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:



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.


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.


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.


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).

New York May Change a Pivotal Arbitration Confidentiality Rule: 3 Impetuses & a First Amendment Drawback


An approaching New York rule decision may transform the confidentiality of arbitration, with international ramifications.

Sometime in 2017, the Chief Administrative Judge of the Courts of New York State and the Commercial Division Advisory Counsel is expected to decide whether to expand the confidentiality of the Commercial Division, making it easier for adversaries to keep their arbitration's sensitive business matters sealed--even in court.  

The following addresses the impetuses for this potential change, its projected drawbacks, and scenarios in which the Commercial Division’s decision may severely shift the risks of arbitration.

Arbitration’s Popularity

Arbitration is an attractive choice to parties for several reasons.  Most notably: it’s fast, it’s cheap, and it’s foreign relations friendly.  According to PricewaterhouseCoopers, 88% of corporate counsel have arbitrated at least once, mostly because of its quick resolution relative to litigation.  Since arbitrators are subject matter experts and discovery is limited, arbitration routinely laps litigation.  Also, arbitration is markedly cheaper than litigation; less time spent means less billing.  The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which smooths the jurisdictional thorns of international conflicts, further renders arbitration an attractive local avenue, specifically for resolving global contract disputes.  

Finally, according to the American Arbitration Association, 54% of parties choose to handle disputes via arbitration because the process “preserves confidentiality.”  Per explicit binding rules, arbitrators place a heavy premium on maintaining the confidentiality of their parties.

Impetus for Change Part 1: Enforcement via Confirmation

If arbitration is such a slam dunk, why is New York proposing to change it? 

Because arbitration can be toothless.  Unlike litigation and the courts that adjudicate it, arbitration lacks enforcement.  

Arbitration is rooted in a contractual agreement between parties: a compact that should a dispute arise under the agreement they’ve executed, the parties will (neatly) arbitrate instead of (messily) litigate.  As such, post-arbitration, the losing party pays the winner voluntarily.  Meaning no court, state, sheriff or marshal compels the losing party’s compliance with the arbitration award.  The whole proceeding, and its resolution, is a private matter.

So: what happens when a party who lost in arbitration refuses to pay up?  While arbitration itself lacks enforcement, parties to arbitration may turn to the courts to get their awards enforced.

Via confirmation (a.k.a. validation) a party seeking the enforcement powers of the court (likely the arbitration’s prevailing party) presents to the court the relevant arbitration agreement, the award the arbitrator declared, and the award’s record.

A special or summary proceeding follows, where the court reviews and confirms the arbitrator’s award.  The court thereby attaches judicial clout to the arbitrator’s ruling, infusing it with enforceability.  Now the party that lost in arbitration is compellable by the many enforcement tools of the state, and the arbitrator’s award is within reach, regardless of the voluntary proclivities of the losing party.

While many parties who lose in arbitration voluntarily comply with their arbitration’s awards (somewhere between 49% and 90%), when voluntary compliance falls flat, confirmation proceedings to enforce arbitration awards may be necessary.

Impetus for Change Part 2: Confidentiality

Confirmation is litigation, which many parties flock to arbitration to avoid.  Besides for the relative expenses and time-suck of litigation, confirmation has another downside, too. 

By producing an arbitration agreement, record, and award in court a party may expose its secrets, since unlike arbitration proceedings, court proceedings are public.  This publicity guts arbitration’s confidentiality.

Parties facing noncompliance with arbitration awards therefore face a problematic impasse.  On the one hand, a party may prevail in arbitration, maintain its confidentiality, yet receive no award from its opposition.  On the other hand, a party may enter court to enforce its arbitration award, but only by relinquishing its confidentiality as the price of admission.  Indeed, this relinquishment may expose a party’s prized, even proprietary information.

While a party that prevails in arbitration is likely to win confirmation in court (about 90% of arbitration awards are confirmed) the toll in confidentiality lost in exchange for this victory can be severe, even prohibitive.

Impetus for Change Part 3: Tough Sealing

A party may address this impasse by sealing its court record.  This way, a party can get confirmation from the court, while keeping its arbitration docs confidential.  However, sealing a court record isn’t easy.

To maintain judicial integrity, courts strongly prefer keeping their records open to the public.  This aligns with the First Amendment, which protects the public’s (and the press’s) right to access court records. 

New York’s current record sealing rule, 22 NYCRR §216.1, is carefully construed to avoid upsetting this preference.  §216.1 states:

Except where otherwise provided by statute or rule, a court shall not enter an order in any action or proceeding sealing the court records, whether in whole or in part, except upon a written finding of good cause, which shall specify the grounds thereof.  In determining whether good cause has been shown, the court shall consider the interests of the public as well as of the parties.

Courts’ preference for open records and New York’s opaque sealing rule may therefore combine to evaporate confidentiality for parties seeking arbitration enforcement through confirmation.

New Rule to the Rescue?

To stem the flow of confidential info, the New York State Courts Administrative Board for the N.Y. Supreme Court’s Commercial Division drew up Proposed Rule 11-h, 22 NYCRR Sec. 202.70(g)—or Rule 11-h for short.  Rule 11-h clarifies what constitutes “good cause” for sealing court records.  This makes it easier for petitioners to flesh out their arguments for sealing confirmation proceedings, and perhaps, for courts to rule in these petitioners’ favor.  

Rule 11-h, with its revision of §216.1 emphasized, reads:

Except where otherwise provided by statute or rule, a court shall not enter an order in any action or proceeding sealing the court records, whether in whole or in part, except upon a written finding of good cause, which shall specify the grounds thereof. Good cause may include the protection of proprietary or commercially sensitive information, including without limitation, (i) trade secrets, (ii) current or future business strategies, or (iii) other information that, if disclosed, is likely to cause economic injury or would otherwise be detrimental to the business of a party or third-party.

By explicitly stating that protecting “proprietary or commercially sensitive information” (and specific subsections!) is “good cause” for sealing court records, Rule 11-h guides petitioners, providing touchstones for their pro-sealing arguments.  Where petitioners convince the court that their businesses stand to suffer in these particular ways if their arbitration materials are published, sealing is achievable.

Combine Rule 11-h’s specificity with the relative speed of confirmation proceedings, and seeking enforcement of arbitration awards, where necessary, may suddenly present a more palatable recourse against arbitration delinquency.

The Opposition

The possibility of Proposed Rule 11-h has compelled bodies such as the New York State Bar Association’s Committee on Media Law to argue the dangers of shrinking court transparency.  The Committee’s Report points to legitimate alternatives to outright sealing of court records (i.e. redaction) and substantial case law on the “stringent requirements” that litigants must currently meet in order to seal records in New York.  Per the Committee, law and precedent dictate practices such as “document-by-document” analyses to ascertain whether an open record would cause a “clearly defined and serious injury” to a petitioner; only then may “narrow” sealing occur. 

Rule 11-h, which opens the door to “conclusory” statements of business harm, would represent a perilous departure from established, constitutional court standards, presses the Committee.  What if the sealing in question is not petitioned to protect lawfully guarded business secrets, but “dubious management decisions, embarrassing or unlawful business practices, and corporate misconduct or transgressions”?  Often, the Committee stresses, the more a private company wants to keep a matter secret, the more interest the public has in accessing that record.

In this vein, the Committee’s Report on Rule 11-h points to the parties’ choice to appear in court to begin with.  The Report argues that “where the parties have availed themselves of New York State’s court system in order to resolve their dispute, ‘the public’s right to know both the process and outcome of litigation outweighs the parties’ desire to keep their business secret.’”

“[I]f the parties to a commercial dispute want to preserve the confidentiality of their business dealings in all circumstances,” the Report continues, “they can easily resort to confidential private arbitration of their disputes.”

Which lands parties back in square one.  What if, due to arbitration’s lack of enforcement, a party must appear in court? 


Whether or not 11-h modifies §216.1, arbitration is the preferred method of resolution for many global entities looking to quickly, cost-effectively solve contract disputes in New York.  Buttressing this preference is the current §216.1 and established case law protecting current or future business strategies and trade secrets whose exposure would competitively disadvantage the party petitioning for sealed records. 

Yet sometimes, despite the current protections and even when parties elect to arbitrate instead of litigating, enforcement of arbitration awards is necessary, and litigation looms.  It is in such cases, however rare, that the Commercial Division’s upcoming decision on Proposed Rule 11-h may be most impactful.