Estey v MacKe 324 Or 372; 927 P2d 86
(1997).
QUESTION BEFORE THE COURT: Does an inspection contract clause, which
limits the inspector's liability to the cost of the inspection, also limit the inspector's
liability for negligence?
FACTS: Plaintiff hired Defendant, a licensed professional engineer, to
perform a "limited visual review" of a house that Plaintiff intended to
purchase. The review was intended to identify major structural deterioration, if any,
including settlement to the structure. The contract called for an inspection fee of $200
and contained a clause stating "The liability of [the firm] and the liability of its
employees are limited to the Contract Sum."
The inspection reported no major areas of structural deterioration. Six weeks after
Plaintiff purchased the home, he discovered that a broken water pipe had been leaking
under the house before the date of the inspection, and the floors were not level. Another
inspection firm in a subsequent inspection report noted severe settlement. Plaintiff later
spent $190,000 on repairs and received contractors' estimates for an additional $150,000
to further stabilize the home.
The trial court ruled in favor of Defendant by noting that such a limitation clause
constitutes a complete bar to Plaintiff's claims for damages. The Oregon Court of Appeals
later affirmed the trial court's ruling, whereupon Plaintiff appealed to the Oregon
Supreme Court.
DECISION: The Oregon Supreme Court reversed and remanded the case to
the trial court for further proceedings. It concluded that the limited liability clause
applied only to a breach of contract or reasonable failure to discover latent defects;
i.e., Defendant should have recognized the rather obvious defects that actually existed.
