1800 Ocotillo L.L.C. v. The WLB Group (11/3/08)

The Court has used this business dispute to deliver a major statement on assumption of risk and contractual limitation of liability.

1800 hired engineering firm WLB to survey property; the survey missed a right-of-way and 1800 sued WLB for the resulting damages. WLB’s contract limited its liability to the amount of its fees. The Court upheld the provision.

Presumably, the Court accepted this case to try to undo the damage done by Phelps v. Firebird Raceway, 210 Ariz. 403. That was the case that said that a voluntary, contractual waiver of liability was not binding because it was an “assumption of risk.” This was a classic example of expanding what were once rather clearly-defined tort principles, denying that any expanding is going on, and using the result to trump what used to be thought of as reason, common sense, and our legal rights.

1800 does not, of course, suggest that Phelps was guilty of anything more than sloppy wording. Instead, it gives us a clarification of what “assumption of risk” means. The rule of 1800 is this: assumption of risk completely protects the defendant from liability; merely limiting liablility is therefore not assumption of risk. The opinion does us the favor of stating this clearly and repeatedly.

Whether this restores the right to deal contractually with risk, though, depends on how limited the liability can be before it will be seen as no liability at all. Would a provision limiting the Raceway’s liability to one cent change the result in Phelps? How about $1,000.00?

So as to avoid showing any undue concern for the law of contract, however, the Court remanded the case for consideration of whether the provision was valid under Darner.