Contract tip – The Exculpatory Clause
An exculpatory clause is a provision in a contract that grants one party relief from liability if there are any damages caused during a performance of a contract. For example, a lease might contain a clause saying the landlord will not be liable for damage or injury that occurs on the property.
In general, exculpatory clauses are enforceable when the party is disclaiming liability for negligence. However, a party can NOT disclaim liability for intentional acts or reckless behavior.
Courts will also look at various other factors when determining whether to enforce the contract’s exculpatory clause. For example, is it reasonable? Is it understandable? Is it conspicuously stated in the contract, or is it hidden away in the fine print? Is there a disparity of bargaining power between the parties? States may also have laws imposing additional requirements for valid exculpatory clauses.