Consumer Law, Warranties Dual Limitation of Liability Clauses

[badevelopment]

My jurisdiction is: Georgia, US

Hello all,

My company is executing an agreement with another company, which will give that company "agent" status. As an agent of my company, they will be able to offer our product as a reseller and get paid a commission for managing the sales process. We have a Limitation of Liability (LoL) Clause in our standard reseller agreement. The other company (agent) has added his own LoL Clause underneath ours and returned the agreement for review. This agreement now states:

(i) LIMITATION OF LIABILITY. IN NO EVENT SHALL (MY COMPANY) BE LIABLE TO AGENT FOR ANY INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES UNDER ANY CAUSE OF ACTION, EVEN IF (MY COMPANY) HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY FAILURE OF AN ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN. EXCEPT FOR (MY COMPANY)'s OBLIGATIONS TO PAY COMMISSIONS UNDER SECTION 4, IN NO EVENT SHALL (MY COMPANY)'S LIABILITY TO AGENT OR ANY THIRD PARTY ARISING OUT OF THIS AGREEMENT EXCEED THE TOTAL AMOUNT ACTUALLY RECEIVED AND RETAINTED BY (MY COMPANY) HEREUNDER DURING THE PREVIOUS SIX (6) MONTHS.

The potential Agent added:

IN NO EVENT SHALL AGENT BE LIABLE TO (MY COMPANY) FOR ANY INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL DAMAGES UNDER ANY CAUSE OF ACTION, EVEN IF AGENT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION SHALL APPLY NOTWITHSTANDING ANY FAILURE OF AN ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN. IN NO EVENT SHALL AGENT'S LIABILITY TO (MY COMPANY) OR ANY THIRD PARTY ARISING OUT OF THIS AGREEMENT EXCEED THE TOTAL AMOUNT ACTUALLY RECEIVED AND RETAINTED BY AGENT HEREUNDER DURING THE PREVIOUS SIX (6) MONTHS.

This is my first big deal and it's my responsibility to figure out how to handle this contract. My questions is, will executing this contract with two seemingly conflicting LoL Clauses be a problem in the event of litigation, or is this fairly commonplace?

Thanks,
Dave

 

[dee_dub]

Do you know what your clause means?

The clause added by the agent is virtually identical (mutatis mutandis) to yours. I don't think they necessarily conflict, since they deal with different situations (your potential liability to the agent vs. the agent's potential liability to you). But I query whether some of the language is at all relevant to the agent's situation.

I would consult with whomever drafted the original contract.

 

[badevelopment]

Thanks Dee_dub

Thanks a ton dee. I don't think this clause is a major game-stopper, but I am wondering how it might affect our nondisclosure agreement already in place with the agent. For example, if the agent were to divulge our business or tecnology models to the competition, would this LoL also limit the agent's liability to us in seeking payment for those damages?

Dave

 

[dee_dub]

Without reading the contracts and knowing a lot more about the facts, it is impossible to say. I would speculate that adding these clauses might affect a party's potential liability for special damages etc. in the event they breach the NDA. You would probably still be entitled to compensatory damages, at least to the extent of the amount of money received by the agent. Again, I would strongly suggest you consult the person(s) who drafted these contracts.

 

[Michael Wechsler]

Doesn't your company have a contracts attorney? I might be concerned about that clause because you need the protection more than they do - if the agent represents something on behalf of your company, there could be problems that might arise. An agent means they can obligate your company even though your company didn't agree and specifically contracted with the agent as to the limits of their authority. You need to look at the contract and see what all the terms are. Good luck.