Limited Liability Contract and Home Inspection

Insurance Newsletter, October 2003

Home Inspection

The liability of home inspectors in connection with home inspections undertaken for purchasers of residential homes was recently considered in the decision of Mr. Justice Coo of the Superior Court of Justice in John DiSanto vs. Amerispec Home Inspection Service. I had the privilege of acting for the defendant in this action.

In this action the plaintiff (purchaser) claimed that the defendant (home inspector) breached its contractual obligations in the way in which it conducted a home inspection. More specifically the plaintiff complained with respect to flaws and problems not seen, or at least not properly reported on, by the home inspector, despite the fact that they were all readily observable and accessible.

The plaintiff argued that had there been a proper report, he would have not have purchased the home, as the cost of required repairs would have put the real cost out of his reach. Accordingly, the plaintiff claimed the cost of the repair work to remedy the unreported problems.

Prior to conducting the inspection, the parties entered into a written inspection agreement which provided, among other things, that responsibility for observing and reporting on features or problems was limited to what could be seen.
The defendant argued that the inspection agreement limited liability to the return of the contract price paid by the plaintiff. The limitation clause in the agreement provided as follows:“Limit of Liability–if we [the defendant], or our employees, inspectors, or any other person, you [the plaintiff], claim to be our agent, are careless or negligent in making the inspection and/or preparing the Report, our liability to you is limited to the fee paid for the inspection services and, any releases from any additional liability. There will be no recovery for secondary or consequential damages by any person. By signing this agreement, you agree to this limitation on our liability.” Additionally, in bold, centered and capitalized type, on the second line of the agreement the following words appeared:THIS AGREEMENT LIMITS OUR LIABILITY - PLEASE READ IT.The plaintiff argued that he did not read the agreement and therefore was not bound by its terms. The court did not accept this argument and found that there was nothing to prevent the plaintiff from taking whatever time he might have required to read the agreement before signing. The court found that there was “nothing done by the inspector to inhibit that reading or to pressure the plaintiff.” Moreover the court found that the inspection obligations or limits on liability were in language that was readily understandable and in print that was readable. As such the agreement was not in a form that was in some way unfairly drafted or printed.

The plaintiff also argued that by the time the plaintiff arrived at the home site for the inspection, there was already an agreement between the parties made through a telephone conversation between the plaintiff’s real-estate agent and the home inspection service. The plaintiff therefore argued the agreement between the parties was an oral one and not governed by the terms of the written inspection agreement for which no further consideration was provided. The court did not accept this argument.

Although the court did find certain aspects of the inspection may have been performed negligently, the limitation clause precluded a finding of liability in excess of the cost of the inspection.

Good one Ray hope all read and save a copy .
This is great information to hand to that client who is so set on taking the Home Inspector to Court .
I have it on all My reports very simular.
Roy Cooke A Happy NACHI member

That clause is on the Nachi agreement which I use, also my lawyer has advice me to get the client to put his initial beside it proving that he as read it.

This is also a great idea. I will definitely put this into my proceedure manual.

Thanks for the tip!

Thanks for the finding.

Ray, do you know from what area the court proceedings took place. I wouldn’t mind pulling it up through the system. Thanks.

Couldn’t find it, and I couldn’t find it on Maritime Law site. It may not have been in superior court but small claims court, which aren’t published in Ontario.

If you follow these tips you will reduce your risk substantially.

Here they are…

  1. The report identifies a problem condition, but NOT its significance or

  2. The report understates the significance or meaning of a problem condition.

3.The inspector verbally dilutes the significance or meaning of a problem
condition identified in the report.

4.The report fails to suggest that the client retain an expert to more fully evaluate a problem condition.

  1. The report fails to identify a limitation which prevents or hinders a more thorough inspection of an area.

  2. The inspector does not obtain a signed contract from the client.

  3. The inspector presents the contract for the first time immediately before the actual inspection.

  4. The contract does not contain a limit of liability provision.

  5. The contract does not identify what services are being offered and excluded.

Regardless what report one uses, computer generated or not, if you are not relaying the info, you need to improve your reports in my opinion.