Exculpatory Clauses in Leases (and Contracts)

Exculpatory Clauses in Leases (and Contracts)

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An exculpatory clause is a clause in a contract, such as a lease, that relieves a party of liability for damages.  In a lease, there may be an exculpatory clause that relieves the lessor  (landlord) of liability for damages upon an occurrence.

Exculpatory clauses are enforceable if they are clear, unambiguous, and unequivocal.  If they are ambiguous, unclear, or equivocal, the clause will be unenforceable.  This is because public policy disfavors exculpatory clauses.  For this reason, a court in interpreting an exculpatory clause should strictly construe it against the party that would be relieved of liability pursuant to the clause.  See Obsessions In Time, Inc. v. Jewelry Exchange Venture, LLP, 43 Fla.L.Weekly D1033a (Fla. 3d DCA 2018). 

For example, in Obsessions In Time, a tenant leased a booth to sell watches and other items.  The lessor provided a master safe so that the tenant could store its watches and valuable items in the master safe.   The tenant lost over $2 Million in watches and items after an unauthorized person accessed the safe.  The tenant claimed that the lessor allowed an unauthorized individual to access and remove the tenant’s items from the safe.

The lease, however, contained an exculpatory clause that seemingly benefited the lessor:

In making this lease, it is hereby agreed that lessor does not assume the relations and duty of bailee and shall not be liable for any loss or damage to the contents of the vault within the premises caused by burglary, fire, or any cause whatsoever, but that the entire risk of such loss or damage is assumed by the lessee. The lessor shall not be liable for any delay caused by failure of the vault doors to lock, unlock or otherwise operate and the sole liability of the lessor hereunder is limited to the exercise of ordinary care to prevent the opening of said vault or boxes contained therein by any person other than lessee or the authorized agent of the lessee.

The appellate court found this clause to be ambiguous, unclear, and equiovocal and, therefore, unenforceable.  Why?  Because the first sentence absolves the lessor of liability.  But then the last sentence states that the lessor’s liability is limited to the exercise of ordinary care to prevent the unauthorized access to the vault or boxes contained in the vault. These two sentences make this exculpatory provision unclear, ambiguous and equivocal.  Since the clause is to be strictly construed against the party it benefits, here the lessor, the clause was rendered unenforceable.  

In reality, there was no reason for the last sentence in this exculpatory clause if the lessor’s intent was to be fully absolved of any liability relating to the master safe / vault. 

Remember, when drafting an exculpatory clause, make sure the language is clear, unambiguous, and unequivocal.  If it is, it will be enforceable.  If it is not, it will not be enforceable.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.