In our everyday lives, we often encounter such messages as, “Management is not responsible for (fill in the blank).” If you are looking to store your belongings in a rental facility, you will no doubt have to agree that the owner is not responsible for the condition of your property. The owner of a hotel may make the same disclaimer. And what about personal injury disclaimers at a sports venue? Or the sponsor of your child’s athletic event proclaiming that it has no liability for injury to your child?
Such “exculpatory” statements are not limited to consumer and recreational events. They are often found in professional services contracts as well as sophisticated business contracts. How do courts treat such “you agree not to sue me” exculpatory clauses? There is no simple, “one size fits all” answer, except to say that courts do not favor such agreements, especially where the intent of the agreement is to exonerate a person or a company from bodily injury liability due to one’s own negligence or other wrongful conduct. On the other hand, where both parties to an agreement are equally knowledgeable about the risks being undertaken and have equal bargaining power, courts have great respect for freedom of contract.
In some situations, where the risk is to property rather than personal safety, courts favor freedom of contract. The practical approach in such cases is for the party at risk to obtain insurance. In the property storage world, for example, it is common for owners of these facilities to offer an upcharge option whereby the owner will then obtain insurance, at least up to a specified limit. Or the person storing the property should obtain his or her own insurance. This solution could be available for any parties faced with an exculpatory provision in a contract.
In professional services and business contract situations, courts will generally allow the parties to freely negotiate the terms of their relationship, unless a party is attempting to exonerate itself for its own misconduct. In that event, courts will closely scrutinize the contract language. If the injury which ultimately occurred was not specifically identified in the exculpatory clause, the provision will not be effective. Courts will also look closely for unequal bargaining power and competing public interests. This is the case especially where recreational activities are involved. Where the participants are highly skilled, such as in racecar driving or even competitive cycling, courts have upheld exculpatory contract language. They will not do so, even if participation is risky, where the participants are not highly skilled.
Careful drafting of an exculpatory clause, mindful of relevant court decisions, is essential. Whenever confronted with such a clause, one must consider all options, including the insurance option, before signing such an agreement.
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