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Can an engineering firm limit its liability by contract?

 

Maybe not, in certain circumstances. A Fairfax County judge has determined that an engineering firm cannot limit its liability by contract in a case involving a 2008 fee contract. The typical fee agreement for an engineering firm includes some form of “limitation of liability” in which the firm seeks to limit its liability “to the amount of fees paid” to the firm, whether the claim is for breach of contract or warranty, or for negligence. In the case of Dewberry & Davis, Inc. v. C3NS, Inc., the engineering services firm, Dewberry, filed a fee claim against C3NS. C3NS filed a counterclaim for breach of contract. Dewberry had a limitation of liability clause in its fee agreement. It sought summary judgment to prevent C3NS from claiming that the limitation of liability paragraph was void. The Court sided with C3NS.

The Court relied upon Virginia Code § 54.1-411 which, prior to 2010, stated that “no corporation [providing engineering services] shall limit the liability of any licensee or certificate holder for damages arising from his acts or limit such corporation . . . from liability for acts of its employees or agents.” The Court specifically repudiated a decision from the United States District Court for the Eastern District of North Carolina which held that “Nothing in the statute is relevant to the question of whether an engineer or an engineering firm may contractually limit its liability to a client.”

Finally, the Court relied upon the 2010 changes to § 54.1-411 that a) deleted the sentence prohibiting a contractual limitation of liability; and b) added a phrase that permitted an engineering services corporation to limit its liability through contract. The Court noted that those changes “demonstrate that the General Assembly fully intended to alter the statute’s intent.”

Consequently, engineering firms with contracts that pre-date the statutory change of July 1, 2010 need to be aware of the possible effect this decision could have on any pending matters. Contact your experienced construction litigation attorney to review cases or contracts on which you have concerns.

Tarley Robinson, PLC, Attorneys and Counsellors at Law

Williamsburg, Virginia

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John Tarley

John is the firm's managing partner and chairs the firm's small business, zoning, and litigation practice areas.

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Filed under: Business Planning, John Tarley, State & Federal Litigation by John Tarley

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