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Contract Alert: Are Your Limitation of Liability Clauses Enforceable in Oregon?

April 6, 2017

Overview

In March 2017, the Oregon Court of Appeals issued an opinion that serves as a reminder to us all of the importance of drafting a clear, concise contract—in particular, the exclusions of contract warranties, tort liability and contractual limits on damages provisions for manufacturers, suppliers and distributors.

In Kaste v. Land O’Lakes Purina Feed, LLC, 284 Or App 233 (2017), plaintiff dairy farmers contracted with defendant Land O’Lakes to provide them with feed for their dairy cattle. Plaintiffs alleged the feed sickened or killed a number of their cattle, causing them to incur losses. Plaintiffs sued alleging recovery for breach of contract, as well as in tort. The jury awarded about $90,000 for breach of contract and breach of warranty and $750,000 for negligence and strict products liability, and the judge awarded about $765,000 in attorney fees.

Land O’Lakes argued that plaintiffs’ claims should be dismissed based on the contract wording. The defendant relied on language in its contract that purported to limit the defendant’s tort and contract liability.

The trial court and the Oregon Court of Appeals both rejected the defendant’s argument. The Court of Appeals conducted a detailed review of the text and the context of the exclusionary language and found it susceptible to multiple interpretations. Because the Court was unable to conclude that the limiting provision applied unambiguously to the plaintiffs’ tort and contract claims, defendant was not entitled to a directed verdict.

Although the Court of Appeals’ opinion did not break any new legal ground, it serves as a reminder of the importance of conducting a routine review of your contracts to make certain they are free from ambiguity and, therefore, enforceable. The Court of Appeals also provided “examples” of wording that would, in their eyes, be unambiguous and effectively limit tort claims and contract damages.

Schwabe’s Manufacturing, Distribution and Retail Industry Group team is available to review your current form of contracts to make sure that they meet your goals. We also recommend that you review your contracts with your insurance brokers to make certain that you have appropriate coverage.

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