MGT 3010A Class exercise Exclusion clauses
A retail jewelry store “Precious Gems” (PG) entered into a contract with “Alert Security
Services” (ASS) for the protection of their premises against burglary and robbery. The
jeweler was robbed and pressed an alarm button while the robbers were on the premises.
For or no apparent reason, an employee of the security firm failed to respond to the alarm
for 10 full minutes and the robbers made a clean getaway. PG sued ASS for $150,000,
the replacement cost of the stolen jewelry
The contract between the parties included the following exclusion clause read:
It is understood that ASS is not an insurer, that insurance, if any, shall be obtained by
the customer and that the amounts payable to ASS hereunder are based upon the value of
the services and the scope of liability as herein set forth and are unrelated to the value of
the customer’s property or property of others located in customer’s premises. ASS makes
no guarantee or warranty, including any implied warranty of merchantability or fitness,
that the system or services supplied, will avert or prevent occurrences or the
consequences therefrom, which the system or service is designed to detect or avert; that if
ASS should be found liable for loss, damage or injury due to a failure of service or
equipment in any respect, its liability shall be limited to a sum equal to 100% of the
annual service charge or $10,000.00, whichever is less, as the agreed upon damages and
not as a penalty, as the exclusive remedy; and that the provisions of this paragraph shall
apply if loss, damage or injury irrespective of cause or origin, results, directly or
indirectly to persons or property from performance or non-performance of obligations
imposed by this contract, or from negligence, active or otherwise, of ASS, its agents or
employees.
Will PG be successful in recovering $150,000 damages from ASS or will the extent of
damages be limited to $10,000 as indicated in the contract? What factors are relevant and
what answer do you suggest?