:18-cv-170-DMB-RP, 2019 WL 4534022, at *6 (N.D. Miss. Sep. 19, 2019) (“Mississippi courts appear to have not addressed whether the economic loss doctrine applies to fraud claims.”).

No Expansion Beyond Products Liability

Mississippi courts have not expanded the application of the doctrine beyond the context of products liability cases.  See Lyndon Prop. Ins. Co. v. Duke Levy & Associates, LLC, 475 F.3d 268, 274 (5th Cir. 2007) (finding that “no Mississippi case law appl[ies] this doctrine outside of the realm of products liability” in a surety suit against a sewer contractor); see also Massey v. CNH Indus. Am., LLC, No. 3:17-cv-179-MPM-RP, 2018 WL 3873585, at *3 (N.D. Miss. Aug. 15, 2018) (citing Lyndon).

Enforceability of No Damages for Delay Clauses

No damages for delay clauses are generally enforceable in Mississippi, but courts strictly construe such clauses.  Tupelo Redev. Agency v. Gray Corp., 972 So. 2d 495, 512 (Miss. 2007); Miss. Transp. Comm’n v. SCI, Inc., 717 So. 2d 332, 338 (Miss. 1998).  However, Mississippi courts recognize exceptions for delays that: “(1) [were] not intended or contemplated by the parties to be within the purview of the provision; (2) resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (3) [have] extended such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; or (4) [were] not within the specifically enumerated delays to which the clause applies.”  Tupelo Redev., 972 So. 2d at 512.

Strict Interpretation of Contract

Mississippi courts strictly interpret contracts. Mississippi courts have noted that a cardinal rule of “contract interpretation is to give effect to the intent of the parties, however, the words utilized are ‘the best resources for ascertaining intent and assigning meaning with fairness and accuracy.’”  Farm Servs., Inc. v. Oktibbeha Cnty. Bd. of Supervisors, 860 So.2d 804, 807 (Miss. 2003) (quoting Simmons v. Bank of Miss., 593 So.2d 40, 42 (Miss. 1992)).  In Mississippi, courts generally apply a three three-step analysis when interpreting contracts.  Royer Homes of Miss., Inc. v. Chandeleur Homes, Inc., 857 So.2d 748, 752 (Miss.2003).  First, the Mississippi courts determine whether the contract is ambiguous, and if it is not, then it must be enforced as written.  Id.  When making that determination, the courts review the express wording of the contract as a whole.  Cherokee Ins. Co. v. Babin, 37 So.3d 45, 48 (Miss.2010).  If the contract is unambiguous, “the intention of the contracting parties should be gleaned solely from the wording of the contract” and parol evidence should not be considered. Turner v. Terry, 799 So.2d 25, 32 (Miss.2001) (citing Heritage Cablevision v. New Albany Elec. Power Sys., 646 So.2d 1305, 1312 (Miss.1994)).  Second, if the Mississippi courts are unable to ascertain the meaning of the contract and the intent of the parties within the “four corners” of the contract, the courts will apply the “canons of contract construction.”  Cherokee Ins., 37 So.3d at 48.  “Where the language of an otherwise enforceable contract is subject to more than one fair reading, the reading applied will be the one most favorable to the non-drafting party.”  Royer Homes, 857 So.2d at 753.  Third, if the meaning of the contract is still ambiguous, only then is extrinsic evidence considered.  Id.  “It is only when the review of a contract reaches this point that prior negotiation, agreements[,] and conversations might be considered in determining the parties’ intentions in the construction of the contract.”  Id.  The parol evidence rule “provides that where a document is incomplete parol evidence is admissible to explain the terms but, in no event, to contradict them.” Busching v. Griffin, 542 So.2d 860, 865 (Miss. 1989).  Mississippi courts follow the general rule that if a contract is found to be ambiguous, uncertainties will be resolved against the drafter of the contract. Dalton v. Cellular South, Inc., 20 So.3d 1227 (Miss. 2009).  However, the rule of construing ambiguities against the drafter of a contract is not absolute.  Harrison Cnty. Commercial Lot, LLC v. H. Gordon Myrick, Inc., 107 So.3d 943, 950 (Miss. 2013). 

Prompt Payment Requirements (Public/Private)

Mississippi PublicMiss. Code Ann. §§ 31-5-25, 31-5-27 (2022) (“[p]artial, progress or interim payments” shall be paid when due and payable under the contract, and if not paid within 45 days of that date, interest at 1% per month; for final payments, “[i]f the contractor is not paid in full within 45 calendar days … then said final payment shall bear interest from the date of said first occurrence at the rate of 1% per month until fully paid;” for prime to sub, “[i]f the contractor without reasonable cause fails to make any payment to his subcontractors and material suppliers within 15 days after the receipt of payment under the public construction contract, the contractor shall pay … in addition to the payment due them, a penalty in the amount of 1/2 of 1% per day of the delinquency, calculated from the expiration of the 15 day period until fully paid,” but not to exceed 15% of the outstanding balance due).

Mississippi PrivateMiss. Code Ann. §§ 87-7-3, 87-7-5 (2022) (owner to prime per terms of the contract; if prime is not paid within 30 days from date due and payable, interest at rate of 1% per month; prime to sub/sub to lower tier within 15 days of receipt of payment, interest at 0.5% per day, not to exceed 15% of the outstanding balance due).

False Claims Statute

Federal False Claims Act – 31 U.S.C. § 3729-3733 

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).

Mississippi – N/A 

Licensing Requirements for Construction Managers

There are no express statutory licensing requirements for construction managers in Mississippi.  The Mississippi State Board of Contractors, however, addresses the issue in part.  Specifically, the Mississippi Rules and Regulations of the State Board of Contractors provide that “[n]o contract for public or private projects shall be issued or awarded to any contractor who did not have a current certificate of responsibility issued by said board at the time of the submission of the bid, or a similar certificate issued by a similar board of another state which recognizes certificates issued by said board.  Any contract issued or awarded in violation of this section shall be null and void.”  Miss. Code. Ann. § 31-3-15.  

The Mississippi Court of Appeals extended application of the foregoing statute to construction managers when it found that contracts between owners and construction managers for private construction projects are null and void where the construction manager failed to possess the appropriate certificate of responsibility from the State Board of Contractors for the type of work it undertook to perform, and the construction manager did not claim an exception to the requirement of holding the appropriate certificate of responsibility.  United Plumbing & Heating Co., Inc. v. AmSouth Bank, 30 So. 3d 343, 347 (Miss. Ct. App. 2009).

By contrast, the Mississippi Attorney General has opined that a construction manager provides professional services rather than “engaging in the construction process.”  Op. Miss. Att’y Gen. No. 96-0780 (Dec. 6, 1996).  Accordingly, the Attorney General appears to consider a construction manager as a provider of administrative services rather than purely construction services.  Thus, it remains a somewhat open question in Mississippi as to whether a construction manager must obtain a license to perform work in the state.  Although Mississippi courts have recognized that Attorney General advisory opinions may be persuasive in certain cases, Attorney General advisory opinions are not binding and may be dismissed by the court at its discretion.  City of Durant v. Laws Constr. Co., Inc., 721 So. 2d 598, 604 (Miss. 1998).  Therefore, although it is unclear whether or not there are licensing requirements for all construction managers, interested parties may reference the aforementioned sources to determine if there are licensing requirements for their specific projects.

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