EXCULPATORY CLAUSE

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LAWI ANUPAM 1224108221 SECTION – B MBA 2008-10

GITAM INSTITUTE OF INTERNATIONAL BUSINESS VISAKHAPATNAM

DEFINITION

An exculpatory clause is one that attempts to shift a risk from one party to another 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 But it does not relieve person or organization from absolute liability resulting from gross or willful and wanton acts In a trust agreement, it excuses a trustee from liability where he executes a power in good faith In a lease, the exculpatory clause relieves the landlord of liability for personal injury to tenants or damage to tenants' property

Are Exculpatory Clauses Enforceable?

YES, Exculpatory clauses are enforceable The general rule is that exculpatory clauses are enforceable if they are reasonable Courts will also consider a number of factors in determining whether or not to enforce an exculpatory clause, including:  The clause should be conspicuous  The wording should be clear and understandable so that an ordinary person knows what they are contracting away  The clause should be specific and state specific theories of liability, such as "negligence"  The bargaining power of each party is equal  The intent of the parties

Unenforceability of Exculpatory Clause

Generally unenforceable unless the clause is clearly written, readily visible or unambiguous Generally unenforceable when it attempts to exclude an intentional tort or gross negligence It does not apply when intentional, reckless or criminal conduct is involved. Also unenforceable when the harm caused is intentionally or recklessly It is unenforceable when the affected activity is in the public interest, such as medical care, public transportation, or some essential service Generally unenforceable when the parties have greatly unequal bargaining power

Sander case

Mr. and Mrs. Jessup owned a houseboat, which, pursuant to a written slip rental agreement of Yatch Club Mr. Jessup noticed a fuel leak and asked to repair it The general manager suggested that Mr. Jessup hire one of the maintenance workers, to repair the fuel leak A few days later, Mr. Jessup started the boat, and it caught fire. The fire spread to other boats and other docks of the marina The Jessups filed a limitation of liability suit in federal court The Jessups and the Yacht Club each filed negligence claims against the other Yatch Club defense was based on exculpatory clause

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