Brief Fact Summary.
The Fretwells (Plaintiffs) had an alarm system installed and maintained in their residence by Protection Alarm Company (Defendant), and brought a negligence action against the Defendant after robbers successfully stole $91,379.93 worth of property from their home.
Synopsis of Rule of Law.
. Except in the case of certain public service contracts, the parties can by agreement limit their liability in damages to a specified amount, either at the time of making their principal contract, or subsequently thereto.
Accompanying every contract is a common-law duty to perform with care, skill, reasonable expedience and faithfulness the thing agreed to be done, and a negligent failure to observe any of these conditions is a tort, as well as a breach of the contract.View Full Point of Law
Following an alarm from the Plaintiffs’ home, the alarm company notified the police and dispatched an employee to the home. The employee was told by the police that the home was secure, and so did not inspect the premises or discover that the line running to the alarm company had been cut. After the employee and police left, the home was successfully burglarized by the robbers.
At trial, the jury rendered a verdict for the Plaintiffs for the full value of the stolen property. However, Defendant contended that its liability was limited to $50 under the contract.
What impact did the contract have upon the damages allowed in the negligence action?
Reversed and remanded for further proceedings.
It did not matter that the Fretwells were third-party beneficiaries, rather than parties to the contract. Since the contract established the alarm company’s duty to the Fretwells, it could also limit the liability of the promisor.
The $50 cap for damages was not an unenforceable liquidated damages clause, as the Plaintiffs contended. Rather, it was valid, agreed upon limit to the alarm company’s liability.
An examination of the agreement clearly expressed an intention that the alarm company be indemnified from its own negligence, and that was enforceable.
The contract was valid and enforceable against the Plaintiffs, and the alarm company’s liability was limited to $50 under the terms therein. This seems appropriate, in light of the fact that the monthly charge for the service was $46.