Tag Archives: exculpatory provision

APPRECIATE THE RISKS YOU ARE ASSUMING IN YOUR CONTRACT

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APPRECIATE THE RISKS YOU ARE ASSUMING IN YOUR CONTRACT.   Otherwise, those risks will come back and bite you in the butt.  This language is not capitalized for naught.  Regardless of the type of contract you are entering into, there are risks you will be assuming.  You need to appreciate those risks because there may be insurance you can obtain to cover that risk.

For instance, exculpatory provisions (or get-out-of-jail provisions) in contracts are enforceable if they are unambiguous.  “Such provisions are deemed to be unambiguous and enforceable when the language unequivocally demonstrates a clear and understandable intention for the defendant to be relieved from liability such that an ordinary and knowledgeable person will know what he or she is contracting away.”  Pillay v. Public Storage, Inc., 44 Fla.L.Weekly D2744c (Fla. 4th DCA 2019).

An example of an exculpatory provision can be found in the public storage rental contract found in Pillay that read:

(1) ALL PERSONAL PROPERTY IS STORED BY OCCUPANT AT OCCUPANT’S SOLE RISK.

(2) Owner and Owner’s agents . . . will not be responsible for, and Tenant releases Owner and Owner’s agents from any responsibility for, any loss, liability, claim, expense, damage to property . . . including without limitation any Loss arising from the active or passive acts, omission or negligence of Owner or Owner’s agents.

(3) Tenant has inspected the Premises and the Property and hereby acknowledges and agrees that Owner does not represent or guarantee the safety or security of the Premises or the Property or any of the personal property stored therein, and this Rental Agreement does not create any contractual obligation for Owner to increase or maintain such safety or security.

In this case, a tenant renting storage space sued his landlord because his rental space was burglarized and damaged.  The tenant claimed the landlord failed to safeguard his property.  But…take a look at the exculpatory provision in the tenant’s rental agreement.  The tenant assumed this very risk and relieved the landlord from liability for this risk.  “By the express terms of the rental agreement, [the landlord] had no duty to safeguard [tenant’s] storage units.”  Pillay, supra.  There was likely insurance the tenant could have obtained, but elected not to, that would have covered this risk.  The point, however, is that the tenant assumed a risk by virtue of an exculpatory provision that he did not appreciate and that risk came back to bite him in the butt!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

EXCULPATORY PROVISIONS IN BUSINESS CONTRACTS

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shutterstock_734837968-644x316An exculpatory provision in a contract is a provision that relieves one party from liability for damages.  It shifts the risk of an issue entirely to the other party.   Such a provision is generally drafted by the party preparing the contract that is looking to eliminate or disclaim liability associated with a particular risk, oftentimes a risk within their control.  These provisions are also known as limitation of liability provisions because they do exactly that — limit liability as to a risk.   For this reason, they can be useful provisions based on the context of certain risks, and are provisions that are included in business contracts (such as construction contracts).

 

While such clauses are disfavored, they are enforceable if they are drafted clearly, unambiguously, and unequivocally.  If they are unclear, ambiguous, or equivocal, they will construed against enforcement.  See Obsessions In Time, Inc. v. Jewelry Exchange Venture, LLP, 43 Fla.L.Weekly D1033a (Fla. 3d DCA 2018) (finding exculpatory clause in lease ambiguous and, therefore, unenforceable as to lessor looking to benefit from the exculpatory clause).   

 

Exculpatory clauses are enforceable only where and to the extent that the intention to be relieved from liability is made clear and unequivocal. The wording must be so clear and understandable that an ordinary and knowledgeable person will know what he is contracting away. A phrase in a contract is ambiguous when it is of uncertain meaning, and thus may be fairly understood in more ways than one.

Peterson v. Flare Fittings, Inc., 177 So.3d 651, 654 (Fla. 5th DCA 2015) quoting Tatman v. Space Coast Kennel Club, Inc., 27 So.3d 108, 110 (Fla. 5th DCA 2009). 

 

 

Because such clauses are disfavored and will be narrowly construed against the party who benefits from the clause, there are certainly public policy considerations that may come into play. See, e.g., Loewe v. Seagate Homes, Inc., 987 So.2d 758 (Fla. 5th DCA 2008) (exculpatory provision in agreement for purchase and construction of new home unenforceable to the extent it relieved homebuilder for an intentional tort and homebuilder could not contract around complying with building code). 

 

When negotiating a contract with an exculpatory provision in a contract, make sure you appreciate the risk associated with the clause.  The risk could be significant and outside of your control.  Make sure the provision is drafted in a clear, unequivocal. and unambiguous manner.  If you are dealing with such a provision after-the-fact, consult with counsel to best analyze arguments pertaining to the enforceability of that provision.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.