Enforceability of Limitation of Liability Clauses
Limitations of Liability
Rhode Island courts recognize limitations of liability. See, e.g., Ostalkiewicz v. Guardian Alarm, Div. of Colbert’s Sec. Servs., Inc., 520 A.2d 563, 566 (R.I. 1987) (upholding limitation of liability clause in an alarm service contract). Parties contracting under the Uniform Commercial Code may also modify or limit remedies and warranties. R.I. Gen. Laws §§ 6A-2-316, 6A-2-719 (West 2021); see also Star-Shadow Prods., Inc. v. Super 7 Sync Sound Sys., 730 A.2d 1081, 1084 (R.I. 1999) (discussing a limitation of liability clause in a film production contract and explaining that “limitation of liability clauses are not unconscionable merely because buyers are not fully protected for damages that may arise from the malfunction of their purchased goods or service”); see also, E. Side Prescription Ctr., Inc. v. E.P. Fournier Co., 585 A.2d 1176, 1180 (R.I. 1991) (discussing a disclaimer of warranty must be conspicuous to be effective under Rhode Island law).
Rhode Island law permits individuals to limit liability for their own negligence through exculpatory clauses. R.I. Hosp. Trust Nat’l Bank v. Dudley Serv. Corp., 605 A.2d 1325, 1327 (R.I. 1992). Such clauses must be “sufficiently specific.” Corrente v. Conforti & Eisele Co., Inc., 468 A.2d 920, 922 (R.I. 1983). However, parties are not required to specifically include the word “negligence” to make an exculpatory clause enforceable. Best Impressions, Inc. v. Port Edgewood Ltd., 641 A.2d 1323, 1323-24 (R.I. 1994) (“This court does not simply mechanically search for use of the term ‘negligence’ in making a determination . . . but examines the intent of the parties as expressed in the contract.”).
Rhode Island law invalidates indemnification provisions in construction contracts that purport to indemnify a promisee against liability proximately caused by or resulting from the promisee’s negligence. R.I. Gen. Laws § 6-34-1(a) (West 2021). This statute would bar a provision requiring a subcontractor to indemnify a contractor even when the general contractor (the indemnitee) and the subcontractor (the indemnitor) both contributed to the loss. Cosimini v. Atkinson-Kiewit Joint Venture, 877 F. Supp. 68, 71 (D.R.I. 1995). However, this provision does not bar a contractor from securing indemnification from a subcontractor for damages attributable to the subcontractor’s percentage of negligence. Id.; see also A.F. Lusi Constr., Inc. v. Peerless Ins. Co., 847 A.2d 254, 265 (R.I. 2004) (stating that a subcontractor may indemnify a general contractor for claims arising from the subcontractor’s negligence). Rhode Island’s anti-indemnity statute does not apply to construction bonds or insurance contracts. R.I. Gen. Laws § 6-34-1(b) (West 2021).
Enforceability of Waiver of Consequential Damages Clauses
At least one Rhode Island court has enforced a waiver of consequential damages clause in the construction context. In DePasquale Building & Realty Co. v. Rhode Island Board of Governors for Higher Education, No. PC07-6393, 2009 WL 3328533 (R.I. Super. Ct. June 29, 2009), the parties entered into a construction contract containing a clause limiting the general-contractor-plaintiff’s consequential damages. See id. at *1. The court vacated an arbitration award that disregarded the contract’s waiver of consequential damages and improperly awarded such damages. See id. at *10. The court explained that the plaintiff “offered no legal authority to support a ruling by this Court that damage limitation provisions . . . are per se unenforceable or that the presence of these provisions in a contract renders the entire agreement void as against public policy.” Id. at *6.
In the context of transactions for the sale of goods, the Rhode Island Uniform Commercial Code allows a buyer to recover consequential damages from the seller under appropriate circumstances. See 6A R.I. Gen. Laws Ann. §§ 6A-2-711 – 6A-2-714, 6A-2-715(2). However, Rhode Island code section 6A-2-719 of title 6A permits the buyer and seller to contract to limit or exclude consequential damages unless the limitation or exclusion is unconscionable or where the circumstances cause a contractually specified limited or exclusive remedy to fail of its essential purpose.
Application of Economic Loss Doctrine
Rhode Island law recognizes the economic loss doctrine, although its approach to the doctrine is not well-defined. Generally, a plaintiff may not recover purely economic losses in tort unless there is personal injury or damage to other property. See Franklin Grove Corp. v. Drexel, 936 A.2d 1272, 1275 (R.I. 2007) (“The economic loss doctrine provides that a plaintiff is precluded from recovering purely economic losses in a negligence cause of action.”). The doctrine has been applied to construction contracts, with the Supreme Court of Rhode Island stating that “[w]hen parties have contracted to protect against potential economic liability, as is the case in the construction industry, contract principles override tort principles and thus, purely economic damages are not recoverable.” Id. (quotation omitted) (affirming summary judgment in favor of builder against property owner’s negligence claim).
In the context of construction cases, a lack of privity does not warrant an exception to the doctrine: “In the absence of privity of contract with the general contractor, the subsequent purchaser of a commercial building in Rhode Island is not entitled to recover economic damages that are proximately caused by the negligence of a general contractor.” Boston Inv. Prop. # 1 State v. E.W. Burman, Inc., 658 A.2d 515, 518 (R.I. 1995); see also Hexagon Holdings, Inc. v. Carlisle Syntec Inc., 199 A.3d 1034, 1043 (R.I. 2019) (reaffirming E.W. Burman). This holding was later limited to transactions between commercial entities; by contrast, in consumer transactions, tort remedies for economic loss are available absent privity. See Rousseau v. K.N. Constr., Inc., 727 A.2d 190, 193 (R.I. 1999).
Independent Duty Exception
Rhode Island courts do recognize an independent duty exception to the economic loss doctrine where circumstances establish a “direct and reasonable reliance” on the contractual performance of one who knows, or should know, of that reliance. Forte Bros. v. Nat’l Amusements, Inc., 525 A.2d 1301, 1303 (R.I. 1987) (maintaining that “[t]his duty of care extends to contractors who share an economic relationship and community of interest with the architect on a construction project” and to render … services professionally”). In such a case the lack of privity does not bar a tort action between a contractor and an engineer. Id.
Enforceability of No Damages for Delay Clauses
No damages for delay clauses are generally enforceable in Rhode Island, absent bad faith or other tortious intent, but are strictly construed. Psaty & Fuhrman, Inc. v. Hous. Auth. of Providence, 68 A.2d 32, 36 (R.I. 1949); see also Depasquale Bldg. & Realty Co. v. R.I. Bd. Of Governors for High Educ., No. PC07-6393, 2009 WL 3328533 at *6 (R.I. Super. 2009) (vacating arbitration award where arbitrator did not enforce no damages for delay clause in contract).
Strict Interpretation of Contract
Rhode Island courts strictly interpret contracts. “Long-established” rules of contract interpretation in Rhode Island provide that “[u]nless plain and unambiguous intent to the contrary is manifested, words used in contract language are assigned their ordinary meaning.” State v. R.I. Empl’t Sec. Alliance, Local 401, 840 A.2d 1093, 1096-97 (R.I. 2003). Thus, “[w]hen a contract is determined to be clear and unambiguous, then ‘the meaning of its terms constitute a question of law for the court ….’” Young v. Warwick Rollermagic Skating Center, Inc., 973 A.2d 553, 558 (R.I. 2009) (quoting Cassidy v. Springfield Life Ins. Co., 262 A.2d 378, 380 (R.I. 1970)). If the language is unambiguous, the contract must be applied as written. W.P. Assocs. v. Forcier, Inc., 637 A.2d 353, 356 (R.I. 1994). However, if the contract is ambiguous, extrinsic evidence is admissible to aid in its interpretation. Id. Rhode Island courts hold that a contractual term is ambiguous when the term is “reasonably and clearly susceptible to more than one rational interpretation.” Botelho v. City of Pawtucket School Dept., 130 A.3d 172, 176 (R.I. 2016) (quoting Miller v. Saunders, 80 A.3d 44, 49 (R.I. 2013)). “In determining whether or not a particular contract is ambiguous, the court should read the contract ‘in its entirety, giving words their plain, ordinary, and usual meaning’ … [and] ‘refrain from engaging in mental gymnastics or from stretching the imagination to read ambiguity … where none is present.’” Young, 973 A.2d at 558-59 (quoting Mallane v. Holyoke Mut. Ins. Co. in Salem, 658 A.2d 18, 20 (R.I. 1995)). While not an absolute rule, if ambiguity exists as to contractual terms, Rhode Island courts will follow the contractual cannon of construing ambiguous contract terms against the drafter. Judd Realty, Inc. v. Tedesco, 400 A.2d 952, 952 (R.I. 1979).
Prompt Payment Requirements (Public/Private)
Rhode Island Public – R.I. Gen. Laws §§ 42-11.1-1 to -11.1-16 (2022) (owner to prime within 30 days of invoice or per contract; prime to sub 10 days after payment; interest at prime rate for primes).
Rhode Island Private – N/A
False Claims Statute
9 R.I. Gen. Laws Ann. §§ 9-1.1-1 to 9-1.1-9 – The Rhode Island False Claims Act mirrors the FCA. Rhode Island imposes a civil penalty between $5,500 and $11,000, plus treble damages sustained by the state, as well as the state’s costs of bringing a civil action to recover the damages. Id. § 9-1.1-3.
Licensing Requirements for Construction Managers
Rhode Island law requires all contractors to register with the state’s Contractors’ Registration Board, but does not expressly mention “construction management.” See R.I. Gen. Laws Ann. §§ 5-65-1 to 5-65-26. Certain services often provided by construction managers, however, may fall within the definition of “contractor.” Id. § 5-65-1. For purposes of registration:
[A] ‘contractor’ means a person who, in the pursuit of an independent business, undertakes or offers to undertake or submits a bid, or for compensation . . . arranges to construct, alter, repair, improve, move over public highways, roads or streets or demolish a structure or to perform any work in connection with the construction, alteration, repair, improvement, moving over public highways, roads or streets or demolition of a structure, and the appurtenances thereto.
Id. § 5-65-1(3)(i). “Contractor” also includes any person who “for compensation arranges for the construction of one or more structures.” Id.
Under Rhode Island law, the registration requirement is not the same as a licensing requirement. Licensing of a contractor typically implies that some form of aptitude screening is involved, such as experience verification or competence testing. Rhode Island law does not employ any such aptitude screening for registration purposes. Rather, registration with the Contractors’ Registration and Licensing Board requires a contractor to provide information including their name, address, tax and insurance information.