Print Friendly, PDF & Email

Enforceability of Limitation of Liability Clauses

Limitations of Liability

Nevada courts recognize limitation of liability clauses.  See Clark Cty. Sch. Dist. v. Rolling Plains Constr., 16 P.3d 1079, 1083 (Nev. 2001) (noting that a school could have protected itself from foreseeable damages by obtaining a waiver or limitation of liability from the contractor on consequential damages), disapproved of on other grounds by Sandy Valley Assocs. v. Sky Ranch Estates Owners Ass’n, 35 P.3d 964 (Nev. 2001); see also Am. Fire & Safety, Inc. v. City of N. Las Vegas, 849 P.2d 352, 360 (Nev. 1993) (limiting damages to bid bond forfeiture).  Parties to sales contracts may limit or modify remedies and warranties.  Nev. Rev. Stat. Ann. §§ 104.2316, 104.2718, 104.2719 (West 2021).  If a limited remedy fails to serve its essential purpose, a buyer may recover incidental and consequential damages.  Newmar Corp. v. McCrary, 309 P.3d 1021, 1026 (Nev. 2013) (permitting buyer to pursue remedies available under the Uniform Commercial Code after motorhome manufacturer’s failed attempts to repair motorhome under the expanded warranty resulted in deprivation of the buyer’s benefit of the bargain); see also, Wood v. Winnebago Indus., Inc., 218CV1710JCMBNW, 2020 WL 3453076, at *7 (D. Nev. Mar. 23, 2020) (upholding limited warranty based on express and unambiguous limitation on damages).

Exculpatory Clauses

Nevada recognizes exculpatory clauses “as a valid exercise of the freedom of contract,” although public policy concerns may render them unenforceable.  Miller v. A & R Joint Venture, 636 P.2d 277, 278 (Nev. 1981).  Under Nevada law, the following additional standards must be met before an exculpatory clause will be interpreted to relieve a person of liability that the law would otherwise impose: (1) contracts providing for immunity from liability for negligence must be construed strictly since they are not a favorite of the law; (2) such contracts must spell out the intention of the party with the greatest particularity and show the intent to release from liability beyond doubt by express stipulation; (3) such contracts must be construed with every intendment against the party who seeks immunity from liability; and (4) the burden to establish immunity from liability is upon the party who asserts such immunity.  Contreras v. Am. Family Mut. Ins. Co., No. 2:12-cv-00249, 2015 WL 5708456, at *15 (D. Nev. Sept. 29, 2015) (enforcing exculpatory clause).  Courts resolve ambiguous releases by examining the intentions of the parties.  Ghanem v. ADT Corp., No. 2:15-cv-01551, 2016 WL 1698286, at *2 (D. Nev. Apr. 26, 2016).

Indemnity Agreements

Nevada previously did not have an anti-indemnity statute. Reyburn Lawn & Landscape Designers, Inc. v. Plaster Dev. Co., Inc., 255 P.3d 268, 273 (Nev. 2011) (“[S]ince Nevada has not adopted an anti-indemnity statute, parties have great freedom in allocating indemnification responsibilities between one another.”).  However, Nev. Rev. Stat. Ann. § 40.693 (West 2021) governs contracts entered into after February 24, 2015 for residential construction.  It prohibits any contractual provision that requires a subcontractor to defend or otherwise hold harmless a controlling party from any liability, claim, action, or cause of action resulting from a constructional defect caused by the negligence (active or passive) or intentional act or omission of the controlling party.  Id. § 40.693(a).  A subcontractor may still be obligated to indemnify a controlling party for damages resulting from a construction defect related to the subcontractor’s scope of work, negligence, or intentional act or omission.  Id. § 40.693(b).

Nev. Rev. Stat. Ann. § 338.155 (West 2021) governs contracts between a public body and a design professional who is not a member of the design-build team.  Under this statute, the contract must include specific terms, including but not limited to, penalties imposed on the public body if it fails to pay the design professional within the designated timeframe set forth in the contract and further, “that the prevailing party in an action to enforce the contract is entitled to reasonable attorney’s fees and costs.” Id. at § 338.155(1)(a).  Nevada courts have found that where each party prevails in part in an action under this statute, there is a cause to deny either party’s request for fees and costs. Canyon Const. Co. v. City of Elko, 2015 WL 3938569, at *1 (Nev. 2015).  The statute also prohibits provisions requiring the design professional to defend, indemnify, or hold harmless the public body from any liability caused by the negligence, errors, omissions, recklessness or intentional misconduct of the public body or its employees.  Id. § 338.155(1)(e).  However, the public body may require the design professional to indemnify and hold it harmless to the extent any liabilities are caused by the design professional’s negligence, errors, omissions, recklessness or intentional misconduct.  Id. § 338.155(1)(f).

Enforceability of Waiver of Consequential Damages Clauses

Nevada courts have not directly addressed the enforcement of contractual waivers of consequential damages in the construction context.  However, Nevada courts have long recognized a public “interest in protecting the freedom of persons to contract.”  Hansen v. Edwards, 426 P.2d 792, 793 (Nev. 1967); see Rivero v. Rivero, 216 P.3d 213, 226 (Nev. 2009) (“Parties are free to contract, and the courts will enforce their contracts if they are not unconscionable, illegal, or in violation of public policy.”), overruled in part on other grounds by 501 P.3d 980 (Nev. 2022).  Accordingly, Nevada courts generally enforce waiver of consequential damages clauses.  See Clark Cnty. Sch. Dist. v. Rolling Plains Constr., Inc., 16 P.3d 1079, 1083 (Nev. 2001), overruled on other grounds by 35 P.3d 964 (Nev. 2001).  In Clark County, a school district breached its agreement with a general contractor, thereby causing the contractor to breach its contract with a subcontractor.  Id. at 1080–81.  The court held: “We see no reason why [the school district] could not have protected itself from foreseeable damages caused by its own breach by bargaining for or obtaining a waiver or limitation of liability on consequential damages.”  Id. at 1083; see also Verifone, Inc. v. A Cab, LLC, No. 15-cv-157, 2015 WL 6443126, at *2–3 (D. Nev. Oct. 23, 2015) (noting that, under Nevada law, consequential damages may be limited or excluded unless such limitation or exclusion is unconscionable, and holding that an exclusion of consequential damages in a dispatch-service lease agreement was not unconscionable – and thus enforceable – because the provision was displayed prominently and “applied equally to both parties and thus [was] not oppressively one-sided”).

In the context of transactions for the sale of goods, the Nevada Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances.  See Nev. Rev. Stat. Ann. §§ 104.2711 – 104.2714, 104.2715(2).  However, Nevada code section 104.2719 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.  Nevada courts generally hold that a contract is unconscionable only when the contract, and the circumstances existing at the time of its execution, is “so one-sided as to oppress or unfairly surprise an innocent party.”  Guerra v. Hertz Corp., 504 F. Supp. 2d 1014, 1021 (D. Nev. 2007) (quoting Bill Stremmel Motors, Inc. v. IDS Leasing Corp., 514 P.2d 654, 657 (Nev. 1973)) (applying Nevada law); see also Bill Stremmel, 514 P.2d at 657 (affirming the determination that a disclaimer was “effective and not unconscionable[] because the parties were of the same bargaining power and they made an arm’s-length transaction”).

Application of Economic Loss Doctrine

Nevada courts recognize the economic loss doctrine in products liability cases.  See Local Joint Exec. Bd. v. Stern, 651 P.2d 637, 638 (Nev. 1982) (“[A]bsent privity of contract or an injury to person or property, a plaintiff may not recover in negligence for economic loss.”); see also G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., Inc., 460 F. Supp. 2d 1222, 1235 (D. Nev. 2006) (“Nevada courts have adopted the economic loss doctrine to limit recovery for tort claims that arise out of a party’s failure to perform his contractual obligations.”).

Limited Expansion Beyond Products Liability

The application of the rule outside of products liability is limited.  As a general proposition, exceptions to the economic loss doctrine apply “in a certain category of cases when strong countervailing considerations weigh in favor of imposing liability” and “[l]iability is proper in cases where there is significant risk that the law would not exert significant financial pressures to avoid such negligence.”  Halcrow v. Eighth Jud. Dist. Ct., 302 P.3d 1148, 1153 (Nev. 2013).  For example, the doctrine does not apply to intentional torts such as tortious interference with contractual relations or prospective economic advantage.  Stern, 651 P.2d at 638.  Nevada law has also declined to apply the doctrine to negligence cases concerning construction defects brought under Nev. Rev. Stat. § 40.640; see Terracon Consultants Western, Inc. v. Mandalay Resort Group, 206 P.3d 81, 85 n.3 (Nev. 2009) (citing Olson v. Richard, 89 P.3d 31, 33 (Nev. 2004)).  But Nevada courts do apply the doctrine to bar negligence claims against design professionals on non-residential projects.  See Halcrow, 302 P.3d at 1154 (“[I]n commercial construction defect litigation, the economic loss doctrine applies to bar claims against design professionals for negligent misrepresentation where the damages alleged are purely economic.”); Terracon Consultants Western, 206 P.3d at 89 (“In the context of engineers and architects, the bar created by the economic loss doctrine applies to commercial activity for which contract law is better suited to resolve professional negligence claims.”). 

Other Property and Integrated Systems

Under Nevada’s economic loss doctrine, “when an integrated component of a product, such as a building’s heating or plumbing system, fails and causes damage to the larger product but not to other property, only economic loss has occurred.”  Tharaldson Fin. Grp., Inc. v. AAF McQuay Inc., No. 2:13-CV-01861-GMN, 2014 WL 4829649, at *2 (D. Nev. Sept. 30, 2014); see also Fireman’s Fund Ins. Co. v. Sloan Valve Co., 2:10–CV–01816–RLH, 2011 WL 5598324, at * 2 (D. Nev. Nov. 16, 2011) (“[W]hen an integral component of a product (including a building) fails and damages the larger product, only economic loss occurs and, thus, tort recovery is barred.”); but see Charleston Rancho, LLC v. Stanley Convergent Security Solutions, Inc., No. 2:18-cv-02205-APG-VCF, 2019 WL 3754581, at *2 (D. Nev. Aug. 8, 2019) (declining to apply economic loss bar where plaintiff alleged that it was defendant’s negligent response to fire alarm, not fire alarm itself, that caused property damage).

Enforceability of No Damages for Delay Clauses

No damages for delay clauses are generally enforceable in Nevada, subject to certain exceptions.  In public works contracts, no damages for delay clauses are void and unenforceable as to delays thar are:  “(1) So unreasonable in length as to amount to an abandonment of the public work; (2) caused by fraud, misrepresentation, concealment, or other bad faith by the public body; (3) caused by active interference by the public body; or (4) caused by a decision by the public body to significantly add to the scope or duration of the public work.”  Nev. Rev. Stat. § 338.485(2)(c)(1)-(4).

For contracts between private prime contractors and owners, pursuant to Nev. Rev. Stat. § 624.622(2)(c), no damages for delay clauses are void for delays deemed unreasonable under the circumstances, that were not within the contemplation of the parties at the time of the agreement, or for which the prime contractor is not responsible.  Further, the Nevada Supreme Court has recognized the following exceptions to the enforcement of no damages for delay clauses:  “(1) willful concealment of foreseeable circumstances that impact timely performance; (2) delays so unreasonable in length as to amount to project abandonment; (3) delays caused by the other party’s bad faith or fraud; and (4) delays caused by the other party’s active interference.”  J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 89 P.3d 1009, 1015-16 (Nev. 2004).

Strict Interpretation of Contract

Nevada courts strictly interpret contracts.  The cardinal objective when interpreting contracts is to discern the intent of the contracting parties.  Am. First Fed. Credit Union v. Soro, 359 P.3d 105, 106 (Nev. 2015) (citing Davis v. Beling, 278 P.3d 501, 515 (Nev. 2012)).  If the language of a contract is clear and unambiguous, the contract will be enforced as written. Id.  Determining whether the contract is ambiguous is a question of law for the court. Margrave v. Dermody Props., Inc., 878 P.2d 291, 293 (Nev. 1994).  A contract is ambiguous if its terms may reasonably be interpreted in more than one way, Anvui, L.L.C. v. G.L. Dragon, L.L.C., 163 P.3d 405, 407 (Nev. 2007), but ambiguity does not arise simply because the parties disagree on how to interpret their contract.  Galardi v. Naples Polaris, LLC, 301 P.3d 364, 366 (Nev. 2013) (citing Parman v. Petricciani, 272 P.2d 492, 493–94 (Nev. 1954)).  “Rather, an ambiguous contract is an agreement obscure in meaning, through indefiniteness of expression, or having a double meaning.”  Galardi, 301 P.3d at 366.  Where a contract is not ambiguous, its plain meaning controls. State v. Sutton, 103 P.3d 8, 14 (Nev. 2004).  If courts must interpret the parties’ intent, it generally must be discerned from the four corners of the contract.  MMAWC, LLC v. Zion Wood Obi Wan Trust, 448 P.3d 568, 572 (Nev. 2019).  However, if the meaning of a contract is ambiguous, the court may resort to extrinsic evidence in order to ascertain the intention of the parties.  Margrave v. Dermody Properties, Inc., 878 P.2d 291, 293 (Nev. 1994). While Nevada courts will seek to discern the intent of the parties when interpreting a contract, any ambiguities will be construed against the drafter. MMAWC, LLC 448 P.3d at 572 (Nev. 2019) (citing Am. First Fed. Credit Union, 359 P.3d at 106). 

Prompt Payment Requirements (Public/Private)

Nevada Public – Nev. Rev. Stat. §§ 338.510–338.535, 338.550, 338.565 (2022) (owner to prime 30 days after invoice or per contract; not more than 95 percent of the amount of any progress payment may be paid until 50 percent of the work required by the contract has been performed; final payment 30 days after earliest occupancy or notice of completion; prime to sub/sub to lower tier 10 days after payment; interest on monies due prime at rate equal to that quoted by at least 3 insured banks, credit unions, or savings and loan associations in Nevada as the highest rate paid on a CD whose duration is approximately 90 days on the first day of the quarter; interest on monies due subs at rate equal to lowest daily prime rate at 3 largest U.S. banks or other U.S. financial institutions on the date contract was executed plus 2%).

Nevada Private – Nev. Rev. Stat. §§ 624.606 to 624.630 (2022) (owner to prime within 21 days of invoice or as otherwise agreed; 30 days after availability of improvement for intended use for final payment; prime to sub/sub to lower tier per agreement or 10 days after receipt of payment, whichever is earlier, or, if subcontract does not include schedule for payments, prime must pay sub/sub to lower tier within 30 days of request for payment or 10 days after prime receives payment from owner, whichever is earlier; interest at statutory prime rate plus 4% or agreed rate, whichever is higher).

False Claims Statute

Nev. Rev. Stat. Ann. §§ 357.010-357.250 – Nevada’s false claims statute mirrors the FCA.  The Nevada statute additionally holds liable those who benefit from an inadvertent submission of a false claim and fail to disclose this fact within a reasonable period of time after discovery.  Id. § 357.040(1).  Nevada law imposes a civil penalty between $5,500 and $11,000, plus treble damages sustained by the state or political subdivision, and costs expended by the government in a civil action to recover the damages.  Id. § 357.040(2).  Similar to the FCA, the Nevada statute 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 that violation to the governmental investigators within 30 days of gaining that knowledge; (2) fully cooperates with the governmental investigators; and (3) provides the information without knowledge of the investigation and before the commencement of criminal prosecution, civil action, or administrative action.  Id. § 357.050.

Licensing Requirements for Construction Managers

Nevada Revised Statute § 624.020(4) provides that “[a] contractor includes a construction manager who performs management and counseling services on a construction project for a professional fee.”  Nev. Rev. Stat. Ann. § 624.020(4).  Accordingly, construction managers are subject to the same licensing requirements as contractors in Nevada.  Nevada statutory law provides that it is unlawful for any contractor to: (a) engage in the business or act in the capacity of a contractor within this State; or (b) submit a bid on a job situated within Nevada, without an active license, unless that contractor falls within a specific statutory exemption from licensure.  Id. § 624.700.

Print Friendly, PDF & Email

Request for Info

If you would like to be on our mailing list and receive our quarterly newsletters and announcements, please complete the following form:

This field is for validation purposes and should be left unchanged.