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What Happens When There is a Flaw in the Indemnity Clause in Your Commercial Contract in Florida?

Protecting your business interests can take many forms. It may involve carefully negotiating a contract, or ensuring that the agreement that is drafted matches the results of the contract negotiations. Ideally, the contract you end up with will be flawless. Even if it isn’t, though, the flaws that may exist will not necessarily result in the invalidation of sweeping portions of the contract. As always, a knowledgeable South Florida commercial litigation attorney can give you the advice you need about your specific circumstances.

A case from the “Space Coast” provides an example. The underlying construction job was a residential condominium project in Brevard County that involved several buildings. After the construction was completed, the condo association sued the general contractor for alleged construction defects. The general contractor, asserting that the defects were really the fault of several subcontractors, filed a series of lawsuits against those subcontractors for contractual and common law indemnification.

Each of the agreements between the general contractor and the subcontractors contained the same indemnification provision. That indemnification provision was the key to the subcontractors’ defenses, as they argued that it was legally void and unenforceable. Specifically, the subcontractors argued that the provision didn’t comply with Section 725.06 of the Florida Statutes, which requires that all indemnification provisions in contracts for the “construction, alteration, repair, or demolition” of buildings must contain ‘a monetary limitation on the extent of the indemnification that bears a reasonable commercial relationship to the contract.’”

The subcontractors’ assertion was that the indemnity paragraph, which contained a flawed clause that said that a subcontractor’s “indemnity obligations hereunder shall apply regardless of whether or not the claims, damages, losses, and expenses or causes of action are caused in part by a party indemnified hereunder,” made the entire indemnification paragraph void and unenforceable and completely doomed the general contractor’s contractual indemnification claim.

In a case like this, the first step is to establish whether or not Section 725.06 applies to the construction project in your case at all. Earlier this year, the Fourth District Court of Appeal ruled against a party that was seeking to have its indemnification provision declared void and unenforceable under the statute. The court reached its decision because the statute didn’t apply to that type of project at all. The construction job was an excavation one, and the court declared that an excavation project that is not “associated with the ‘construction, alteration, repair or demolition of a building, structure, appurtenance, or appliance.’” does not implicate Section 725.06 and no party is entitled to a judgment declaring the indemnification provision void and unenforceable. Since this project in Brevard County involved condo buildings, it clearly fell within the parameters of Section 725.06.

While obviously it is best not to have a flawed indemnification paragraph in a construction contract, that does not automatically defeat a general contractor’s claim in its entirety. As the appeals court explained, the subject indemnity clauses were “only void and unenforceable as to the ‘portion’ purporting to impose the indemnity obligation for the acts or omissions of” the general contractor. The flaw did not, as the subcontractors had argued, render that the entirety of the provision unenforceable. By taking the case up to the appeals court, the general contractor avoided a “nightmare” scenario where it would’ve been on the hook for all of the damages by itself, with no indemnification from the subcontractors.

For advice and counsel regarding your commercial contracts and commercial litigation, consult the skilled South Florida business attorneys at Stok Kon + Braverman. Our experienced team has been helping clients protect their business interests for many years.

Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.

More blog posts:

What it Takes to Secure (or Stop) the Issuance of an Injunction in Your Florida Commercial Litigation Matter, Florida Business Lawyers Blog, Nov. 30, 2018

Piercing the Corporate Veil in Florida to Obtain the Damages Owed to You Under a Breach of Contract Judgment, Florida Business Lawyers Blog, Oct. 29, 2018