Sander v. Richardson
DMC Category Rating: Developed
This case note was contributed by Marissa Jacobs,
an associate with the firm of Healy &
Baillie LLP, New York. Healy & Baillie are the International
Contributors to the website for the USA
The Court first considered the clarity of the exculpatory clause. Noting that the clause did not specifically exclude liability for the yacht club’s negligence, the Court nevertheless held that by looking at the contract as a whole and giving the terms their normal and everyday meanings, the clause clearly extended to that kind of liability.
The next question was whether exculpatory clauses violate public policy. The Eighth Circuit noted that the circuit courts generally agree that exculpatory clauses are enforceable under admiralty law; the disagreement arises when a party seeks to exclude liability for its own negligence. The Supreme Court, in Bisso v. Inland Waterways Corp., 349 U.S. 85 (1955), refused to enforce an exculpatory clause in a towage contract on the basis that such a rule was necessary to discourage negligence and prevent overreaching by parties with strong bargaining power. The First and Eleventh Circuits have extended this rule beyond towage contracts, and in those circuits exculpatory clauses are only enforceable in admiralty matters if (a) they are clear and unequivocal, (b) they do not absolve a party from all liability for its own negligence, (c) the liability risk provides a deterrent to negligence, and (d) the parties are of equal bargaining power. The Fifth and Ninth Circuits, on the other hand, have distinguished Bisso, holding that that decision applies only in situations which are analogous to towing agreements, such as bailor/bailee relationships, employer/employee relationships and other similar circumstances.
The Eighth Circuit, following the reasoning of the Ninth Circuit, concluded that the public policy of freedom of contract should prevail, so long as the contract does not have elements of unequal bargaining power. In this case, the Court held, equal bargaining power existed since the slip owners were able to choose other marinas and evidence existed that other boat owners had negotiated the particulars of their slip agreements. Accordingly, the first instance judgment was reversed. Importantly, the Court did not resolve the question of whether exculpatory clauses are valid in all maritime contracts, but expressly limited its holding to marina slip agreements.
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