On appeal from the Superior Court of New Jersey, Law Division, Camden County, L-1142-00.
Before Judges King, Lintner and Lisa.
The opinion of the court was delivered by: Lisa, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted October 9, 2003
We consider in this appeal the enforceability of a limitation of liability provision in a home inspection contract. The Law Division judge found the provision enforceable, and granted partial summary judgment in favor of the home inspector. The effect of this order was to limit the home buyer's potential recovery to one-half of the fee paid for the home inspection service, namely $192.50. We hold that this limitation of liability provision is unconscionable, in contravention of public policy, and is therefore unenforceable. Accordingly, we reverse.*fn1
Plaintiffs, Eric Lucier and Karen A. Haley, a young married couple, were first-time home buyers. They contracted with defendants, Angela M. Williams and James B. Williams, to purchase a single family residence in Berlin Township for $128,500. Lucier and Haley engaged the services of Cambridge Associates, Ltd. (CAL) to perform a home inspection. Defendant Al Vasys had formed CAL and was its president. Only Lucier signed the home inspection agreement, dated July 7, 1999. Lucier dealt directly with Vasys, and Vasys performed the inspection and issued the home inspection report, dated July 14, 1999, on behalf of CAL.
The home inspection agreement contains this provision limiting CAL's liability:
Client and CAL have discussed the risks, rewards and benefits of this assignment and CAL's total fee for services. It is acknowledged that benefits vary disproportionately between them.
Accordingly, the risks have been allocated such that the Client agrees that, to the fullest extent permitted by law, CAL's total liability to Client for any and all injuries, claims, losses, expenses, damages or expenses arising out of this Agreement from any cause or causes shall not exceed the total amount of $500, or 50% of fees actually paid to CAL by Client, whichever sum is smaller. Such causes include, but are not limited to, CAL's negligence, errors, omissions, strict liability, breach of contract or breach of warranty. CAL will not be liable to Client or Client's insurers, in contract, warranty, tort, (including negligence), or otherwise, for any special, indirect, or consequential damages resulting from the performance of or failure to perform services under this Agreement, which damages shall include specifically, but without limitation, loss of use, cost of replacement substitute facilities, cost of capital or similar damages.
This provision, as several others in the form agreement prepared by CAL, was followed by a line for placement of the clients' initials. Lucier initialed this provision.
Lucier has certified that when he began to read the agreement, in Vasys' presence, he felt some of the language was unfair and confusing. According to Lucier, Vasys stated he would not change any provisions, that it was a standard contract based upon home inspections done in New Jersey, and Lucier would have to sign the agreement"as-is" or not at all. Vasys does not dispute this, but relies upon Lucier's signing the agreement and initialing the limitation of liability clause. Likewise, Lucier does not deny signing the contract or initialing that clause.
Lucier has also certified other unrefuted facts: he reviewed and relied upon Vasys' resume in entering into the contract; he was never aware that Vasys or CAL were uninsured; he would not have entered into the contract had he known; he was not represented by an attorney in any aspect of this real estate transaction; and he relied upon the home inspection report issued by Vasys on behalf of CAL in going through with the home purchase. The fee for the home inspection contract was $385, which Lucier paid to CAL.
Vasys' resume reveals he holds a 1960 engineering degree with a major in structural design from Villanova University, he is a member of the National Society of Professional Engineers, the New Jersey Society of Professional Engineers and the Building Officials and Code Administrators (BOCA) International, and he has inspected more than 3,000 residential properties for prospective home buyers. The resume further states that Vasys is certified as a BOCA building inspector, he is a licensed New Jersey building inspector and a certified New Jersey radon measurement specialist, and he has qualified and served as a litigation expert involving residential dwellings.
Lucier and Haley went to settlement and obtained title to the property from the Williams'. Shortly after settlement, plaintiffs noticed leaks in the house. They contacted the Williams' regarding the problem, and engaged the services of a roofing contractor. Plaintiffs contend the roof was defective because of a lack of flashing, which they contend Vasys should have observed and reported to them. According to plaintiffs, had they known of this defect, they would have either withdrawn from the agreement of sale or attempted to negotiate a lower price to reflect the cost required to remedy the problem. They contend the cost of repair was about $8,000 to $10,000.
Plaintiffs brought suit against the Williams', CAL and Vasys, seeking damages to compensate them for the loss occasioned by the alleged defect. They asserted various theories, including fraud, breach of warranty, breach of contract, and negligence. After filing their answer, CAL and Vasys moved for partial summary judgment seeking a declaration that the limit of their liability in the action, if any, was one-half the contract price, or $192.50. On January 5, 2001, the motion for partial summary judgment was granted, supported by these findings:
I find that the exculpatory clause in this agreement is enforceable. All right.
I find that the clause is not the product of unduly disproportionate bargaining powers. The bargaining power of both sides was ...