Avco Corp., Textron Lycoming Reciprocating Engine Division of Avco Corp. v. Interstate Southwest, Ltd.
251 S.W.3d 632 | Texas Court of Appeals, 14th District (Houston) | 2008
What This Case Means for Subcontractors
An aircraft engine manufacturer (Lycoming) contracted with a forging company to make crankshaft parts. After crankshaft failures, the forging company's affiliate sued for fraud, claiming Lycoming hid information and deceived them into extending the contract. The court ruled the broad indemnity clause in their contract was unenforceable under Texas and Pennsylvania law, but threw out the $86 million fraud damages award because there wasn't enough proof of actual losses. This matters to subcontractors because it shows courts won't enforce one-sided indemnity clauses that try to shift all risk to one party.
Key Takeaways
- •Broad indemnity clauses that require one party to cover all losses are unenforceable—courts will strike them down even if both parties signed
- •Don't rely on indemnity clauses to protect yourself from fraud or concealment by the other party; you need actual evidence of real damages to win
- •When suing for fraud damages, document everything: lost profits, extra insurance costs, expert fees, and other concrete losses—vague or inflated damage claims will be rejected
The contractual indemnity provision at issue is unenforceable under both Texas and Pennsylvania law.
Frequently Asked Question
Can my contract require me to indemnify the general contractor for everything, no matter what?
No. Texas courts will not enforce indemnity clauses that are too broad or one-sided. Even if you signed it, a court may strike it down if it tries to shift unreasonable risk to you. Always have an attorney review indemnity language before signing—narrow, specific indemnity clauses are more likely to hold up than blanket ones.
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