By UpCounsel Attorney Sue Dunbar

Just seeing the phrase “disclaimers of warranty and limitation of liability clauses” probably makes your eyes glaze over. The typically long, grammatically incorrect run-on sentences in these types of contracts certainly don’t help. The common consumer tends to skim over the content if they read it at all. BUT THOUGH THE ALL CAPS IS ANNOYING, THEY’RE NECESSARY TO GRAB YOUR ATTENTION.

Startups often request that the language in their terms of service be accessible to their end users. In other words, get rid of all that “legalese” – words not found in Merriam-Webster’s dictionary seemingly made up by your lawyer.

However, a recent unpublished decision by the California Court of Appeal serves as a reminder that some legalese can mean the difference between thousands of dollars in damages and attorneys’ fees and an early dismissal of a lawsuit. In Jan Lewis v. YouTube, the often-present all caps “LIMITATION OF LIABILITY” clause served to terminate a lawsuit almost at its inception based solely on standard contract interpretation.

Legalese can mean the difference between thousands of dollars in damages and attorneys’ fees and an early dismissal of a lawsuit  

In Jan Lewis, a user sued YouTube after her account was suspended without notice. The plaintiff, Jan Lewis, had created an account, accepted the terms of service and uploaded 24 videos over a five-year period. Lewis discovered one day that her account had been suspended without prior notice. She was later advised that she was in breach of YouTube’s terms of service.

Lewis sued for breach of contract and breach of the covenant of good faith and fair dealing, seeking an order to restore her account and force YouTube to pay damages to cover costs associated with the production of her videos. YouTube sought to dismiss the complaint based on the very common limitation of liability clause, which was prominently posted in ALL CAPS in the terms of service as follows:

“IN NO EVENT SHALL YOUTUBE, ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, BE LIABLE TO YOU FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES WHATSOEVER RESULTING FROM ANY (I) ERRORS, MISTAKES, OR INACCURACIES OF CONTENT, (II) PERSONAL INJURY OR PROPERTY DAMAGE, OF ANY NATURE WHATSOEVER, RESULTING FROM YOUR ACCESS TO AND USE OF OUR SERVICES, (III) ANY UNAUTHORIZED ACCESS TO OR USE OF OUR SECURE SERVERS AND/OR ANY AND ALL PERSONAL INFORMATION AND/OR FINANCIAL INFORMATION STORED THEREIN, (IV) ANY INTERRUPTION OR CESSATION OF TRANSMISSION TO OR FROM OUR SERVICES, (IV) ANY BUGS, VIRUSES, TROJAN HORSES, OR THE LIKE, WHICH MAY BE TRANSMITTED TO OR THROUGH OUR SERVICES BY ANY THIRD PARTY, AND/OR (V) ANY ERRORS OR OMISSIONS IN ANY CONTENT OR FOR ANY LOSS OR DAMAGE OF ANY KIND INCURRED AS A RESULT OF YOUR USE OF AND CONTENT POSTED, EMAILED, TRANSMITTED, OR OTHERWISE MADE AVAILABLE VIA THE SERVICES, WHETHER BASED ON WARRANTY, CONTRACT, TORT, OR ANY OTHER LEGAL THEORY, AND WHETHER OR NOT THE COMPANY IS ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF LIABILITY SHALL APPLY TO THE FULLEST EXTENT PERMITTED BY LAW IN THE APPLICABLE JURISDICTION.” [Emphasis added.]

At issue was whether the phrase “ANY ERRORS OR OMISSIONS IN ANY CONTENT” could preclude Lewis’s claims. She argued that the limitation of liability clause was inapplicable because “she ha[d] not alleged that there were any errors or omissions in any content, but rather a deletion of her content without prior notice.”

In its analysis, the court stated, “Limitation of liability clauses have long been recognized as valid in California . . . [and] are appropriate when one party is offering a service for free to the public.” Relying on California Civil Code sections 1636 through 1644, the court interpreted the contract to give the terms their intended effect and to interpret pursuant to the words “ordinary and popular sense.”

The typical limitation of liability clause saved YouTube thousands of dollars in attorneys’ fees by terminating the lawsuit at its inception

Relying on both the definitions in the terms of service and Webster’s dictionary, the court found that the term “content” encompassed Lewis’ videos and the term “omission” encompassed YouTube’s alleged “failure to do as one should.” As a result, the “errors and omissions” language precluded Lewis’s claim that YouTube wrongfully took her videos down as a matter of law.

What is clear from the court’s ruling is that the typical legal limitation of liability clause saved YouTube thousands of dollars in attorneys’ fees by terminating the lawsuit at its inception. Although efforts should always be made to make contract terms simple, transparent and fair and to create a mutual understanding between the parties – it is also important to keep in mind that sometimes the language of a standard legal clause is best left “AS IS.”

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About the author

Sue Dunbar

Sue Dunbar

Sue Dunbar has represented clients on nearly 50 projects through the UpCounsel marketplace, and more than half of those clients returned to her for help with another job. For more than 20 years, Sue has represented clients in internet, business, intellectual property and contract matters. Whether you are an independent contractor, startup or a thriving business owner, Sue can provide "big law firm" experience at a "small law firm" price. She’s committed to providing high caliber work product in a timely and responsive manner.

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