An exculpatory clause is part of an agreement which relieves one party from liability. It is a provision in a contract which is intended to protect one party from being sued for their wrongdoing or negligence.
Many of us encounter exculpatory clauses everyday without ever knowing it. Some examples of exculpatory clauses include:
- A restaurant checking a coat: the ticket most likely states the restaurant is not responsible for loss or damage.
- A parking lot receipt: where the parking lot says it is not responsible for loss of contents or damage to the vehicle.
- A drycleaner: the pick-up ticket usually states the cleaner is not responsible for changes in the color or texture of the garments.
- A lease: where the landlord says they will not be responsible for damage, injury, or loss which occurs on the property.
- A clause in a trust agreement: relieving the trustee from liability resulting from any act performed in good faith under the trust.
The general rule is that exculpatory clauses are enforceable if they are reasonable. They are not valid if they are unconscionable or unreasonable. Additionally, they cannot excuse liability from harm which is caused intentionally or recklessly. Courts will also consider a number of factors in determing whether or not to enforce an exculpatory clause, including:
- The clause should be conspicuous. This means it should be in bold, all capitals, or different color.
- The wording should be clear and understandable so that an ordinary person knows what they are agreeing to.
- The clause should be specific and state specific theories of liability, such as “negligence.” The court will consider whether the releasing party knew and appreciated any risk.
- The bargaining power of each party and public policy.
- The intent of the parties. An exculpatory clause will be enforced if intent to relieve a party from liability is clear and unequivocal.
A business attorney can be helpful in any situation where two parties are entering into an agreement. Whether you need a contract drafted, want to modify an existing contract, or have been sued for breaching a contract, an attorney can inform you of your options. An attorney can also help create, enforce, or invalidate exculpatory clauses in your contract.