3 F.4th 1
1st Cir.2021Background
- Annie Zhao paid CIEE to participate in a Spring 2020 study‑abroad program in Amsterdam and signed a Participant Contract that incorporated CIEE's Terms and Conditions.
- After COVID‑19 escalated in March 2020, CIEE suspended the abroad portion (March 15, 2020) and migrated instruction online so students could complete coursework; Zhao finished online.
- Paragraph 14 of the Participant Contract says that if a program is canceled, CIEE "will refund all payments received but will have no further liability to participant."
- The Terms and Conditions contain a Program Cancellation section that explicitly provides refunds only when a program is canceled "prior to the start of the program," and describes alternative arrangements (but not refunds) if a program is canceled "following the program start date."
- Zhao sued for breach of contract seeking refunds for services not delivered abroad; the district court dismissed for failure to state a claim, holding the contract unambiguously foreclosed refunds for cancellations after program start.
- The First Circuit affirmed: read together, Paragraph 14 and the Terms and Conditions show refunds are only required for pre‑start cancellations; liability‑limiting clauses do not create ambiguity, nor do they constitute liquidated‑damages or unconscionable provisions here.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Paragraph 14 entitled students to refunds when CIEE canceled the abroad portion after the program started | Zhao: Paragraph 14 broadly promises refunds for cancellations "due to low enrollment or any other reason," so she is entitled to a refund for lost abroad experiences | CIEE: Paragraph 14 must be read with the Terms and Conditions, which limit refunds to cancellations before program start and provide only alternative arrangements post‑start | Held: Contract unambiguous when read as whole; refunds only for cancellations prior to program start; no breach for moving program online post‑start |
| Whether liability‑limiting clauses (pandemic/force majeure language) create an ambiguity that would permit a factfinder to find a refund obligation | Zhao: The liability limits, read against Paragraph 14, create ambiguity about refund rights | CIEE: Liability limits address different subjects (risk, loss, hold harmless) and do not contradict refund provisions | Held: No ambiguity; refund provisions and cancellation paragraphs control; liability clauses do not alter refund rule |
| Whether liability‑limiting paragraphs are unenforceable liquidated‑damages provisions | Zhao: If liability clauses permit withholding refunds they operate as impermissible liquidated damages | CIEE: Liability clauses are risk‑allocation/hold‑harmless provisions, not liquidated damages | Held: Clauses are liability limitations, not liquidated‑damages provisions; Zhao waived pressing this alternative theory on appeal |
| Whether the contract (or its refund allocation) is unconscionable or an adhesion contract excuse for a different interpretation | Zhao: Post‑start no‑refund rule would be unconscionable/one‑sided (and contract is adhesive) | CIEE: Contract terms are plain, conspicuous, and not procured by sharp practice; unambiguous language governs | Held: No procedural or substantive unconscionability shown; plain, unambiguous language controls; adhesion argument does not alter result |
Key Cases Cited
- Crowe v. Bolduc, 334 F.3d 124 (1st Cir. 2003) (contracts executed together are construed as one instrument)
- Acadia Ins. Co. v. Buck Constr. Co., 756 A.2d 515 (Me. 2000) (specific terms control over general language)
- Dow v. Billing, 224 A.3d 244 (Me. 2020) (specific/exact terms given greater weight)
- Denutte v. U.S. Bank, N.A., 213 A.3d 619 (Me. 2019) (purpose and nature of liquidated damages)
- Blanchard v. Blanchard, 148 A.3d 277 (Me. 2016) (standards for procedural and substantive unconscionability)
- NLRB v. SW Gen., Inc., 137 S. Ct. 929 (2017) (context affects force of negative implication)