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Southern California Edison Awarded $125 Million in Contract Dispute, Liability Cap Prevents Additional Damages

contract.jpgAccording to a report from the Los Angeles Times, Southern California Edison, the single largest subsidiary company of the Edison Corporation, has been awarded $125 million by a three-person arbitration panel. Originally, the company and its business partners were seeking more than $7 billion in damages from Mitsubishi Heavy Industries. While the arbitration panel agreed that additional financial damage occurred, a liability cap in the underlying contract limited the recovery.

The Background of the Case

The Japanese company Mitsubishi Heavy Industries entered into an agreement with Southern California Edison. Under the terms of the contract, Mitsubishi was responsible for supplying steam generators to the San Onofre Nuclear Generating Station. However, the steam generators provided by the company quickly failed. As a result, the San Diego County located nuclear power plant had to cease operations entirely, several decades earlier than initially planned. Southern California Edison argued that the defective generators, provided by Mitsubishi Heavy Industries, amounted to a breach of contract. The company then pointed to the massive amount of financial damage that was incurred as a result of the breach. While the arbitration panel agreed that there was a breach, and that Mitsubishi was responsible for the damages, the panel determined that the award had to be limited to the liability cap that was included in the contract.

Contact Language Matters: Liability Caps

This case provides an instructive example of how much contract language matters. Every term that is bargained for means something. Whenever a business enters into a contract, it is imperative that the company's representative pays close attention to every small detail. Contract language is incredibly important. Ultimately, whenever possible, California courts (and arbitration panels) try to uphold the intention of the parties. This is true when it comes to liability caps as well. If a liability cap or limit is contained in a contract, courts generally presume that it will be enforced. That being said, there are certain contract terms that courts will decline to enforce. In some cases, liability caps and other attempts to limit liability are not enforceable as a matter of public policy. There are many different ways to craft liability limitations. Many of those ways are enforceable, some of them are not. The bottom line is that your company needs to work with an experienced contract attorney who can help ensure that the language of the agreement truly protects the best interests of your business.

Contact Our Office Today

At Diemer, Whitman & Cardosi, LLP, our passionate San Jose contract dispute attorneys have extensive experience representing California businesses. To set up a free review of your legal case, please get in touch with our team today by calling 408-971-6270. From our office in San Jose, we represent companies throughout the Bay Area, including in Napa County and Marin County.



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