Exculpatory Agreements: Are They Enforceable?
What is an Exculpatory Clause?
Today, virtually every form contract contains an exculpatory clause. An exculpatory clause is a clause in the contract that strictly limits the liability of one party. For example, if you rent skis from a local ski shop, the contract may contain an exculpatory clause limiting the liability of the ski shop for any loss or injury you incur while using the rental equipment. This typically includes loss or injury due to the negligence or gross negligence of the ski shop. You are accepting all responsibility for the condition of the equipment, and you are agreeing to pay the legal fees of the ski shop should you later decide to sue the shop. This additional promise to pay legal fees is called a promise to indemnify.
Are Exculpatory Clauses Enforceable?
The big question is whether these exculpatory clauses are enforceable. Typically, the answer is yes, but there are exceptions.
Exculpatory Clauses in Colorado
Courts in Colorado look upon these broad exculpatory clauses with disfavor. Exculpatory clauses stand at the crossroads of two competing principles. Those competing principles are freedom to contract and taking responsibility for one’s own negligent acts.
In most cases, a judge, not a jury determines, whether an exculpatory clause will be enforced. In Colorado, the judge considers four factors:
- Whether the party benefiting from the exculpatory clause has a duty to the public,
- The nature of the service performed,
- Whether the contract was fairly entered into and
- Whether the exculpatory clause is expressed in clear and unambiguous language.
Ambiguity Determines if an Exculpatory Clause is Enforceable
Often, it is this fourth factor, ambiguity, which determines whether the exculpatory clause will be enforced. That is why many companies have people initial next to the exculpatory clause. To be enforced, the clause must be written in clear, easy to understand language.
Ambiguity will exist if the exculpatory clause is susceptible to two or more reasonable interpretations. If the exculpatory clause is not susceptible to more than one interpretation, it will be enforced, as written. If the clause is susceptible to more than one interpretation or if it is not written in clear, easy to understand language, it will not be enforced because exculpatory clauses are strictly construed against the person who drafted the clause.
