Limited Product Liability
Third Party Procurement
Frequently Asked Questions
Q = Question; A = Answer
Q. The distributor is demanding we limit their liability as detailed below. This would put transit agencies at risk for any claims that may arise from faulty product. The distributor states they will no longer enter into any contract with anyone who does not agree to add their limited liability language. The distributor has a monopoly, as they are the only distribution for both Allison Transmission and Detroit Diesel Engines. We are wondering if there is anything the FTA can do on all transit agencies' behalf to encourage this distributor to drop this demand. This will affect virtually all U.S. transit agencies. Any insight or suggestions would be appreciated. We went out to bid for some Allison transmission kits for our in-house rebuild of transmissions in our FTA funded buses and received one bid from this distributor. In their bid, they had quite a few exceptions. One in particular that our legal counsel says we should not agree to: limitation of contractor's liability. They are demanding we "waive, to the maximum extent permitted by law, any claim for incidental, special, indirect, consequential and exemplary damages".
A. We have asked the FTA Chief Counsel's Office to review your question and they have responded with the following:
We have done some exploring whether there is any antitrust potential here but it doesn't look promising. Vertical restraints are not generally seen as evil, and the cases are laced with phrases like "antitrust law is concerned primarily with inter-brand rather than intra-brand competition." FTA is not sure there is anything that can be done to solve this problem in the short run. For the long term, grantees may want to explore the possibility of incorporating long-term spare parts support terms and conditions in rolling stock contracts so things like this can be considered up-front when evaluating life cycle costs.