Invalidity of Damage Limitations for Willful Injury Under California Civil Code §1668

Introduction

The Supreme Court of California’s decision in New England Country Foods, LLC v. VanLaw Food Products, Inc. (2025) establishes a pivotal rule under Civil Code section 1668: contractual clauses that limit or cap damages for willful injury to person or property are invalid. This commentary examines the background facts, procedural history, central issues, and parties involved, setting the stage for the Court’s articulation of the new precedent.

Background: New England Country Foods (NECF), a Vermont-based sauce manufacturer, outsourced production of its popular barbecue sauce to VanLaw under a 2015 contract. As renewal negotiations stalled, NECF discovered that VanLaw secretly planned to reverse-engineer NECF’s sauce and pitch it to Trader Joe’s, leading to alleged intentional interference with NECF’s economic relations.

Procedural History: NECF sued in federal court for tortious interference, breach of fiduciary duty, breach of contract, and related claims, seeking lost profits and punitive damages. The district court dismissed these claims based on a Limitation on Liability clause in the parties’ manufacturing agreement. The Ninth Circuit then certified the question whether a clause that “substantially limits damages” for intentional wrongdoing—but does not entirely exempt liability—runs afoul of section 1668. The California Supreme Court granted review to answer that question.

Summary of the Judgment

The Court unanimously held that any contractual limitation on damages for willful injury to person or property is invalid under Civil Code section 1668. The statutory text prohibits contracts “directly or indirectly” exempting parties from responsibility for such injury. Reading “exempt” narrowly to cover only total releases of liability would undermine the statute’s protective purpose. Thus, clauses that cap or restrict tort damages—even if they leave some recovery open—are unenforceable when the underlying conduct is willful.

At the same time, the Court clarified that section 1668 does not apply to pure breaches of contract unsupported by an independent tort duty. In those cases, traditional contract doctrines (e.g., unconscionability, economic loss rule) govern limitations on remedies.

Analysis

Precedents Cited

Civil Code §1668: Bars contracts exempting parties from responsibility for fraud or willful injury.
Tunkl v. Regents of University of California (1963) 60 Cal.2d 92: Invalidates negligence waivers affecting public interest based on six factors.
City of Santa Barbara v. Superior Court (2007) 41 Cal.4th 747: Holds that releases of gross negligence are categorically unenforceable under §1668.
Westlake Community Hospital v. Superior Court (1976) 17 Cal.3d 465: Court invalidates bylaws purporting to waive liability for intentional hospital misconduct.
Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130: Establishes standard for assuming truth of complaint allegations.
Food Safety Net Services v. Eco Safe Systems USA, Inc. (2012) 209 Cal.App.4th 1118: Treats limitation clauses as invalid for fraud under §1668.
Klein v. Asgrow Seed Co. (1966) 246 Cal.App.2d 87: Holds that a cap on damages in a seed‐sale warranty would be void under §1668 if seller knowingly misrepresented seed type.
Health Net of California, Inc. v. Department of Health Services (2003) 113 Cal.App.4th 224: Strikes contract provision restricting recovery to equitable relief for statutory violations under §1668.
Epochal Enterprises, Inc. v. LF Encinitas Properties, LLC (2024) 99 Cal.App.5th 44: Confirms §1668 also invalidates clauses limiting liability for willful asbestos nondisclosure.

Legal Reasoning

1. Statutory Text and Scope: Section 1668 outlaws contracts “which have for their object, directly or indirectly, to exempt anyone from responsibility for … willful injury … to the person or property of another.” The Court reads “exempt” to include provisions that limit—rather than completely eliminate—liability, because a partial cap on tort damages still releases the wrongdoer from full responsibility.

2. Purpose of Section 1668: Civil Code section 1668 reflects a public policy against licensing future willful torts and maintaining community standards of conduct. Allowing parties to cap damages for intentional wrongdoing would effectively privatize the price of willful harm and undermine tort law’s social policy role.

3. Rejection of Case‐by‐Case “Public Interest” Test: The Court declines VanLaw’s invitation to apply a context-dependent approach akin to the Tunkl factors. Just as gross negligence waivers are per se invalid (City of Santa Barbara), so too are caps on damages for willful injury.

4. Distinguishing Pure Contract Claims: Section 1668 applies only to torts and statutory duties—i.e., independent legal obligations—rather than to simple breaches of contract. Contract parties remain free to limit remedies for pure contractual breaches absent an underlying tort duty.

Impact

Parties can no longer limit, cap or exclude monetary recovery for willful torts through contract provisions.
Commercial agreements must be revised to remove or narrow damage‐limitation clauses that could apply to intentional misconduct.
Contract drafters must distinguish damages for contractual breaches (governed by UCC §2719 and contract law) from those for willful torts (governed by §1668).
Litigants alleging willful torts may invalidate limitation clauses at the outset, potentially avoiding protracted contractual‐vs‐tort liability battles.

Complex Concepts Simplified

Willful Injury: Intentional acts that knowingly cause harm to another’s person or property.
Limitation on Liability Clause: A contract term that caps or restricts the amount or types of damages one party must pay if it breaches or commits wrongdoing.
Tort vs. Contract: Tort law enforces social duties to avoid harm, whereas contract law enforces private promises; section 1668 protects tort duties from private waiver.
Economic Loss Rule: Prevents tort recovery for purely economic damages arising from a contractual breach unless there is an independent tort duty.

Conclusion

The Supreme Court’s ruling in New England Country Foods v. VanLaw Food Products reinforces Civil Code section 1668 as a firm barrier against contractual caps on damages for willful tortious conduct. By reading “exempt” broadly to cover partial as well as total releases of liability, the Court upholds tort law’s public‐policy function over private bargaining interests. At the same time, it preserves the primacy of contract law in regulating pure breaches of contract. This decision will guide future contract drafting, tort litigation, and statutory interpretation in California.