McCrory v. Terminix Service Co., Inc.
1992 WL 330502, 609 So. 2d 883 (1992)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
When the words of a contract are clear and explicit, they must be enforced as written, and courts will not consider extrinsic evidence to alter the terms or grant relief to a party who assumed what later proved to be an unfavorable bargain.
Facts:
- In 1962, W.D. Fowler, the prior owner of a residence, entered into a termite protection contract with Terminix Service Co., Inc.
- The contract obligated Terminix to perform annual inspections and treatments for an annual fee.
- The contract contained a clause stating that in the event of new termite damage, Terminix would perform repairs, but its liability would not exceed $5,000.
- Beverly and Gerard McCrory later purchased the residence from Fowler and assumed the terms of the existing Terminix contract.
- In June 1989, during a routine inspection, Terminix discovered active termite infestation and damage to the McCrorys' home.
Procedural Posture:
- Beverly and Gerard McCrory filed suit against Terminix Service Co., Inc. in a Louisiana trial court, claiming property damages.
- Terminix filed a motion for partial summary judgment to limit its liability for property damage to the $5,000 stipulated in the contract.
- The trial court granted Terminix's motion, ruling that its liability for property damage repairs was contractually limited to $5,000.
- The McCrorys, as appellants, appealed the trial court's judgment to the Court of Appeal of Louisiana, Fourth Circuit. Terminix is the appellee.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a contractual provision stating that a termite company's liability for 'new subterranean termite damage' shall 'not to exceed five thousand dollars' unambiguously limit its total liability for property damage repairs to that amount?
Opinions:
Majority - Armstrong, J.
Yes. A contractual provision stating that a termite company's liability for 'new subterranean termite damage' shall 'not to exceed five thousand dollars' unambiguously limits its total liability for property damage repairs to that amount. The court reasoned that under Louisiana law, a contract is the law between the parties. When the terms of a contract are clear and explicit and lead to no absurd consequences, no further interpretation is permitted to search for the parties' intent. The court found the provision, read as a whole, was not susceptible to more than one interpretation and clearly limited Terminix's liability for property damage repairs to $5,000. Because the contract was unambiguous, extrinsic evidence, such as other contracts Terminix had with different customers, was inadmissible. The McCrorys were bound by the terms of the contract they assumed, even if it represented a 'bad and/or outdated bargain.'
Analysis:
This decision reinforces the principle of strict contract interpretation under the Louisiana Civil Code, emphasizing the finality of clear and unambiguous terms. It illustrates that courts are highly reluctant to declare a contract ambiguous or to look beyond the 'four corners' of the document when the language is plain. The ruling serves as a strong precedent for enforcing limitation of liability clauses, cautioning parties who assume pre-existing contracts that they are bound by the original terms, regardless of whether those terms have become disadvantageous over time.
