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Can a Seller Exempt Itself from Liability for Harm by Deception?
Can a Seller Exempt Itself from Liability for Harm by Deception?
A jewelry dealer and a coin dealer, Puro and Yoken, (the dealers) rented booths in the Antiques Mall in Quechee Gorge (The Mall). Sometime in the night, a thief broke in and stole $25,239 worth of goods from Puro, and $31,698 from Yoken. The dealers sued the Mall for negligence in protecting their property and in consumer fraud for falsely representing the extent and quality of their security systems and practices.
The Mall replied that the dealers had signed a lease agreement which provided that the Mall would not be liable for any damages or loss whatsoever, and dealers should obtain their own insurance against loss. (Exculpatory clause) Dealers did not buy insurance.
Dealers agreed they signed the lease, but pointed out that the Mall had a handbook which provided that it was “equipped with cameras and customer service personnel who watch over your merchandise… (and had) an alarm system with a direct link to the central office. All doors are alarmed (and there are) infrared motion detectors…” In fact, some of the cameras were only working during business hours, and security personnel didn’t monitor all cameras continuously. So dealers argued the Mall had misrepresented the quality of its security.
Proof of consumer fraud only requires that a seller of goods deceives the buyer into buying something, or paying a price for something, they would not have done if they were not deceived. Nevertheless, the trial judge decided that the exculpatory clause was valid and ruled for the Mall. Dealers agreed the clause applied to their negligence claim but said it didn’t if there was fraud. They appealed.
A unanimous Supreme Court agreed with the dealers. It ruled that a person cannot gain a benefit, such as exempting themselves from liability, from a fraudulent act. The security system was not as represented to dealers. Thus they could be liable for actual fraud – that is intentionally misleading the dealers. Moreover, the same principle applied to the Consumer Fraud claim. In that claim, dealers did not need to prove the Mall intended to deceive, but only that the sales practice was unfair and deceptive. The CFA is intended to protect “citizens from unfair and deceptive business practices and to encourage a commercial environment highlighted by integrity and fairness.” For this reason the exculpatory clause was invalid.
To paraphrase Horton the Elephant: “Say what you mean! And mean what you say one hundred percent!” Puro and Yoken v. Neil Enterprises, Inc. d/b/a Quechee Gorge Village. 2009 VT 95
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