CHAPTER 14.02. Drafting to Minimize Claims

• Jurisdiction: United States

14.02. Drafting to Minimize Claims

Lenders seeking to minimize their exposure to claims of lender liability will typically include certain provisions in the loan documents. For example, lenders will typically include a waiver of jury trial and a waiver of punitive damages. Delaware law clearly allows waiver of jury trial in contracts.³⁴ Lenders may also include releases in documents as applicable.³⁵ What is less clear is whether public policy allows the waiver of punitive damages.³⁶ Certainly, the rule is that punitive damages are generally not available for breach of a contract,³⁷ unless the conduct amounts independently to a tort.³⁸ Moreover, punitive, or exemplary, damages are generally understood to punish the breaching party and not to compensate the injured party.³⁹ Accordingly, one could anticipate how a court might conclude that a waiver of liability for punitive damages would violate public policy in the same way as a waiver of intentional misconduct in an exculpation or indemnity, and that such a public policy outweighs the policy of freedom of contract. Unfortunately, there appear to be few cases that address this issue directly.⁴⁰

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Notes:

^[34] Wilmington Trust Co. v. Renner's Paving, LLC, 2013 WL 1442366 at *3 (Del. Super. March 27, 2013).

^[35] Edge of the Woods at n. 1 supra.

^[36] M. Madison, J. Dwyer & S. Bender, The Law of Real Estate Financing § 14:35 at 14-84 (2018).

^[37] J. J. White, Inc. v. Metropolitan Merchandise Mar, Inc., 107 A.2d 892 (Del. Super. 1954); 24 Williston on Contracts § 65:2 at 225 (2018).

^[38] Bhole, Inc. v. Shore Investments, Inc., 67 A.3d 444, 454 (Del. 2013).

^[39] 24 Williston on Contracts § 65:2 at 229 (2018); 11 Corbin on Contracts § 59:2 at 550 (2005).

^[40] Ex parte Thicklin, 824 So. 2d 723, 732 (Ala. 2002); Stark v. Sandberg, Phoenix & von Gontard, P.C., 381 F.3d 793, 800 (8th Cir. 2004).