Consequential Waiver

In Alta Power v. General Electric, the Fifth Circuit held that a mutual contractual waiver of consequential damages was enforceable and barred the plaintiff’s tort claims, even though the party invoking it was a non-signatory subcontractor accused of fraud and intentional wrongdoing.

The waiver said that neither party, nor their “contractors[,] or subcontractors,” would be liable for “any incidental, indirect[,] or consequential damages arising out of or connected in any way to” the agreement. Applying Texas law, the court concluded that the subcontractor was an intended third-party beneficiary entitled to enforce the waiver, reasoning that the contracting parties “bargained only for a scope limitation”—that disputes have a connection to the contract—rather than a restriction as to capacity or timing about who was a subcontractor.

The Court also rejected the argument that alleged fraudulent inducement made the waiver unenforceable, noting Texas authority holding that sophisticated parties can bargain to limit fraud damages without waiving a fraud claim altogether. Finally, the Court held that the waiver included inentional torts, in that the provision’s references to “any cause of action,” and its illustrative list of claims, signaled an intent for the clause to have broad coverage. No. 25-10774; Jul. 1, 2026.