Rinehart v. Sonitrol of Dallas, Inc.
620 S.W.2d 660, 1981 Tex. App. LEXIS 3696 (1981)
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Rule of Law:
A contractual limitation of liability for breach of an express warranty is effective to cap actual damages, but it does not limit a consumer's recovery of statutory treble damages under the Texas Deceptive Trade Practices Act, as such penalties are not a 'contractual liability' and cannot be waived.
Facts:
- Charles Rinehart entered into a contract with Sonitrol for the installation and monitoring of a burglary alarm system.
- The contract contained a 'performance warranty' that guaranteed the system would detect and report any forcible entry into the protected building.
- The contract also included a clause limiting Sonitrol's 'total maximum contractual liability' to $5,000 for any loss or damage.
- More than seven days after installation, burglars broke into Rinehart's building, and the Sonitrol system failed to detect or report the entry.
- The burglars stole property with a stipulated value of $10,000 and a bailed automobile with a stipulated value of $4,028.
- Plaintiff, Rinehart's representative, filed a claim with Sonitrol for $11,249.21.
- A claims adjuster for Sonitrol denied the claim.
Procedural Posture:
- Plaintiff sued Sonitrol in a Texas trial court for breach of an express warranty.
- The trial court found Sonitrol breached the warranty but limited plaintiff's recovery to $5,000, as stipulated in the contract.
- The trial court denied plaintiff's request for treble damages under the Deceptive Trade Practices Act.
- Plaintiff, as appellant, appealed the trial court's judgment to the Court of Appeals of Texas, seeking treble damages.
- Sonitrol is the appellee in this appeal.
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Issue:
Does a contractual clause limiting liability for breach of an express warranty also limit the statutory treble damages available under the Texas Deceptive Trade Practices Act for that breach?
Opinions:
Majority - Guittard, Chief Justice
No. A contractual limitation of liability does not limit statutory penalties available under the Texas Deceptive Trade Practices Act (DTPA). The court reasoned that the 'performance warranty' in the contract was an express warranty under the Texas Business & Commerce Code, bringing the claim within the scope of the DTPA. While the contract's $5,000 limitation clause was effective at capping Sonitrol's 'contractual liability' for actual damages, it could not limit the statutory penalty of treble damages. The court distinguished between 'contractual liability' and the statutory penalty, holding that the treble damages are imposed by the Act for the failure to promptly fulfill a warranty obligation, not as an extension of the contract itself. Furthermore, the DTPA expressly forbids any waiver of its provisions by a consumer, rendering the limitation clause unenforceable against the statutory remedy.
Analysis:
This decision reinforces the strength of consumer protection statutes by establishing that they can supersede private contractual agreements. It clarifies that while parties are free to limit their liability for actual damages stemming from a breach of contract, they cannot contractually waive statutory penalties designed to punish and deter deceptive practices. The ruling creates a clear distinction between 'contractual liability' and statutory remedies, ensuring that the punitive and deterrent purposes of laws like the DTPA are not nullified by boilerplate limitation clauses in consumer contracts. This precedent significantly impacts how businesses draft limitation of liability clauses, as they must now understand that such clauses will not shield them from statutory penalties for warranty breaches.
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