Oregon Supreme Court holds contracts must be clear and unequivocal when seeking to disclaim tort liability
By: Vivian Krupicka
On March 7, 2024, the Oregon Supreme Court issued a decision on the question of what language is necessary in a contract to waive tort liability. In Certain Underwriters v. TNA NA Manufacturing, the court found that contract language must be clear, explicit, and unambiguous that the parties intend to disclaim actions outside of contract, such as tort actions.
SunOpta is a food company that had a product recall in 2016 after the discovery of listeria. As a result, it had $20 million in damages. SunOpta used equipment purchased from Food Design, Inc. (“FDI”) in processing that food. Lloyd’s London (“Lloyd’s) paid SunOpta its insurance policy limit of $20 million and SunOpta subrogated its claims for FDI’s potential tort liability to Lloyd’s.
Lloyd’s sued FDI and its successor in interest, TNA NA Manufacturing, Inc. (“TNA”), for negligence and strict product liability under ORS 30.920.
FDI and TNA challenged the lawsuit by filing a motion for summary judgment. That motion argued that the purchase contract for the equipment executed between FDI and SunOpta barred the tort lawsuit brought by Lloyd’s. Lloyd’s argued that the language in the contract was not clear and unequivocal in limiting tort liability.
The trial court granted summary judgment in favor of FDI and TNA, finding that nothing extended their liability beyond repair or replacement and that no language suggested that they have any responsibility for damage to person or property as in tort-type damages. In making this decision, the court based its ruling on the contract in its entirety and four sections in particular. The first, section 5, limited warranties under the UCC and limited liability to replacing defective products. The second, section 7, limited liability based on damage resulting from faulty installation or negligent operation by SunOpta. The third, section 11, stated in part that “[s]eller’s liability shall be limited to the repair or replacement of any defective equipment and the parties agree that this shall be Purchaser’s sole and exclusive remedy. Seller shall not be liable, in any event, for loss of profits, incidental or consequential damages or failure of the equipment to comply with any federal, state or local laws.” (emphasis added). The last, section 12, stated that the seller was not to be liable for any consequential damages. Lloyd’s appealed the trial court decision to the Oregon Court of Appeals.
The Oregon Court of Appeals affirmed the decision, but with a narrower ruling holding that only section 11 of the contract unambiguously disclaimed any liability in tort. That section of the contract was located under the “disclaimer” portion of the contract and stated that FDI “shall not be liable, in any event.” Lloyd’s appealed this decision to the Oregon Supreme Court.
The Oregon Supreme Court stated that in Oregon there is a presumption against an intention to contract for immunity from the consequences of one’s own negligence. Generic text that purports to waive all liability or any loss will be insufficient to overcome the presumption against the waiver of tort liability. Courts will consider the language of the contract and the possibility of a harsh or inequitable result that would fall on the releasing party by immunizing the other party from the consequences of their own negligence. The court characterizes this as a “heavy burden” and the contract must “make it crystal clear that the releasing party has absolved the other party from the consequences of the party’s own negligence and product defects.”
In reviewing the contract at issue between SunOpta and FDI, the Oregon Supreme Court decided that the limitation in sections 5 and 12 applied to contract claims and were not sufficient to limit tort liability. The court decided that section 7 shifts some tort liability relating to the installation or negligent operation of the equipment, but not all tort liability. Reviewing section 11, the court determined it did not clearly and unequivocally waive tort liability.
The court continued by reviewing other decisions on this same issue. An instance where a sales contract limited liability to the repair or replacement of the product as the purchaser’s “sole and exclusive remedy whether in contract, tort or otherwise, and [the manufacturer] shall not be liable for injuries to persons or property” was sufficient to limit tort liability. In another instance, a general provision to limit “any liability” or “any and all loss *** from any cause whatsoever” was not sufficient.
There are no magic words that are required to limit tort liability, but generic or broad language may be insufficiently specific to meet the “clear and unequivocal” standard. Considering this ruling, it is important for businesses that want to include waivers for tort liability to review their contracts and determine whether they are sufficiently clear and unequivocal on that point. If you would like assistance in reviewing contract language or adding a provision limiting tort liability, please reach out to Vivian Krupicka at Vivian.Krupicka@Harrang.com.
« Back to News & Insights