Litigation

Superior Court Dismisses Negligent Misrepresentation Claim Because Contract Barred Reliance On Extra-Contractual Representations

By Morris James LLP

Transched Sys. Ltd. v. Versyss Transit Solutions, LLC, 2008 WL 948307 (Del. Super. Apr. 2, 2008)

This case illustrates Delaware’s objective theory of contract interpretation and underscores the importance of certain standard contractual provisions. 

The plaintiff purchased software from the defendants and argued that it incurred significant losses due to material misrepresentations, including, for example, the extent of completion of the software.  The defendants argued that the material misrepresentation claim was barred by the plain language of the contract, namely the exclusive remedy clause, integration clause, and disclaimer of extra-contractual representations. 

The contract stated that indemnification was the exclusive remedy “in respect of any breach of or default under this Agreement . . . .”  The integration clause stated that the written agreement was the entire agreement.  And, the reps and warranties clause stated that the seller was making no representation or warranty in respect of any of its assets.  The court held that the thrust of these three provisions was unambiguous: “no representations made outside of the four corners of the Agreement are to be given consideration by the parties in interpreting the terms.”  That is, the provisions precluded the plaintiff’s argument that it justifiably relied on the extra-contractual claims made by the defendants.

Accordingly, the Superior Court dismissed the plaintiff’s negligent misrepresentation claim.   

Full post as published by Delaware Business Litigation Report on April 22, 2008 (boomark / email).