12-18

A limitation of liability clause where the state agrees not to seek damages against a private supplier or agrees to limit the damages it may seek (1) does not violate Oklahoma Constitution prohibitions related to debt of the state because there is no affirmative promise on the part of the state to pay another party to the contract and (2) is not inherently violative of public policy.

The limitation of liability clause considered in this Opinion does not constitute an obligation that binds future legislatures beyond the fiscal year; however, the terms of each clause must be analyzed to determine if the clause contains language that exempts the supplier from its own fraud, willful injury or violation of law. If so, the clause is null and void because such a limitation of liability is prohibited by 15 O.S. §212 and against the public policy of the state. Additionally, a clause may be labelled as a limitation of liability but its terms may require the state to indemnify a supplier for the supplier’s own damage; indemnification clauses requiring the state to pay a third party constitute a debt and are prohibited by the Oklahoma Constitution, Article X, §23. See 74 O.S. 85.5.

NOTE: This Opinion overrules Opinion Nos. 06-11, 01-02, and 78-256 to the extent those Opinions determined a limitation of liability clause in a contract constitutes a debt, liability or obligation of the state in violation of the Oklahoma Constitution or is inherently violative of public policy. Opinion 01-02 which addressed only limitation of liability clauses has been withdrawn.

http://www.oscn.net/applications/oscn/DeliverDocument.asp

Attorney General Opinion No. 12-18

Purchasing Reference Guide