Exculpatory Clause: What it is, How it Works, Limitations

What Is an Exculpatory Clause?

An exculpatory clause is a contract provision that relieves one party of liability if damages are caused during the execution of the contract. The party that issues the exculpatory clause is typically the one seeking to be relieved of the potential liability.

For example, a venue may print an exculpatory clause on tickets it sells for a concert, indicating that it is not responsible for personal injury caused by employees or others during the show.

Understanding Exculpatory Clauses

Exculpatory clauses are often included in agreements where a service provider can come into contact with the personal property, possessions, or physical well-being of a customer. When a patron visits a restaurant or bar that offers coat-check service, the venue might inform the customer that the business is not responsible for items that go missing from their coat. Likewise, the operator of a parking facility might post signs indicating that damages to vehicles stored at the facility and thefts that occur are not the responsibility of the company.

Enforcement of exculpatory clauses may be challenged in court. If a court finds that an exculpatory clause is unreasonable, the clause will not be upheld. The court can also determine that the clause is unreasonable if both parties in the contract do not have equal bargaining power or if the clause eliminates liability for negligence.

Limitations of Exculpatory Clauses

Special conditions can also be included in an exculpatory clause to indicate circumstances when a party does not assume liability for damages. Passengers in vehicles operated by a third party are often informed of safe behavior and actions that are permitted on their journey. If the passengers fail to abide by those rules and put themselves and other passengers at risk, the operator of the vehicle might invoke the terms of their exculpatory clause if injuries occur.

For example, flight attendants instruct passengers on the proper use of the available safety devices and equipment before each flight takes off. Passengers who disregard these instructions and act in defiance of these instructions may be held accountable for any harm that befalls them.

Arguments made against exculpatory clauses might focus on how they are presented. Some of the measures for enforceability include whether the clause was displayed or made known in a conspicuous manner that all parties could readily find. The language of the clause must also be made clear and understandable for all parties.