Who Knows What An Exculpatory Clause Is?
Is an exculpatory clause a relevent legal instrument today?
Apparently it was used to limit liability to not beyond a property, preventing personal liability, and limiting financial setbacks significantly.
Is this actually true? Sounds better than an LLC...
Alan
Exculpatory clauses can still be used today but they are of limited value. Essentially the courts are reluctant to let them stand. Especially where the party insisting on the exclusion of liability is deemed to be either smarter or more powerful than the other.
For example, lets say I run a bungee jumping company. I make you sign a waiver that says that you understand that bungee jumping is a dangerous sport and that I'm not responsible if you get hurt even if your injury is the result of some error on my part.(this is pretty much what an exculpatory clause does). Then I make a really dumb mistake (attach 50 feet too much cord and you end up 30 feet in the ground). Odds are the court is going to rule that since your damages (death) are the result of my neglegence your estate can still collect against me in spite of the waiver.
Why? Because even though you waived my liablity you trusted me as a professional not to do something stupid. The waiver is "against the public policy" that companies/people are responsible for their actions. In addition I told you "you cannot jump unless you sign this form". The court will probably rule that since the power in this situation lay with me your waiver was not valid. Same with a landlord. If I include exculpatory clauses in my lease the court is probably going to rule them invalid because of either public policy, my greater barganing position or the fact that the tenant did not understand what the clause meant when he signed the lease.
A corp. or a LLC does not attempt to avoid liability in the same way. Rather than deny that liability exists it transfers the liability to to a different entity. However lets be clear here. If you do something that endangers your tenant (say you know that the back porch is rotten and could collapse and you do nothing about it) and they get seriously injured (i.e. they go crashing through the porch and break their back) your corporation or LLC is probably not going to protect you either. The court is going to "pierce the corporate veil" and find you liable. In that case your only hope is to have adaquate insurance.
Run a google search on the term. The commerce clearing house site has a nice discussion of the matter.
Awesome. It sounds very close to what I heard in my ethics class.
Now I see it tied together with that old school RE clause that was bugging me (except that Robert G. Allen believes it should be used today in '04, the reason I'm not sure of. It's in his recent materials).
Thanks! Alan