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North Brunswick Township Board of Education v. French and Parrello Associates


February 26, 2008


On appeal from Superior Court of New Jersey, Law Division, Middlesex County, No. L-7681-04.

Per curiam.


Argued December 12, 2007

Before Judges Wefing, Parker, and Lyons.

Plaintiff, North Brunswick Board of Education, appeals, pursuant to leave granted, from a trial court order granting defendant's motion for partial summary judgment. After reviewing the record in light of the contentions advanced on appeal, we affirm.

In 2001 plaintiff entered a contract with MRM Architecture to design an addition for North Brunswick High School. MRM required a geotechnical evaluation of the site to assist it in its planning, and it issued a request for quotations for preparation of such a report. Defendant French & Parrello Associates submitted the low quote, $8,122.50. Together with its quote, it sent to MRM a contract specifying the terms of the agreement. This contract described the scope of the services to be performed in the following manner:

Scope of Services: Geotechnical services will include 18 test borings advanced to depths ranging from approximately 12 to 25 feet or rock refusal in the areas of the proposed building additions, 4 test borings each to a depth of 6 feet in proposed pavement areas (see attached test boring location plan and schedule of proposed boring depths) using a truck mounted drill rig, preparation of test boring logs, and geotechnical report. Geotechnical report to include: site location map, test boring location sketch, general description of exploration work performed, subsurface conditions encountered, engineering recommendations such as foundation type, bearing capacity, depth to bearing subgrade, subgrade preparation, modulus of subgrade reaction, seismic criteria, and general earthwork recommendations such as fill type and compaction specifications. We will measure the depth to groundwater and assess the impact upon the proposed elevator pit and stage. We will assess the static CBR value of the soil in proposed pavement area and will provide recommendations for preparing pavement subgrades.

In addition, it included among the conditions the provision that "[t]he scope of [its] services will not include any environmental assessment or investigation for the presence or absence of wetlands, chemically hazardous or toxic materials in the soil, surface water, groundwater or air, on or below or around this site." Finally, attached to the contract was the following clause allocating risk:

In recognition of the relative risks, rewards and benefits of the project to both the Client and FPA, the risks have been allocated so that the Client agrees that, to the fullest extent permitted by law, FPA's total liability to the Client, for any and all injuries, claims, losses, expenses, damages or claim expenses arising out of this agreement, from any cause or causes, shall not exceed the total amount of $50,000 or the amount of FPA's fee (whichever is greater). Such causes include, but are not limited to the FPA's negligence, errors, omissions, strict liability and breach of contract. Higher limits are available at additional cost prior to commencement of services.

After reviewing French & Parello's quote and its attachments, MRM wrote a letter to the Board's school business administrator recommending that French & Parello's quote be accepted. MRM included with its letter all the documents that had accompanied French & Parello's quote. He reviewed all the material submitted and, based upon the architect's recommendation, approved the quote and issued a purchase order.

French & Parello commenced its work and by letter dated August 19, 2002, submitted to MRM its report. The report noted the presence of fill on the site. It also set forth its opinion, based upon its subsurface exploration and geotechnical evaluation, that the proposed addition could be constructed on shallow foundations with an allowable bearing pressure of 4,000 pounds per square foot. The report specified the recommended footings, the manner of excavation, and the recommended backfill. The report closed with the statement, "[t]he scope of our services did not include any environmental assessment or investigation for the presence or absence of wetlands, chemically hazardous, or biologically toxic materials in the soil, surface water, groundwater or air, on or below or around this site." Following submission of this report, plaintiff's business administrator then issued a requisition for $8122.50 for French & Parrello which was approved by plaintiff on August 20, 2002.

Almost one year after French & Parello submitted its report to MRM, plaintiff discovered that the fill to which French & Parello had referred in its report was pharmaceutical waste that would have to be removed before the planned addition could be built. The project was delayed for approximately thirteen months. Plaintiff then filed this action in which it sought to recover from French & Parello its delay damages, which plaintiff estimated to be in excess of six million dollars.

After engaging in discovery, both parties moved for partial summary judgment. Defendant pointed to the provision contained with the terms and conditions annexed to its proposal limiting the extent of its liability. Plaintiff, on the other hand, stressed that it had never signed the proposal, although the document contained a signature line, and had never initialed the terms and conditions, although that sheet contained a space for the client to initial, indicating its acceptance. The trial court granted defendant's motion and entered an order that defendant's liability for damages could not exceed $50,000. We granted plaintiff's subsequent motion for leave to appeal.

The Board argues on appeal that it is not bound by the limitation of liability clause because it never indicated its acceptance of that provision. It also argues that such a clause is void as against public policy. We reject these contentions and affirm.

We are satisfied that in this factual context, plaintiff did not have to sign the proposal or initial the terms and conditions to be bound by them. The documents in question were reviewed by its agents, its architect, MRM, and its own business administrator who was its contracting agent. N.J.S.A. 18A:18A-2(a). MRM, as the project architect, had the authority to solicit quotations from subcontractors, and the business administrator had the undisputed authority to bind the Board to contracts involving an expenditure of less than sixteen thousand dollars without seeking specific Board approval. N.J.S.A. 18A:18A-3. MRM reviewed the proposal submitted by French & Parello and its knowledge of the terms of that proposal can be imputed to plaintiff Board. Pfenniger v. Hunterdon Central, 167 N.J. 230, 242 (2001). Plaintiff is bound by the decisions and conduct of its agents.

We also reject plaintiff's argument that defendant's attempt to cap its liability is void as against public policy. We recently had occasion to consider the question of enforceability of a limitation of liability clause. Lucier v. Williams, 366 N.J. Super. 485 (App. Div. 2004). In that case, we declined to enforce the clause, finding it both tantamount to an exculpatory clause and against public policy. That case, however, is significantly distinguishable from the matter at hand. There, plaintiffs, first-time home buyers, engaged the services of a home inspection company. Id. at 488. The contract provided that the parties agreed that the company's liability would not "exceed the total amount of $500, or 50% of fees actually paid," whichever was less. Id. at 489. Plaintiff Lucier objected to language within the contract but was told the terms were non-negotiable. Ibid. He acceded and signed the contract and paid $385 for the home inspection. Ibid. After closing, leaks developed in the roof which required repairs estimated to cost between $8,000 to $10,000. Id. at 490. In the subsequent litigation, the home inspection company relied on the limitation of liability clause, under which its liability could not exceed $192.50.

In setting aside the clause, we noted the grossly unequal bargaining position of the parties as well as our view that the contract was one of adhesion. Id. at 493. Here, no such disparity in bargaining power existed.

In that case, we were satisfied that the clause in question "[ran] afoul of the public policy disfavoring clauses which effectively immunize parties from liability for their own negligent actions." Id. at 492. We reached that conclusion in light of the gross disparity between the damages alleged as a result of the inspector's negligence and the contractual cap.

No such disparity exists here. By the terms of the contract, French & Parello could be held liable for damages more than 600% greater than the fee it received. "To be enforceable, the amount of the cap on a party's liability must be sufficient to provide a realistic incentive to act diligently." Ibid.

Having reviewed this record, we perceive no reason to depart from the settled principle that a court will not rewrite a contract to provide a party a better bargain. Kampf v. Franklin Life Ins. Co., 33 N.J. 36, 43 (1960).

The order under review is affirmed.


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