Enforceability of Limitation of Liability Clauses
Limitations of Liability
Montana courts uphold limitations of liability. “Where a contract specifically provides that the remedies enumerated therein shall be the only course of settlement thereunder, a party to it is limited to the remedies provided therein.” Glacier Campground v. Wild Rivers, 597 P.2d 689, 696-97 (Mont. 1978). Parties to sales contracts may also contractually limit remedies and warranties, unless unconscionable. Mont. Code Ann. §§ 30-2-316, 30-2-719 (West 2021). The buyer must be aware of the limitation of liability for it to be effective. Vandalia Ranch, Inc. v. Farmers Union Oil & Supply Co. of Hindsale, 718 P.2d 647, 649 (Mont. 1986) (finding that a limitation of liability on cans of herbicide and in instructions were not part of the contract between an herbicide manufacturer and farmer because the farmer was unaware of the limitation). Montana courts are reluctant to re-write contract terms negotiated between sophisticated business entities. All-States Leasing Co. v. Top Hat Lounge, Inc., 649 P.2d 1250, 1252-53 (Mont. 1982).
Montana courts generally do not recognize exculpatory clauses that purport to release a party from negligence. By statute, certain exculpatory clauses are prohibited: “All contracts that have for their object, directly or indirectly, to exempt anyone from responsibility for the person’s own fraud, for willful injury to the person or property of another, or for violation of law, whether willful or negligent, are against the policy of the law.” Mont. Code Ann. § 28-2-702 (West 2021); see also Haynes v. Cty. of Missoula, 517 P.2d 370, 376 (Mont. 1973). Thus, under Montana law, any waiver by which an entity seeks to contractually exculpate itself from liability arising out of negligent violations of legal duties, whether those duties are rooted in case law or statutes, is invalid. Spath v. Dillon Enters., Inc., 97 F. Supp. 2d 1215, 1218 (D. Mont. 1999).
Even when not invalidated by statute, Montana courts will void exculpatory clauses contrary to public policy. Haynes, 517 P.2d at 376. Exculpatory clauses violate public policy where “(1) the interest of the public requires the performance of such duties, or (2) because the parties do not stand upon a footing of equality, the weaker party is compelled to submit to the stipulation.” Id.
In Zirkelbach Constr., Inc. v. DOWL, LLC, 402 P.3d 1244 (Mont. 2017), the Supreme Court of Montana held that that a clause in a contract between a construction project’s general contractor and the designer that capped the designer’s liability for special, incidental, or consequences damages at $50,000 was not against public policy under Section 28-2-702. Id. at *12-13. Although the $50,000 cap was only eight percent of the company’s total fee, the clause did not except the designer from all liability, but only limited liability to the amount agreed upon by the parties. Id. at *13. Further, at the time of the contract, the $50,000 limitation was nearly forty percent of the designer’s fee. Id.
In Stenerson v. City of Kalispell, 629 P.2d 773 (Mont. 1981), the Supreme Court of Montana refused to enforce an exculpatory clause in a contract for grading work between a city and contractor. Id. at 776. When the contractor alerted the city that the work required more material than the contract contemplated, the city refused to pay the contractor for its additional work, claiming that the contract contained an exculpatory clause stating that the contractors assumed the risk of making an erroneous bid. Id. at 774. The court found that, despite the exculpatory clause, the contractor had justifiably relied on the information provided in the specifications and plans in making its bid. Id. Thus, the contractor was entitled to recover additional costs. See also Clark Bros. Contractors v. State, 710 P.2d 41, 44 (Mont. 1985) (holding that exculpatory language in construction contract for segment of interstate did not conclusively relieve state from liability for damages caused by quantities underrun but was a factor in determining whether contractor justifiably relied on the state’s estimates when preparing its bid).
Mont. Code Ann. § 18-2-124 (West 2021) voids provisions in construction contracts that require one party to indemnify the other party for liability, losses, or costs that are caused by the other party’s negligence, recklessness, or intentional misconduct. A construction contract, however, may contain a provision requiring one party to indemnify the other party for liability, damages, losses, or costs only to the extent that liability, damages, losses, or costs are caused by the indemnitor’s or a third party’s negligence, recklessness, or intentional misconduct. Id. § 18-2-124(2)(a). A construction contract may also require a party to purchase a project-specific insurance policy. Id. § 18-2-124(2)(b). This section does not apply to indemnity of a surety by a principal on a construction contract bond or to an insurer’s obligation to its insureds. Id. § 18-2-124(3).
Montana law provides that the rules prescribed in Sections 28-11-314 through 28-11-317 are applied when interpreting a contract of indemnity, unless a contrary intention appears. Mont. Code Ann. § 28-11-313 (West 2021). These provisions describe, among other things, when and what a person indemnified is entitled to recover, the costs of defense, and the duty of the person indemnifying to defend actions brought against the person indemnified.
Enforceability of Waiver of Consequential Damages Clauses
The Montana Supreme Court has directly addressed the enforcement of contractual waivers of consequential damages in the construction context, holding that a clause between a general contractor and design company that capped the design company’s liability for special, incidental, indirect, or consequential damages at $50,000 was not against public policy. Zirkelbach Constr., Inc. v. DOWL, LLC, 402 P.3d 1244, 1246–48 (Mont. 2017). Further, Montana courts have recognized contractual limitations of liability in other contexts. See Nw. Corp. v. Mont. Dep’t of Pub. Serv. Regul., 380 P.3d 787, 796 (Mont. 2016) (recognizing that the parties’ purchase and installation contract contained a provision that excluded consequential damages). The Montana legislature has codified the rules for interpretation of contracts in title 28, chapter 3 of the Montana Code. Specifically, Montana code section 28-3-301 states that a “contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.” Indeed, Montana courts uphold limitations of liability. See Glacier Campground v. Wild Rivers, Inc., 597 P.2d 689, 696–97 (Mont. 1978) (holding that the parties to a contract are limited to recovery based on the remedies enumerated within the contract).
In the context of transactions for the sale of goods, the Montana Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances. See Mont. Code Ann. §§ 30-2-711 – 30-2-714, 30-2-715(2). However, Montana code section 30-2-719 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. “Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.” Id. § 30-2-719(3).
Application of Economic Loss Doctrine
Montana courts do not apply the economic loss doctrine and have permitted recovery in tort for purely economic loss in the construction context without requiring privity of contract, thus adopting a “pure tort” approach. See Jim’s Excavating Serv. v. HKM Assocs., 878 P.2d 248, 252-53 (Mont. 1994) (declining to apply the economic loss doctrine to bar negligence claims of third party for purely economic loss against engineer because engineer “had a duty to use ordinary care and diligence in rendering its professional services in the preparation of the plans and specifications” and should have foreseen that the plaintiff would rely on the information supplied); see also Sonju Indus., Inc. v. Precise Solutions Corp., No. CV 14-02-M-DLC, 2014 WL 1347989, at *6 (D. Mont. Apr. 4, 2014) (“Montana also permits a negligence action for economic loss without direct privity of contract.”); Dewey v. Stringer, 325 P.3d 1236, 1241 (Mont. 2014) (“A fraud-based claim is not precluded by the fact that a party may also make a contract claim based on the same events.”); Corporate Air v. Pratt & Whitney Canada Corp., 2009 WL 10701737, at *6-*8 (D. Mont. Aug. 21, 2009) (analyzing cases and holding that “Montana law does not recognize the economic loss doctrine”); Turner v. Kerin & Assocs., 938 P.2d 1368, 1374 (Mont. 1997) (allowing claim for purely economic loss, holding “that a person who, subsequent to the damage to the property, acquires a pre-existing security interest in the property can maintain a cause of action for impairment of that security interest to the extent of the outstanding debt.”).
Strict Interpretation of Contract
Montana courts strictly interpret contracts. In Montana, the courts interpret the language of the contract according to their plain and unambiguous meaning. Ophus v. Fritz, 11 P.3d 1192, 1196 (Mont. 2000). Where the language of a contract is unambiguous, the duty of the court is to apply the language as written. Corporate Air v. Edwards Jet Ctr. Mont., Inc., 190 P.3d 1111, 1121 (Mont. 2008); Mont. Code Ann. §§ 28-2-905, 28-3-303; see also Wurl v. Polson School Dist. No. 23, 127 P.3d 436, 441 (Mont. 2006) (“[W]here a contract’s terms are clear and unambiguous, a court must apply the language as written”). However, if the contract language is ambiguous, the court may look to extrinsic evidence to determine the intent of the parties. Id. at 1121. Evidence of the circumstances under which a contract was made and the matter to which it relates may be considered, but such evidence may not be admitted to add to, vary, or contradict the terms of the contract. Id. at 1120. Ambiguity in a contract exists where the language, as a whole, [is] reasonably  subject to two different interpretations.” Barthel v. Barretts Minerals, Inc., 496 P.3d 541, 544 (Mont. 2021) (citing Wurl, 127 Pl.3d at 442). “However, the mere fact that the parties disagree as to the interpretation of a contract does not automatically create ambiguity.” Id.; see also Creveling v. Ingold, 132 P.3d 531, 534 (Mont. 2006). Where contracts are ambiguous, Montana courts will construe the ambiguity “most strongly” against the drafter of the contract. Montana Health Network, Inc. v. Great Falls Orthopedic Associates, 353 P.3d 483, 487 (Mont. 2015). However, the rule of construing ambiguities against the drafter of a contract is not absolute. See Mary J. Baker Revocable Trust v. Cenex Harvest States, Cooperatives, Inc., 164 P.3d 851, 860-61 (Mont. 2007).
Prompt Payment Requirements (Public/Private)
Montana Public – Mont. Code Ann. § 17-8-242 (2022) (state) (owner to prime within 30 days of invoice receipt or receipt of services, whichever is later; interest at .05% per day); Mont. Code Ann. §§ 28-2-2101 to 28-2-2117 (2022) (localities) (payment due from owner to prime within 7 days after invoice is approved by the owner and approval granted 21 days after receipt unless owner provides written statement of disapproval; interest at 1.5% per month, or a pro rata fraction of that amount, on amounts due from owner to prime which are delayed for more than 30 days from due date set forth in contract, beginning on the day following the date when payment is due; payment due from prime to subcontractor within 7 days of receipt of payment from owner, interest at 1.5% per month, or a pro rata fraction of that amount, on amounts due from prime to subcontractor which are delayed for more than 30 days from due date set forth in subcontract beginning on the day following the date when payment is due). Note that an alternative payment cycle may be used as set forth in section 2115. See also Mont. Code Ann. § 18-2-123 (2022) (stating payment of contractors and subcontractors on public contracts is governed by §§ 28-2-2101 to -2117).
Montana Private – Mont. Code Ann. §§ 28-2-2101 to -2117 (2022) (payment due from owner to prime within 7 days after invoice is approved by the owner and approval granted 21 days after receipt unless owner provides written statement of disapproval; interest at 1.5% per month, or a pro rata fraction of that amount, on amounts due from owner to prime which are delayed for more than 30 days from due date set forth in contract; payment due from prime to subcontractor within 7 days of receipt of payment from owner, interest at 1.5% per month, or a pro rata fraction of that amount, on amounts due from prime to subcontractor which are delayed for more than 30 days from due date set forth in subcontract beginning on the day following the date when payment is due). Note alternative payment cycle may be used as set forth in Section 2115.
False Claims Statute
Mont. Code Ann. §§ 7-6-4311, 17-8-401 to 413 – The Montana legislature has enacted a false claims statute for claims submitted to municipalities and another statute for claims submitted to the state. Under § 7-6-4311, a person who knowingly presents a false claim to a city, town or its contractors, forfeits the claim (including any legitimate portion) and is subject to a penalty of up to $2,000 plus double the damage sustained by the city or town including legal fees.
The Montana False Claims Act mirrors the FCA. The Montana Act, however, imposes liability where public property is received from any person, and is not limited to receipt of property from a government employee. Id. § 17-8-403(1)(f). Beneficiaries of an inadvertent submission of a false or fraudulent claim, who subsequently discover the falsity of the claim and fail to disclose the false claim to the governmental entity within a reasonable time after discovery, are also liable under the Montana statute. Id. § 17-8-403(1)(h). The Act imposes joint and several liability for acts that are committed by two or more persons. Id. § 17-8-403(4). Montana law imposes a civil penalty between $5,500 and $11,000 for each improper act, plus treble damages, and costs sustained by the government. Id. § 17-8-403(1). Similar to the FCA, the Montana Act reduces the violator’s liability to between two and three times the amount of damage that the government sustained if a violator: (1) provides all the information known about the violation to the governmental attorney within 30 days of gaining that knowledge; (2) fully cooperates with the governmental attorney; and (3) provides the information without knowledge of the investigation and before the commencement of criminal prosecution, civil action, or administrative action. Id. § 17-8-403(2).
Licensing Requirements for Construction Managers
Construction managers in Montana are not required to obtain a license. If the construction manager’s services fall under the definition of services provided by a construction contractor, which does not encompass supervisory or administrative tasks, the construction manager must obtain a certificate of registration. See Mont. Code Ann. § 39-9-102; § 39-9-201.