Definition: An exculpatory clause is a provision that protects a party involved in a contractual relationship from a given liability. It is a stipulation where a party is relieved of its responsibility if a particular negative situation or outcome takes place.
What Does Exculpatory Clause Mean?
Exculpatory clauses appear frequently in formal contracts. Their goal is to alleviate the consequences and liabilities derived from negative scenarios, normally to one of the parties participating in the contract. Therefore, the legal burden is passed to the other party. This is common in the service industry, where there are possible adverse outcomes that might lead to conflict between the customer and the provider.
By adding an exculpatory clause to the contract, the business protects itself from legal conflicts that may arise if one of these situations takes place. These clauses mostly cover unintentional or uncontrollable situations. This means that in practice, the clauses don’t create an extremely unequal situation for the affected party. Nevertheless, exculpatory clauses might be used for abusive purposes, where clients take the blame and the cost for almost everything that turns out negatively and the business is completely unresponsive and unfair about its responsibility.
Example
A dry cleaning business called Fast-to-Clean LLC recently had several complaints coming from its clients because of late deliveries. The company identified that the main reason of this alleged delays is that clients don’t pick up their phones when the staff call them to notify that their order is ready. In order to avoid these complaints, that are already deteriorating the business image, the owners decided to put an exculpatory clause on each of its service orders.
The clause states that clients will be notified immediately after the delivered pieces are ready to be picked up, and the company will do so through a text message and an e-mail notification. The date of the messages will be considered as the day of the delivery and if the client picks up the order after that date the company can’t be held responsible for a late-delivery situation.
By adding this clause the company relieves itself from a possible liability that might cause them to lose money, clients and potential legal conflicts.
