My last article pointed out a situation where parties conflate contractual indemnity and damages clauses.  The standard language in Dunce’s Caps’ contract provided for an indemnification of “any and all losses arising from any breach of any representation or warranty in the agreement” and capped those losses at the price of the order. When Dunce’s failed to deliver the promised 100,000 hats, Flat Backs filed an arbitration action seeking recovery of an alleged $4 million in damages, even though the purchase order price was only $500,000. Ignoring Dunce’s damages cap argument, the arbitrator Terry B.L. Judge awarded Flat Backs the full $4 million. Arguing that Judge was not permitted to award Flat Backs more than $500,000, Dunce’s appealed to the state court seeking to overturn the arbitration award because Judge exceeded his jurisdictional limits. Did Dunce’s contractual indemnification provision operate as a cap on the damages that Flat Backs could recover for Dunce’s breach of contract?
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