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Exculpatory Contracts: Are They Enforceable?

By John F. Kamin

Your claim may have been released before the event occurred.  Exculpatory clauses within contracts are provisions which attempt to eliminate liability for future negligence.  Such contracts are not favored, but are valid and enforceable in Illinois as long as they are not contrary to public policy and there is not a unique relationship between the parties, such as a common carrier/passenger or employer/employee.  To be enforced, the clause must have clear, explicit  and unequivocal language showing the intent of the parties.  Exculpatory clauses violate public policy if it is attempted to be used to release a claim involving fraud, willful and wanton conduct or if there is legislation specifically prohibiting such clauses in certain circumstances.

Exculpatory provisions have been found to be enforceable and barred claims in a variety of circumstances.  For example, a lessee of a horse who had become “spooked” was not allowed to pursue a claim against the horse owner because he had signed a contract including an exculpatory clause.  Similarly, the claim of a tour participant using a four-wheeler against the tour operator and guide was barred by a release which had been executed prior to an accident.  Again, a health club membership agreement relieved the club from liability to a patron for injury caused by an alleged defective bench press.  Exculpatory clauses may also limit damages.  For example, a claim against a home inspector was limited to the inspector’s charges for the home inspection.  In this circumstance, the court had noted that the Home Inspector License Act  did not have any reference to an inspector’s liability, and could not be used as a statement of public policy which would indicate that limitation of liability would be unenforceable.

However, the court has found that enforcement of certain exculpatory contracts was prohibited by legislation.  For example, a dram shop owner may not exculpate itself by requiring customers to sign releases of liability before being served alcohol.  Further, an exculpatory clause in a real estate contract would not protect real estate brokers for liability in negligent misrepresentation where the application would violate the realtors’ specific duties which were established by the Real Estate Brokers and Salesmen License Act.  To enforce the clause in such circumstance would contravene public policy.  Again, an individual who provides elevator service as a common carrier owed the highest degree of care and the common carrier’s liability could not be limited by an exculpatory clause. 

A unique circumstance involves claims that may be pursued by minors.  Exculpatory clauses are based upon contract law.  Minors do not have the capacity to execute contracts.  However, what happens if the parent signs the release for the minor?  The court has held that a waiver of liability signed by a parent before a minor’s cause of action accrues is not enforceable.  See Meyer v. Naperville Manner, Inc., 262 Ill.App.3d 141 (2nd Dist. 1994).  As a general rule, a parent cannot release its minor’s claims unless there is statutory or judicial authorization to do so.  Notably, medical expenses and other damages which may be incurred as a result of a minor’s injury may be pursued by a parent.  To that extent, an exculpatory provision executed by a parent may be used to deny a parent’s claim for medical bills pursuant to the Family Medical Expense Act.

Exculpatory clauses are found in a variety of agreements and contracts.  As a best practice, claim handlers and defense counsel should investigate whether the claim at issue may have already been released by such a provision.

Originally published in the Spring 2013 edition of Quinn Quarterly.

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