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Contracts • Defenses to Enforcement and Formation
K#067
Legal Definition
An exculpatory agreement that exempts intentional or reckless conduct from liability is invalid due to being against public policy.
Plain English Explanation
Most contracts have terms in them that try to limit potential liability. There's generally nothing wrong with limitations of liability, so long as they don't try to limit liability for intentional or reckless conduct. In other words, a contract can limit liability for accidents, or even negligence -- but it can't limit liability for intentionally causing harm, or acting so reckless that harm is likely to result.
Hypothetical
Hypo 1: Sam owns a taco cart. Bob owns a tortilla factory. Bob and Sam contract to do business with one another, where Bob agrees to supply tortillas to Sam. In the contract, Bob includes a clause that says he can not be held liable for any reason, for any harm, no matter how drunk or tired he may be while making the tortillas. Result: While Bob can try to reduce liability related to negligence or accident, he can't give himself complete immunity over any type of liability. As a food preparation business, he has an obligation to create tortillas with care.
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