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SLG's 50 State Survey Part Four: Illinois

This is the fourth installment of a nationwide survey report we’re working on here at SLG, which will ask the questions listed below of each of the fifty U.S. states. Here’s our New York, California, and Florida coverage, respectively. Next up:

ILLINOIS

I. LIMITS OF LIABILITY

Are contractual caps, ceilings, or limits on direct damages enforceable?

Yes, based on the public policy principle of freedom of contract. Rayner Covering Systems, Inc. v. Danvers Farmers Elevator Co., 226 Ill. App. 3d 507, 512 (1992). However, clauses limiting direct damages are disfavored in Illinois and are strictly construed against a benefitting party. Hicks v. Airborne Express, Inc., 367 Ill. App. 3d 1005, 1011 (2006). All the more so when the benefitting party drafted the limiting clause. Harris v. Walker, 119 Ill. 2d at 542, 548 (1988). As such, to make direct limits of liability stick, drafters “must spell out the intention of the parties with great particularity [as such clauses] will not be construed to defeat a claim which is not explicitly covered by their terms.” Scott & Fetzer Co. v. Montgomery Ward & Co., 112 Ill. 2d 378, 395 (1986).

Are provisions that exclude all consequential damages enforceable?

Yes, unless they are unconscionable. 810 ILCS 5/2-719(3). Limiting consequential damages for someone’s physical injuries arising from a consumer goods contract is prima facie unconscionable, although limiting consequential damages where the loss is merely commercial is not. Id.

Can remedies be limited to those express remedies solely and exclusively provided for in a contract?

Yes, unless:

A. the exclusive remedy fails of its essential purpose; or

B. the exclusion is unconscionable. 810 ILCS 5/2-719(1)-(3).

An exclusive remedy—e.g. the repair and replacement of the contracted goods in question—may fail of its essential purpose if it deprives either party of the substantial value of the bargain. Razor v. Hyundai Motor America, 222 Ill.2d 75 (2006), quoting 810 ILCS Ann. 5/2-719, Uniform Commercial Code Comment 1, at 488 (Smith-Hurd 1993). For example, if the repair or replacement of originally contracted goods doesn’t work either, repeatedly. Id.

II. DAMAGES

Does Illinois cap the amount of (A) consequential damages, or (B) punitive damages that a party may recover?

A. No. Moreover, consequential damages resulting from a seller’s contract breach include those: (i) contemplated by the parties at the time of contracting, which could not reasonably be covered; and (ii) arising from an injury to a person or property proximately resulting from any breach of warranty. 810 ILCS 5/2-715(2)(a)-(b).

B. Yes, generally. 735 ILCS 5/2-1115.05(a). The amount of punitive damages that may be awarded for a civil claim covered by this statute may not exceed three times the amount awarded to the claimant for the related economic damages. Id. Those covered claims: “all cases on account of bodily injury, or physical damage to property based on negligence, or product liability based on any theory or doctrine.” Id.

Are punitive damages recoverable in contract matters? If so, when?

No. Bank of Lincolnwood v. Comdisco, Inc., 111 Ill. App.3d 822, 829 (1982). Exception: punitive damages are available in breach of contract matters where the defendant committed the applicable breach with “malice, wantonness or oppression,” and therefore committed an independent tort. Id. As such, the court must analyze the motive underlying the breach to determine whether it warrants punitive damages.

The Illinois Compiled Statues offer further guidance, stating that punitive damages in “cases on account of bodily injury, or physical damage to property based on negligence, or product liability based on any theory or doctrine” may be recovered only if:

A. actual damages are awarded; and

B. the plaintiff shows by clear and convincing evidence that the defendant acted “with evil motive or with a reckless and outrageous indifference to a highly unreasonable risk of harm and with a conscious indifference to the rights and safety of others.” 735 ILCS 5/2-1115.05(a)-(b).

Bonus note: punitive damages are prohibited—whether capped or not—in cases of legal or medical malpractice. 735 ILCS 5/2-1115.

III. DISCLAIMERS/LIMITATIONS OF WARRANTY

Are disclaimers of any and all implied warranties enforceable in Illinois?

Yes, subject to drafting requirements for each warranty the drafter seeks to disclaim. 810 ILCS 5/2-316.

To disclaim or modify the implied warranty of merchantability, the applicable provision must:

A. mention merchantability; and

B. be conspicuous. 810 ILCS 5/2-316(2).

To disclaim the implied warranty of fitness the applicable provision must be conspicuously written. Id.

All implied warranties are also excludable via “language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty.” 810 ILCS 5/2-316(3)(a). This language includes “as is” or “with all faults.” Id.

Finally, implied warranties can also be excluded or modified through the parties’ course of dealing, course of performance, or usage of trade. 810 ILCS 5/2-316(3)(c).

Despite this statutory guidance, drafters should note that Illinois courts have invalidated disclaimers that conformed to the above requirements where “the evidence unequivocally demonstrated that the substantially defective nature of the [contracted good] clearly impaired its value to the plaintiffs and thus revocation of acceptance is appropriate even if the dealer has properly disclaimed all implied warranties.” Blankenship v. Northtown Ford, Inc., 95 Ill.App.3d 303, 306.

IV. STATE DISPUTE RESOLUTION

May claimants sue the State of Illinois for breach of contract? If so, does Illinois mandate any dispute resolution procedures with the State?

Yes, to both. Claimants may sue the State, however, claimants “aggrieved by an administrative action must first pursue all available administrative remedies before resorting to the courts.” Village of South Elgin v. Waste Management of Illinois, Inc., 348 Ill. App. 3d 929, 930 (2004) (citing Rockford Memorial Hospital v. Dep’t of Human Rights, 272 Ill. App. 3d 751, 757 (1995)). Also, contract breach claimants must sue the Illinois in the Court of Claims, as the Court of Claims Act grants the Court of Claims exclusive jurisdiction over “[a]ll claims against the State founded upon any contract entered into with the State of Illinois.” 705 ILCS 505/8(b).

SLG's 50 State Survey Part Three: Florida

This is the third installment of a nationwide survey report by SLG, which will ask the questions listed below of each of the fifty U.S. states. Here is our New York and California coverage, respectively. Next up:

FLORIDA

I. LIMITS OF LIABILITY

Are contractual caps on direct damages enforceable in Florida?

Yes, limits of liability clauses are enforceable in Florida. Mt. Hawley Ins. Co. v. Pallet Consultants Corp., No. 06-61763-Civ (S.D. Fla. 2009). However, drafters should “clearly and unequivocally” provide their limits, considering the general “disfavor” of exculpatory provisions among Florida courts. Id.

Are provisions that exclude all consequential damages enforceable in Florida?

Yes, generally. Florida’s Uniform Commercial Code: Sales states that consequential damages may be limited or excluded altogether unless the limitation or exclusion is unconscionable. Fla. Stat. § 672.719(3). However, commercial contract drafters must note that any limitation of consequential damages for injury to a person in the case of consumer goods is prima facie unconscionable, and therefore unenforceable. Id. Still, a limitation of damages where the loss is merely commercial is not automatically unconscionable, and therefore, may be enforceable. Id.

Can remedies be limited to those expressly and exclusively provided in a contract?

Yes. As long as the remedies are expressly provided as—and therefore agreed to be—exclusive, such exclusive remedies are enforceable. Fla. Stat. § 672.719(1)(a)-(b). However, where circumstances cause an exclusive (or limited) remedy to fail of its essential purpose, such remedy may not be exclusive of other applicable statutory remedies. Fla. Stat. § 672.719(2).

II. DAMAGES

Does Florida cap the amount of (a) consequential damages, or (b) punitive damages that a party may recover?

(a) No. Although, drafters should note that consequential damages are statutorily defined to include losses:

(A) stemming from needs that the seller, at the time of contracting, had reason to know of, and;

(B) that could not reasonably be prevented by cover or otherwise. Fla. Stat. § 672.715(2)(a).

Consequential damages also include losses due to injury to a person or property that are proximately caused by the seller’s breach of warranty. Fla. Stat. § 672.715(2)(b).

(b) Yes, generally. Fla. Stat. § 768.73(1)(a). Punitive damages may not exceed the greater of:

(i) three times the compensatory damages awarded to each claimant; and

(ii) $500,000. Id.

However, Florida law raises this cap where the proven wrongful conduct was:

(1) motivated solely by unreasonable financial gain; and

(2) actually known to be unreasonably dangerous, with a high likelihood of resultant injury. This knowledge may be possessed by a managing agent, director, officer, or other person responsible for making policy decisions on behalf of the defendant. Fla. Stat. § 768.73(1)(b).

Here, the punitive damages cap is the greater of:

(y) four times the compensatory damages awarded to each claimant; and

(z) $2 million. Id.

Despite the foregoing, Florida law does not cap punitive damages at all where the defendant had a specific intent to harm the claimant at the time of injury, and such harm-minded conduct succeeded in harming the claimant. Fla. Stat. § 768.73(1)(c).

Are punitive damages recoverable in contract matters? If so, when?

Yes, unless the defendant establishes, before trial, that that punitive damages have already been awarded against that defendant for the same act or course of conduct. Fla. Stat. § 768.73(1)(d)(2)(a). Still, even in these doubled-up cases, punitive damages remain available if a court determines by clear and convincing evidence that the prior punitive damages were insufficient to punish the defendant’s behavior. Fla. Stat. § 768.73(1)(d)(2)(b).

III. DISCLAIMERS/LIMITATIONS OF WARRANTY

Are disclaimers of any and all implied warranties enforceable in Florida?

Yes. But it has to be done right. To exclude or modify the implied warranty of merchantability, for example, contract language must:

(i) mention merchantability; and

(ii) be conspicuous. Fla. Stat. § 672.316(2).

To exclude or modify any implied warranty of fitness, a contractual exclusion must be conspicuous. Id. Generally, expressions like “as is” or “with all faults” successfully exclude all implied warranties. Fla. Stat. § 672.316(3)(a).

Fun fact: There is no implied warranty that cattle or hogs are free from sickness or disease—unless the seller knowingly sells the beasts diseased. Fla. Stat. § 672.316(3)(d).

IV. STATE DISPUTE RESOLUTION

May claimants sue the State of Florida for breach of contract? If so, does Florida mandate any dispute resolution procedures with the State?

Yes. While the State of Florida waived its sovereign immunity for torts in 1975, clearing the way for claimants to sue the Sunshine State for everything from personal injury to ministerial fails, Fla. Stat. § 768.28, no statutory provisions waive Florida’s sovereign immunity regarding contracts. Florida courts undertook this matter instead, and have ruled consistently that claimants may sue Florida for contract breach as long as such suits concern “express, written contracts into which the state agency has statutory authority to enter.” Pan–Am Tobacco Corp. v. Dep't of Corr., 471 So.2d 4, 6 (Fla.1984). However, “[w]hen an alleged contract is merely implied, [Florida’s] sovereign immunity protections remain in force.” City of Fort Lauderdale v. Israel, No. 4D15–1008 (FL. Dist. Ct. App. 2015).

Florida requires no particular dispute resolution procedures for contract disputes with the State.