Exculpatory Clause Definition: Everything You Need to Know
An exculpatory clause is a contract provision that essentially frees from liability, should damages occur during the execution of a contract.3 min read
2. Places in Which Exculpatory Clauses May Exist
3. How Enforceable Are They?
An exculpatory clause is a contract provision that essentially frees from liability, should damages occur during the execution of a contract. One way of achieving this is through a liability waiver; this is generally included in a contract by the party who is most at risk of potentially being held liable. Additionally, should a contract contain third parties, it alleviates the burden of responsibility for any misconduct or negligence by that third party.
While no one necessarily anticipates needing an exculpatory clause included in their contracts, the unfortunate truth is that even the most diligent and scrupulous among us may find ourselves on the receiving end of a lawsuit.
How an Exculpatory Clause May Be Invalidated
- The parties involved in the contract have unequal bargaining power. If the parties involved are more or less on “equal footing,” however, the exculpatory clause will likely be upheld.
- The clause attempts to eliminate any liability for negligence. This is grounds for invalidating the contract if is one of the parties is a public utility company.
- There was any fraud or wrongful conduct involved with adding the provision of the exculpatory clause.
- Any harm or wrongdoing that was done was intentional in nature.
- If simple recklessness was the cause of any harm done.
Places in Which Exculpatory Clauses May Exist
Chances are, you may have been engaged in exculpatory clauses without even thinking about it or realizing it, as they are actually quite common and used in a myriad of contractual agreements. If you swim at a public pool or beach, for example, you may have seen signs or notices that are essentially entering you into an exculpatory clause, as they are quite common in facilities or areas that are open to the public. Some of the language you may have seen that would be akin to an exculpatory clause might include:
- No lifeguard on duty; swim at your own risk
- Enter at your own risk
- We are not responsible for lost or stolen items (you may see this a lot at restaurants or other venues that utilize a coat check)
Additionally, parking lots or garages may have signs throughout, alerting people that upon leaving your car, you are ultimately responsible for any damages that occur. Should your car become damaged, you will have to take it up with your insurance company, or (hopefully) the insurance company of the person who was responsible for damaging your car, not the garage itself. Other examples include:
- Health clubs having members sign agreements that they will not take legal action against the club, should they become injured while working out.
- Concert venues may provide language on their tickets that they are not responsible, should you hurt yourself while at the concert.
- A dry cleaner or laundry service will often provide signs on the premise, or on the receipt, that they are not responsible for any change in color of your clothing.
- If you rent property, the landlord may include language in the lease agreement that they are not liable for any injuries you suffer while living there. There may also be language that any liability they do claim is only valid for the leaseholders, and it does not apply to guests you may have.
- If you are renting equipment, such as a car, your rental agreement may contain language stating that the rental car company is not responsible, should you somehow injure yourself while driving their vehicle.
How Enforceable Are They?
Given the seeming “get out of jail free” nature of exculpatory clauses, sometimes questions may be raised as to just how enforceable they actually are. Generally speaking, if the exculpatory clause is considered reasonable and not unconscionable, it can probably be enforced. Other factors that a court may take into consideration regarding the validity of an exculpatory clause include:
- Whether or not the clause is conspicuous within the contract. This essentially means that the exculpatory clause cannot be written in tiny, illegible print, but has to be clearly written and easily visible.
- The intent of all the parties involved.
- Whether or not it clearly spells out what defines such things as “liability” and “negligence.”
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