More than four decades ago, country singer Kenny Rogers achieved massive success with a song called “The Gambler.” The song gives the listener several tidbits about playing cards (and presumably about life,) including the value of not overplaying one’s hand. The benefit of refraining from overplaying one’s position is something that can be realized in a variety of settings, including in creating your commercial contract. Even when it seems like you have the “upper hand,” going too far has the potential to cause catastrophic results. To make sure you get a commercial contract that balances your positional strengths with proper restraint to avoid court intervention or other problems, be sure you have the skills of an experienced Florida business attorney on your side.
As an example, there’s this federal case recently before the Eleventh Circuit Court of Appeals. The parties were a Brazilian travel agency that specialized in cruises and cruise packages and a Florida company the travel agency hired to design a website. That “one-of-a-kind” website would allow users to book in Portuguese and pay in Brazilian currency.
What made these parties’ contract noteworthy was the exculpatory clause that the Boca Raton-based entity negotiated. The clause that was included in the final agreement stated that “for any direct, special, indirect, incidental, consequential, punitive, exemplary or any other damages regardless of kind or type (whether in contract, tort (including negligence), or otherwise), including but not limited to loss of profits, data, or goodwill.” The clause also said that the company would not be liable even if it “knew or should have known of the possibility of such damages.”
The provision also stated that the travel agency waived “any and all claims, now known or later discovered, that it may have against [the website designer] and its licensors and vendors arising out of this agreement and the services.” The maximum amount of compensation the website designer could possibly owe the travel agency, according to the contract, was $100.
Going too far can cost you the clause you negotiated… or maybe your entire contract
Sounds like a nice exculpatory clause if you can get it, doesn’t it? In reality, it’s not that clear. The law gives parties broad freedom to enter into contracts, and to customize those agreements’ terms to their mutual satisfaction. That freedom, though broad, is not unlimited. If a provision is sufficiently unreasonable, it might be a target for a successful challenge in court. The court could declare that the clause is so one-sided that it is not enforceable under Florida law.
However, the possible outcomes are even worse than that. Under Florida law, it is also possible that a court can decide that the clause is so extreme (and so extremely one-sided) that it makes the entire contract an illusory agreement, which means that the entire contract is unenforceable.
In this case, the Eleventh Circuit declined to rule, instead asking the Florida Supreme Court for an opinion. Whatever way the Supreme Court decides, this case is a stark reminder of the pitfalls that can await a party that uses its upper hand to get excessively aggressive with provisions like exculpatory clauses.
In a commercial contract setting, you want the best possible agreement that you can negotiate and that can survive court scrutiny. For the help you need on getting to that optimal outcome, retain the skilled South Florida business attorneys at Stok Kon + Braverman. Our attorneys are here to give you the knowledgeable advice and effective advocacy you need.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.