## Facts

- Farris Engineering Corporation contracted with Service Bureau Corporation (SBC) for data-processing services.
- The written agreement included (1) a clause limiting SBC’s liability to the amount the customer paid for services and (2) a clause providing that the agreement would be governed by New York law.
- The parties’ mutual assent was completed when SBC signed the contract in New York, making New York the place of contracting.
- The contract combined typed and printed provisions into a single written proposal; the printed provisions contained the limitation-of-liability and choice-of-law clauses.
- Farris alleged SBC breached the contract and sued for damages in federal court in New Jersey under diversity jurisdiction.
- SBC moved for summary judgment based on the limitation-of-liability and New York choice-of-law clauses; the district court applied New York law, enforced the limitation, and dismissed the complaint.
- Farris appealed, arguing New Jersey law should apply and that the printed clauses were not part of the bargain due to alleged confusion.

## Issues

1. In a diversity case filed in New Jersey, do New Jersey conflict-of-laws rules require application of New York law to determine the validity of a contractual limitation-of-liability clause where New York was the place of contracting and the contract selects New York law?
2. Are printed provisions limiting liability and selecting New York law enforceable as part of the contract when the agreement presents typed and printed terms in a single integrated document and the accepting party claims confusion?

## Decision

- The Third Circuit affirmed the district court’s summary judgment for SBC and dismissal of Farris’s complaint.
- Applying New Jersey conflict-of-laws rules, the court held New York law governed the validity of the limitation-of-liability clause because New York was the place of contracting and the transaction was significantly related to New York.
- The court found no overriding New Jersey public policy that would prevent application of New York law or enforcement of this type of liability limitation.
- Under New York law, the contractual limitation capping SBC’s liability to the amount paid by the customer was valid and enforceable.
- The court rejected Farris’s claim that the printed clauses were excluded from the bargain, concluding the document was facially integrated and unambiguous, leaving no reasonable doubt that both typed and printed terms were part of the agreement.

## Legal Principles

- A federal court sitting in diversity applies the forum state’s conflict-of-laws rules to determine the governing substantive law.
- Under New Jersey conflict principles, the validity of contractual provisions is generally determined by the law of the place of contracting, absent a countervailing policy.
- New Jersey courts commonly give effect to an express choice-of-law clause selecting the law of a state with a significant relationship to the transaction, unless strong public policy requires otherwise.
- New York law generally enforces commercial limitation-of-liability clauses that cap damages, including caps tied to amounts paid under the contract.
- Where a written agreement is facially integrated and unambiguous, extrinsic evidence of a party’s alleged misunderstanding is not used to negate printed terms at the summary-judgment stage.

## Conclusion

The Third Circuit enforced the contract’s New York choice-of-law provision and, under New York law, upheld a clause limiting the service provider’s liability to the amounts paid, holding the printed terms were part of an integrated, unambiguous contract and affirming summary judgment for the defendant.


Farris Eng’g Corp. v. Serv. Bureau Corp., 406 F.2d 519 (3d Cir. 1969)