THE GREAT ESCAPE How to Draft Exculpatory Clauses That Limit or Extinguish Liability

by Steven B. Lesser

xculpatory clauses extinguish or limit liability suggestions to assist in drafting enforceable of a potentially culpable party through the use exculpatory clauses. of disclaimer, assumption of risk and indemni- E fication clauses as well as releases of liability. and Public Policy Considerations For decades, Florida have wrestled with issues Limit Enforcement of Exculpatory Clauses relating to the enforcement of exculpatory clauses where Exculpatory clauses will be enforced as long as the lan- liability arises from , real , construc- guage is clear and unequivocal.1 These same concepts tion, and commercial disputes. apply to indemnification agreements, which shift liabil- These provisions gain significance as parties seek to ity for to another party, and to releases of li- shift the monetary risk of business transactions to oth- ability.2 On the other hand, exculpatory clauses that ex- ers. Frequently these clauses are showcased in contrac- tinguish liability for intentional or reckless harm tual agreements involving common carriers, promoters will generally be declared null and void.3 of sporting events, providers of design/ ser- Florida prohibit the use of exculpatory clauses vices, and among participants to e-commerce transac- in certain transactions such as residential lease agree- tions. As , we constantly draft and interpret ex- ments that disclaim or limit a landlord’s liability to a culpatory clauses hoping that the product of our efforts tenant for breach of the of habitabil- will withstand judicial scrutiny. Recognizing that the eco- ity;4 condominium documents that disclaim liability for nomic stakes often are high, counsel must be aware of breach of the statutory implied warranties of fitness and the pitfalls associated with the drafting and interpreta- merchantability to a purchaser of a new condominium;5 tion of such clauses. These issues should be of enormous agreements that waive the right to assert a construction interest to lawyers because when the deal goes sour, dis- claim in advance of improving real ;6 gruntled clients may seek to recoup their losses by chal- indemnification provisions in construction that lenging the ’s advice through claims for legal mal- encompass claims or damages resulting from gross negli- practice. gence, willful, wanton, or intentional misconduct, or for This article examines how Florida courts interpret statutory violations.7 Likewise, a clause in a fee agree- exculpatory language as utilized in releases, waivers ment that exculpates or limits the liability of an attor- of liability, assumption of risk and indemnification ney for his own to avoid a claim for legal mal- agreements as well as other types of contracts. As simi- practice is prohibited.8 lar legal principles apply to drafting these various Florida law prohibits common carriers such as an air- types of clauses, they will collectively be discussed and line or railroad from extinguishing liability for its own referred to throughout this article as “exculpatory negligence when acting as a , as opposed clauses.” In addition, this article will offer practical to when it engages in private enterprise.9 In interpreting

10 THE FLORIDA JOURNAL/NOVEMBER 2001 these clauses, courts typically will effort to escape liability for breach lieve a party of its own negligence is analyze the relative bargaining of the implied warranty of habit- clear and unequivocal.23 In describ- strength of the parties, especially ability, the developer asserted that ing exculpatory language that will when the indemnitee is a public util- the buyer executed a contractual be enforced, one stated, “The ity, common carrier, or a provider of disclaimer of “all warranties, writ- wording of such an agreement must an essential public service to a large ten or oral.”15 However, the dis- be so clear and understandable that group of individuals.10 This analy- claimer clause failed to specifically an ordinary and knowledgeable sis is employed to evaluate whether mention implied warranties and, party to it will know what he is con- a clause runs afoul of public policy.11 consequently, the court declined to tracting away.”24 It is noteworthy that public policy rule that these warranties were dis- Drafters of exculpatory clauses considerations will defeat an excul- claimed. Other courts have been re- must be sufficiently specific to re- patory clause if doing so would frus- luctant to enforce disclaimers of im- lease liability for certain conduct yet trate a or ordinance that has plied warranties.16 Sellers of be broad enough to encompass other the very purpose of insuring the residential face greater related acts and conduct that may safety of persons.12 This concept challenges when attempting to dis- result in liability. The same chal- would apply to violations of the fire claim any duty to disclose the exist- lenge applies to drafting assumption code, building codes, or any other ence of facts that may materially of the risk clauses. A plethora of penal statute or ordinance imposing affect the value of the property. The cases discussing these various is- a positive duty. Florida Supreme Court has held sues arise in the context of summary Florida courts have failed to that the “as is” sale of residential . For example, in one un- squarely address whether the com- real estate does not relieve the seller reported court decision,25 a par- mon law implied warranty associ- from the duty to disclose latent de- ticipant to a boxing match executed ated with a real estate transaction fects to a buyer.17 a “Release, Assumption of Risk and can be disclaimed. In Hesson v. Indemnification Agreement” in fa- Walmsley Construction Co., 422 So. General Rules for Drafting vor of the owners and operators of 2d 943 (Fla. 2d DCA 1982), the court Exculpatory Clauses the facility hosting the event.26 The addressed whether the implied war- At the heart of every analysis over agreement waived and released the ranty of habitability in the package enforcement of an exculpatory owner from all “risks inherent in sale of a new home and lot by a clause lies the issue of conspicuous- boxing.”27 During the boxing match builder-vendor to an original pur- ness of the language employed. In the plaintiff sustained injuries and chaser could be disclaimed.13 In con- one case, a condominium conversion thereafter initiated a sidering this issue the court com- developer successfully disclaimed against the owner for negligence mented as follows: all express and implied warranties arising from the owner’s failure to One final point should be mentioned. because the disclaimer was bold and provide emergency post-injury medi- Disclaimers under the Uniform Com- conspicuous.18 In the sale of goods, cal treatment.28 The owner’s motion mercial Code cannot apply here since under the Florida version of the Uni- for summary judgment was denied the seller is not a “merchant,” and the form Commercial Code,19 a dis- based upon the fact that the agree- house and lot are not “goods” within sections 672.104 and .105, Florida Stat- claimer of a warranty must be in ment failed to specifically release utes (1981). See Gable v. Silver. How- writing and conspicuous. On this and hold harmless the owner for his ever, we know of no reason why parties score, conspicuous means a larger own negligence.29 Additionally, the to a cannot mutually agree on type size, a different type style, e.g., the reallocation of risks such as sub- agreement was devoid of any lan- surface conditions if the disclaimer is bold or all capitals, or a different guage applicable to events that in clear and unambiguous language and color.20 While this statute is not con- arose following the fight.30 In that clearly reflects both parties’ expectations trolling beyond the sale of goods, the instance the agreement was strictly as to what items are not warranted. See Sloat v. Matheny, 625 P.2d 1031 (Colo. underlying rationale suggests that confined to “risks inherent in box- 1981); Note, Housing Defects: similar considerations would apply ing” and nothing more. Homeowners Remedies—A Time for to exculpatory language utilized in Similarly, in O’Connell v. Walt Legislative Action, at 88. (Emphasis other transactions such as those in- Disney World Company, 413 So. 2d added.).14 volving real estate.21 444 (Fla. 5th DCA 1982),31 a nine- Following the lead of Hesson, an- year-old child sustained injuries other court acknowledged that an Intent of the Parties Is of while horseback riding at Walt “implied warranty can be avoided by Paramount Importance Disney World. Prior to participating a disclaimer in the documents of the Intent of the parties is of para- in this activity, the child’s parents sale transaction.” In re Barrett mount importance when determin- executed a document that released Home Corp., 160 B.R. 387, 390 (M.D. ing the enforcement of disclaimers, and held harmless Walt Disney Fla. 1993). In Barrett, a bankrupt waivers, releases of liability, and in- World from liability.32 In addition, developer constructed a home below demnification clauses.22 Exculpa- the form executed by the parents the required elevation, which re- tory clauses although disfavored consented to the minor’s “assump- sulted in frequent flooding. In an will be enforced if the intent to re- tion of the risks inherent in horse-

12 THE FLORIDA BAR JOURNAL/NOVEMBER 2001 back riding.”33 During the course of When confronted with enforcing Fidesys Corp. N.V., 570 So. 2d 436, the trail ride a Walt Disney World exculpatory clauses, courts consider 437 (Fla. 5th DCA 1990), held that employee, on horseback, caused a whether a releasing party appreci- “There are no words of art required stampede.34 As a result, the child ated and knowingly waived the risk. in a release if the intent of the par- was thrown from the horse and This factor found the spotlight in ties is apparent from the language thereafter, his parents initiated a Parkham v. East Bay Raceway, 442 used.”53 Hardage stands for the lawsuit to recover damages.35 The So. 2d 399 (Fla. 2d DCA 1983). In proposition that the specific use of court denied summary judgment Parkham, a patron paid $1 for in- the word “negligence” is not re- filed by Walt Disney World.36 In surance in order to view a car race quired. However, from a practical reaching its decision the court held from a restricted pit area in close standpoint, utilization of the word that the release form did not spe- proximity to the racetrack.44 In con- “negligence” should increase the cifically mention that Walt Disney junction with payment of the insur- likelihood of enforcement. Most fre- World would be released for the neg- ance fee, the patron was asked to quently, the enforcement of excul- ligence of its own employees.37 As a sign a “form for insurance.”45 In fact, patory clauses frequently occurs in general rule, a release must clearly the document consisted of a stan- connection with personal injury law- demonstrate that it releases one dard form release that contained suits arising from a participant’s from his or her own negligence be- multiple signatures of other pa- involvement in high risk sporting fore it will be effective.38 In contrast, trons.46 When the form was pre- activities cases such as car racing, far too often the use of overly broad sented to the patron for signature, bicycle racing, horseback riding, and language in a release may also prove only the signatures of other patrons boxing. In most instances, courts unsuccessful. were displayed. The form was folded generally will bar a party from re- When a patron fell from a me- over concealing the upper half of the covering damages when an executed chanical bull ride due to the negli- document where the printed excul- waiver or release of liability ac- gence of the defendant, the Fourth patory language appeared.47 As a knowledges the risk sought to be District Court of Appeal analyzed result, the critical language was not limited or extinguished.54 the scope of a release signed by the visible when the patron executed the In Theis v. J & J Racing Promo- patron of “any and all claims, de- document.48 The language released tions, 571 So. 2d 92 (Fla. 2d DCA mands, damages and causes of acts the raceway from “all liability in the 1990), the court granted summary whatsoever.”39 The court concluded event of an injury to a signatory in judgment and barred the recovery that the release failed to include lan- any restricted area.”49 Thereafter, of damages sustained by a partici- guage manifesting an intent to re- the patron was struck by a racecar pating driver to a sprint car race lease or indemnify the defendant for and initiated a lawsuit against the known as the “Dash for Cash.” Dur- his own negligence.40 raceway.50 In response, the raceway ing the Dash for Cash a nonracing The Florida Supreme Court, in defended based upon the existence vehicle improperly entered the track University Plaza Shopping Center, of the patron’s signature on the re- and struck the driver, resulting in Inc. v. Stewart, 272 So. 2d 507 (Fla. lease.51 his death.55 Prior to the race, the de- 1973), adopted a strict test regard- The court denied summary judg- ceased driver executed a release and ing what constitutes clear and un- ment because it was unclear waiver clause that “released the equivocal language that will relieve whether the patron was deceived or track from liability whether caused the indemnitee of his or her own misled by the raceway employee by the negligence of the releasees or negligence.41 In University, a gas when instructed to sign a form otherwise.”56 The court found the line exploded beneath a barbershop, where the release language was hid- exculpatory language to be “clear, killing the tenant. Thereafter the es- den from view.52 The holding in unambiguous, unequivocal, broad tate of the deceased sued the land- Parkham emphasizes that the party enough and specific enough to pro- lord, who defended based upon an benefiting from the release must tect appellees (race promoters) from indemnification provision in a lease demonstrate that the injured party their own negligence, even if their that required the tenant to indem- knowingly waived and released a actions constituted gross negli- nify the landlord against “any and known risk. This decision highlights gence.”57 In reaching its holding, the all claims for damages for any per- the importance of having separate court focused specifically on the “own sonal injury or loss of life in and release forms executed by each in- negligence . . . or otherwise” phrase around the demised premises.”42 It dividual that is waiving and releas- in determining that the exculpatory is significant to note that the ten- ing another from liability. Toward language was broad enough to “en- ant had no control over the explod- that end, the form containing the ex- compass all forms of negligence, ing gas line. The court held that the culpatory language should be dated simple or gross.”58 “any and all claims” language in the and witnessed. Courts have a tendency to enforce lease was not sufficiently clear and these clauses when the language unequivocal to exculpate the land- Language That Works reveals a clear intent of the parties lord from liability for his own negli- The Fifth District Court of Appeal to negotiate away a known risk. Il- gence.43 in Hardage v. Enterprises, Inc. v. lustrating this point is Banfield v.

14 THE FLORIDA BAR JOURNAL/NOVEMBER 2001 Louis, 589 So. 2d 441 (Fla.4th DCA hensive Automobile Liability—Bodily state of Florida have been declared 1991), in which a participant to the Injury: $ 100/300,000 and Property null and void.69 Similarly, the Damage: $50,000. Upon written re- 1985 Bud Light United States quest of Owner received within five Florida has statutorily Triathlon Series competition com- days of the acceptance hereof, Engi- invalidated contract provisions that pleted and executed an official en- neer will provide additional insurance, attempt to shorten the applicable if available including increased - statute of limitations.70 However, try form stating “I understand that age and/or limits, and the Owner will this waiver includes any claims pay an agreed amount for parties are permitted to agree to a based on negligence, action or inac- the increased coverage. Engineer’s li- waiver of trial or stipulate that tion of the above parties.”59 During ability to Owner for any the law of a foreign shall commitments or for any damages aris- the competition, the participant, ing in any way out of the performance apply to the judicial resolution of a while riding a bicycle, was struck by of this contract is limited to such in- dispute. an automobile and sustained inju- surance coverages and amounts. In A clause in an executory contract ries. As a result, the participant filed no event shall Engineer be liable for or unexpired lease that purports to any indirect, special or consequential a lawsuit against the race promot- loss or damage arising out of the perfor- give a right of termination for insol- ers. Against this factual backdrop, mance of services hereunder including, vency or bankruptcy is void and the court barred recovery, holding but not limited to, loss of use, loss of unenforceable.71 profit, or business interruption whether that the above clause was clear and caused by negligence of Engineer, or oth- unequivocal to release the race pro- erwise, and Owner shall indemnify and Checklist for moters from their own negligence.60 hold Engineer harmless from any such Drafting Enforceable In a line of burglar alarm cases, damages or liability. (Emphasis supplied by the court.)64 Exculpatory Clauses exculpatory clauses utilized to de- The following checklist for draft- feat claims for consequential losses The court recognized that the op- ing exculpatory clauses has been have been upheld against claims of tion to pay an additional fee in ex- compiled based upon the statutory and gross negli- change for more insurance coverage and referenced in this ar- gence.61 For example, in L. Luria & represented a critical factor in its ticle: Son, Inc. v. Alarmtec International decision to enforce the limitation of 1) The exculpatory language of the 65 Corp., 384 So. 2d 947 (Fla 4th DCA liability clause. clause should be bold and conspicu- 1980), an alarm company was held In a construction setting, owners ous through the use of larger type, not responsible for $135,000 in often seek to exculpate their own boldfaced type or a special color, e.g., losses arising from alleged breach monetary liability for delays they DO NOT BE RELUCTANT TO of contract, breach of implied war- may cause to contractors engaged in DRAW ATTENTION TO EXCUL- ranties, and negligence in installing construction on their behalf. Con- PATORY CLAUSE. and maintaining a burglar alarm struction contracts often contain “no 2) Specify in the document that system. It appears that the court damage for delay” clauses. Florida you are seeking to obtain a releas- based its decision on that portion of courts generally enforce these ing for your own negligence and spe- the clause which provided an option clauses subject to certain exceptions cifically use the word “negligence.” to the customer to increase liability such as delays not reasonably con- 3) Broadly identify the extent of coverage by paying an additional templated by the parties and active the risks involved, i.e., it is impor- 66 sum.62 This factor strongly supports interference by the owner. These tant to make clear whether the ex- the conclusion that both parties in- clauses will be enforced as long as culpatory language is for all risks tended to exculpate the alarm com- the contractor is provided with a that might arise. Otherwise the pany. In fact, several decisions have remedy for delay such as an exten- clause may be limited to known 67 similarly followed this logic in the sion of time to complete the project. risks or risks that are inherent in context of limiting a design This factor evidences an intent that the activity. professional’s liability for damages.63 the existing risk was appreciated 4) Specify whether the disclaimer, In Florida Power & Light Co. v. and negotiated between the par- indemnity provision, or release is for 68 Mid-Valley, Inc.,736 F.2d 1316 (11th ties. past wrongful acts or future wrong- Cir. 1985), the U.S. Court of Appeals ful acts. Courts are more likely to for the 11th Circuit considered Miscellaneous Clauses find an exculpatory clause unen- whether a limitation of liability and Although not technically exculpa- forceable as applied to future acts. indemnification clause would excul- tory clauses, various language is fre- 5) Specify whose wrongful conduct pate a professional engineer from quently included in agreements to is being exculpated, i.e., the in- his own negligence. The contract discourage parties from asserting demnitor, the indemnitee, or a third contained the following provision: their rights. Consequently, the im- party. Courts disfavor these clauses Engineer shall provide the following pact is the same, namely, a dis- absent clear and unequivocal lan- insurance: Workmen’s Compensa- claimer of liability. For example, guage expressing the intent of the tion—Statutory; Employer’s Liability— clauses that require a dispute aris- parties. $100,000; Comprehensive General Li- ability—Bodily Injury: $100/300,000, ing from a construction contract to 6) When feasible, make sure that Property Damage: $50,000; Compre- be litigated or arbitrated outside the a person with authority to speak for

16 THE FLORIDA BAR JOURNAL/NOVEMBER 2001 the organization is available to ex- plain the risks to the other party. This supports the proposition that the clause was the result of the bar- gaining process reflecting the inten- tion of the parties. 7) Draft the document to provide an option to the person accepting the risk to elect to acquire more protec- tion by paying additional fees. Of- ten this risk can be insured espe- cially with professional services. 8) Courts are more inclined to en- force monetary limitations on liabil- ity as opposed to extinguishing li- ability. 9) The document containing the exculpatory language should be properly executed and witnessed. The person executing the document should initial the exculpatory clause. 10) A separate release or waiver form should be executed by each in- dividual party to avoid multiple sig- natures on the same document. 11) In the event a complete release is being furnished without any limi- tations or exclusions it should be labeled a “GENERAL RELEASE” or “UNCONDITIONAL AND FULL GENERAL RELEASE” as opposed to “RELEASE.” Releases should in- clude the following elements: a) any and all claims, b) demands; c) dam- ages; d) actions; e) causes of action; f) suits in of whatever kind or nature; g) use of the word “negli- gence” to clarify that the release in an exculpatory clause encompasses negligent conduct. 12) Indemnification agreements should include provisions to deal with an arrangement where one party has the and hold harmless the other party in liti- gation. Under these circumstances, the agreement should include a “co- operation clause” requiring the in- demnified party to supply docu- ments and arrange for witnesses to be available for consultation as well as for testimony. Additionally, the indemnification agreement should specifically address the rights of the indemnified party to control the liti- gation arising from the indemnifi- cation obligation. These rights in- clude the manner in which a

THE FLORIDA BAR JOURNAL/NOVEMBER 2001 17 litigated claim will be settled. Ad- the clause is likely to be unenforce- recreational facilities Buyer so desires ditionally, should a third party ini- able. In Orkin Exterminating Co. v in order to assure Buyer as to the qual- Montagano, 359 So. 2d 512, 514 (Fla. ity and condition of the buildings and tiating the litigation seek equitable 4th D.C.A. 1978), the court instructed improvements. relief such as an , these as follows: “We must require draftsmen “EXCEPT FOR THE WARRANTIES allegations may impact other busi- of all contracts which contain them [ex- CONTAINED IN THE OF culpatory clauses] to use clear and un- CONVEYANCE AND ANY WRITTEN ness interests of the indemnified equivocal language totally without a hint WARRANTIES DELIVERED AT CLOS- party. Under those circumstances, of deceptive come-on, or inconsistent, ING, NO WARRANTIES, EXPRESSED the indemnified party may elect to clauses.” OR IMPLIED, REPRESENTATIONS, 2 represent itself in the proceedings. Charles Poe Masonry, Inc. v. Spring UNDERSTANDINGS, GUARANTIES Lock Scaffolding Rental Equipment Co., OR PROMISES HAVE BEEN MADE TO The indemnification agreement 374 So. 2d 487, 489 (Fla. 1979); OR RELIED UPON BY BUYER IN should establish a standard of care Middleton v. Lomaskin, 266 So. 2d 678 MAKING THE DETERMINATION TO applicable to the lawyer assigned to (Fla. 3d D.C.A. 1972). EXECUTE AND CLOSE PURSUANT 3 defend an indemnified party. On Fuentes v. Owen, 310 So. 2d 458 (Fla. TO THIS AGREEMENT AND, TO THE 3d D.C.A. 1975); Mankap Enterprises, MAXIMUM EXTENT PERMITTED BY this point, the agreement should ob- Inc. v. Wells Fargo Alarm Services, Inc., LAW, ALL WARRANTIES, INCLUD- ligate counsel to provide for interim 427 So. 2d 332 (Fla. 3d D.C.A. 1983). ING IMPLIED WARRANTIES OF FIT- litigation progress reports and no- 4 Residential leases containing such NESS FOR A PARTICULAR PURPOSE, exculpatory clauses would effectively MERCHANTABILITY AND HABIT- tification of all hearings. Finally, the render the warranty of habitability ABILITY, AND ALL WARRANTIES agreement should employ proce- meaningless. Exculpatory provisions in IMPOSED BY STATUTE (EXCEPT TO dures for resolving conflicts of inter- residential leases have been declared il- THE EXTENT THEY CANNOT BE DIS- est that may arise during the liti- legal and unenforceable to the extent CLAIMED) ARE DISCLAIMED. that they attempt to relieve the landlord “As to any implied warranties which gation. A sample provision dealing of liability FLA. STAT. §83.47 (1977); see cannot be disclaimed either in whole or with these indemnification issues John’s Pass Seafood Co v. Weber, 369 So. in part, incidental and consequential has been furnished for review.72 2d 616, 617 (Fla. 2d D.C.A. 1979). Prior damages are disclaimed and Seller shall to passage of this statute in 1973, an have no responsibility for any inciden- exculpatory clause in a lease would pre- tal or , including, Conclusion clude recovery by a tenant against a but not limited to, any claims for per- Exculpatory clauses that extin- landlord. Rubin v. Randwest Corp., 292 sonal injury, property damage or emo- guish or limit liability enable your So. 2d 60 (Fla. 4th D.C.A. 1974), cert. tional distress. No warranties or guar- denied, 305 So. 2d 786 (Fla. 1974); anties are given as to consumer clients to limit risk and avoid liabil- Middleton 266 So. 2d at 678. products as defined in 15 U.S.C., §2301 ity. However, the failure to appreci- 5 FLA. STAT. §718.203 (2000) provides et seq. (Magnuson-Moss Warranty Act). ate the legal requirements that trig- for certain implied warranties that flow Seller has not given and Buyer has not ger enforcement of these clauses can from the developer to the purchaser of a relied on or bargained for any such condominium unit and from a contrac- warranties. This paragraph shall sur- spell financial disaster. When the tor (or subcontractor or supplier) to a vive closing.” financial stakes are high these developer or purchaser. The question 6 FLA. STAT. §713.20(2) (2001). clauses will likely be attacked. To- arises concerning whether these warran- 7 Recently, the Florida Legislature re- ties may be disclaimed. FLA. STAT. vised FLA. STAT. §725.06(1)(2001) deal- ward that end, valid clauses must §718.303(2) (2000), resolves the question ing with indemnification among parties be drafted in a clear and unequivo- by providing that “a provision of this to a construction contract. The revised cal manner. Furthermore, the chapter may not be waived if the waiver statute, effective July 1, 2001, now per- clause must disclose the risk being would adversely affect the rights of a mits one party to a construction contract unit owner.” Since a waiver would ad- to indemnify the other party for its own relinquished by the party that has versely affect the benefits derived from negligent conduct as long as a stipulated executed the clause. The drafter the §718.203 warranty provisions, the monetary limitation of liability exists. should be mindful of statutory pro- language of §718.303(2) has the effect of However, this statutory right of indem- hibitions applicable to exculpatory making any attempted disclaimer or nification shall not apply to include waiver unenforceable. Condominium claims or damages resulting from gross clauses. Florida courts disfavor ex- documents and purchase agreements negligence, willful, wanton or inten- culpatory clauses and will declare often contain provisions that disclaim all tional misconduct, or for statutory vio- them invalid should they fail to sat- warranties except the statutory warran- lations. It is also noteworthy that simi- ❑ ties described in FLA. STAT. §718.203 lar provisions declare illegal and isfy applicable legal standards. (2000). A sample disclaimer of warranty unenforceable indemnification provi- clause is as follows: sions that obligate one party to indem- “WARRANTY AND DISCLAIMER. nify a public agency for its own negli- Specimen copies of all manufacturer’s gence. FLA. STAT. §725.06(3) (2001). warranties which will be passed through 8 Rule 1.8(h) Florida Rules of Profes- to Buyer at closing and which are not sional Conduct. See The Florida Bar In 1 University Plaza Shopping Center, expressly warranted by Seller have been Re Herman Cohen, 331 So. 2d 206 (Fla. Inc. v. Stewart, 272 So. 2d 507 (Fla. made readily available for Buyer’s re- 1976). 1973); Theis v. J & J Racing Promotions, view in the ‘Binder’ located in the sales 9 Russell v. Martin, 88 So. 2d 315, 317 571 So.2d 92 (Fla. 2d D.C.A. 1990), rev’d, office and Buyer acknowledges disclo- (Fla. 1956). 581 So. 2d 168 (Fla. 1991); Tout v. Hart- sure of such warranties and the location 10 Banfield v. Louis, 589 So. 2d 441, 446 ford Accident and Indemnity Co., 390 So. thereof by Seller. Buyer, to the extent (Fla. 4th D.C.A. 1991). 2d 155 (Fla. 3d D.C.A. 1980); Ivey permitted by law, is purchasing the Unit 11 In evaluating exculpatory language, Plants, Inc. v. F.M.C. Corp., 282 So. 2d and its interest in the recreational fa- Florida has adopted a six-part “public 205 (Fla. 4th D.C.A. 1973), cert. denied, cilities and common elements “AS IS” interest” test to evaluate whether a pub- 289 So. 2d 731 (Fla. 1974). If there is and should undertake whatever inspec- lic interest factor will invalidate an ex- ambiguity in the exculpatory language, tions of the Unit, common elements and culpatory clause when:

18 THE FLORIDA BAR JOURNAL/NOVEMBER 2001 “(1) it concerns a business of the type “By initialing this contract clause, the terview with Gregg I. Shavitz, counsel generally suitable for public ; purchaser(s) acknowledge(s) that this for the plaintiff in Boca Raton, Florida “(2) the party seeking exculpation is clause has been read and fully under- (August 31, 2001). engaged in performing a service of stood, and that the purchaser(s) has 26 Id. great public importance which is often had the chance to ask questions about 27 Id. a matter of practical necessity for some its meaning and significance. 28 Id. members of the public; “PURCHASER(S) ______(initials)” 29 Id. “(3) the party holds himself out as will- David L. Abney, Disclaiming the Implied 30 Id. ing to perform this service for any mem- Real Estate Common-Law Warranties, 31 See also Ashcroft v. Calder Race ber of the public who seeks it; 17 REAL EST. L.J. 141 (1993). Course, Inc., 492 So. 2d 1309 (Fla 1986), “(4) as a result of the essential nature of 17 Johnson v. Davis, 480 So. 2d 625 (Fla. dealing with express assumption of the the service and the economic setting of 1986), in which the Florida Supreme risk which waives only those risks in- the transaction, the party seeking excul- Court announced as follows: “Accord- herent in the sport itself. In Ashcroft, pation possesses a decisive advantage in ingly, we hold that where the seller of a the Florida Supreme Court held that bargaining strength; home knows of facts materially affect- horseracing on a track with a negligently “(5) in exercising superior bargaining ing the value of the property which are placed exit gap is not an inherent risk power, the party confronts the public not readily observable and are not for jockeys who participate in the sport with a standardized adhesion contract known to the buyer, the seller is under of horseracing. of exculpation; and a duty to disclose them to the buyer. This 32 O’Connell 413 So. 2d at 444. “(6) as a result of the transaction the per- duty is equally applicable to all forms of 33 Id at 446. son or property of the purchaser is placed real property, new and used.”480 So. 2d 34 Id. under control of the party to be excul- at 629 Although applicable to residen- 35 Id. at 448. pated.” Banfield, 589 So. 2d at 446. tial property the doctrine of “caveat emp- 36 Id. For an excellent discussion of public tor” remains applicable to the sale of 37 Id. policy considerations, see Mario R. commercial real estate. Haskell Co. v 38 Dilallo v. Riding Safety, Inc. 687 So. Arango and William R. Trueba, Jr., The Lane Co. Ltd., 612 So. 2d 669 (Fla. 1st 2d 353 (Fla. 4th D.C.A. 1997). Sports Chamber: Exculpatory Agree- D.C.A. 1993). 39 Van Tuyn v. Zurich American Insur- ments Under Pressure, 14 U. MIAMI ENT. 18 Belle Plaza Condominium Associa- ance Co., 447 So. 2d 318 (Fla. 4th D.C.A. & SPORTS L. REV. 1, 19 (1997). tion, Inc. v. B.C.E. Development, Inc., 1984). 12 John’s Pass Seafood Co. v. Weber, 369 543 So. 2d 239 (Fla. 3d D.C.A. 1989), 40 Id. So. 2d 616 (Fla. 2d D.C.A. 1979). rev’d, 551 So. 2d 460 (Fla. 1989). 41 Id. at 508. 13 Hesson, 422 So. 2d at 945. 19 FLA. STAT. §672.316 (2001). 42 Id. at 510. 14 Id. 20 Bert Smith Oldsmobile, Inc. v. 43 Id. Six years following its decision in 15 Id. Franklin, 400 So. 2d 1235 (Fla. 2d D.C.A. University, the Supreme Court extended 16 Rapallo South, Inc. v. Jack Taylor 1981). its holding to include cases in which the Development Corp., 375 So. 2d 587 (Fla. 21 See Hesson v. Walmsley Construction indemnitor and indemnitee were jointly 4th D.C.A. 1979), cert. denied, 385 So. Co Inc 422 So. 2d 943 (Fla. 2d D.C.A. as opposed to solely liable. See Charles 2d 758 (Fla. 1980); the court in Rapallo 1982). Poe Masonry, Inc. v. Spring Lock Scaf- relied on Gable v. Silver, 258 So. 2d 11 22 Dade County School Bd. v. Radio Sta- folding Rental Equipment Co., 374 So. (Fla. 4th D.C.A. 1972), 50 A.L.R.3d 1062, tion WQBA, 731 So. 2d 638 Fla. 1999). 2d 487 (Fla. 1979). opinion adopted by 264 So. 2d 418 (Fla. 23 Banfield, 589 So. 2d at 444. Courts 44 Id. 1972), holding that a one-year express strictly construe exculpatory clauses 45 Id. at 400. warranty in lieu of all other obligations against the party seeking to rely on 46 Id. and duties of the defendant did not pre- them. Auto-Owners Insurance Co. v. 47 Id. clude an action for breach of implied war- Anderson, 756 So. 2d 29 (Fla. 2000). 48 Id. ranty. The court reached this decision However, the general rule of contract 49 Id. based upon the fact that the disclaimer construction is that an ambiguous clause 50 Id. failed to repudiate or renounce implied will be construed against the drafter. 51 Id. at 401. warranties. One commentator has pro- City of Homestead v. Johnson, 760 So. 52 Id. posed utilizing the following clause to 2d 80 (Fla. 2000); Seifert v. U.S. Home 53 See also Lantz v. Iron Horse Saloon, disclaim implied warranties and limit Corp., 750 So. 2d 633 (Fla. 1999). On this Inc. 717 So. 2d 590 (Fla 5th D.C.A. 1998). the buyer to the express warranty cov- score, parties presented with written Courts have held that specifically includ- erage enunciated in the provision: “The agreements containing exculpatory ing a reference in an exculpatory clause seller will repair all defects in the prop- clauses prepared solely by the other or release that identifies a released party erty for a period of year(s) from the party should exercise caution. Fre- by instead of by name (e.g., of- date of sale. This express warranty cov- quently, these agreements contain a pro- ficer, director, and agent) is sufficient ers all types of defects, whether caused vision that stipulates that the document to absolve those parties of liability as a by workmanship or flaws in materials. is the joint product of the parties. Un- matter of law. Banfield, 589 So. 2d at In order to obtain the benefits of this ex- der those circumstances, the party ad- 445. press warranty, the purchaser(s) must versely impacted by the clause may lose 54 Banfield, 589 So. 2d at 445. give written notice of any defect within the ability to have it construed against 55 Theis, 571 So. 2d at 93, 94. In a simi- year(s) from the date of sale. the drafter. lar context, the Fourth District Court Of This express warranty is the only war- 24 Fuentes v. Owen, 310 So. 2d 458 at Appeal in Travent Ltd v. Schecter, 718 ranty covering this property. Except for 459–60(Fla. 3d D.C.A. 1975). So. 2d 939 (Fla 4th D.C.A. 1998), upheld this express warranty, THE PROPERTY 25 Silva v. Cousins Club Corp.et al., strikingly similar exculpatory language IS SOLD ‘AS IS.’ Case No. 98-001615 15th Judicial Cir- to bar a bicycle participant’s claim for “THERE ARE NO IMPLIED WARRAN- cuit in and for Palm Beach County, personal injury against the tour opera- TIES COVERING THIS PROPERTY. Florida. Following denial of the tor based upon the release. The language THERE IS NO IMPLIED WARRANTY defendant’s motion for summary judg- released the operator from liability OF HABITABILITY OR OF GOOD ment a jury trial was conducted in West “whether caused by negligence or other- WORKMANLIKE CONSTRUCTION. Palm Beach, Florida. The jury returned wise.” THERE ARE ABSOLUTELY NO IM- a in excess of $12,000,000 in fa- 56 Theis, 571 So. 2d at 93, 94. PLIED WARRANTIES OF ANY KIND vor of the plaintiff. Post-trial motions are 57 Id. COVERING THIS PROPERTY. pending before the court. Telephone in- 58 Id.

20 THE FLORIDA BAR JOURNAL/NOVEMBER 2001 59 Id. at 443. Pepper & Associates v. Hardrives Com- prospects, (iii) the Third Party Claim 60 Id. at 444. pany, 528 So. 2d 72 (Fla. 4th D.C.A. seeks an injunction or equitable relief 61 Continental Video Corp. v. 1998). against the Indemnified Party or (iv) Honeywell, Inc., 422 So. 2d 35 (Fla. 3d 67 In Marriott Corp. v. Dasta Construc- the Indemnifying Party has failed or is D.C.A. 1982), rev. denied, 456 So. 2d 892 tion Co., 26 F.3d 1057 (11th Cir. 1994), failing to prosecute or defend vigorously (Fla. 1984); Ace Formal Wear, Inc. v. reh’g denied, 37 F.3d 639 (11th Cir. the Third Party Claim. Baker Protective Service, Inc., 416 So. 2d 1994), the court enforced the following “If the Indemnifying Party shall as- 8 (Fla. 3d D.C.A. 1982). “no damage for delay” clause: “If the Con- sume control of the of any Third 62 In Luria, the exculpatory language tractor is delayed at any time in the Party Claim in accordance with the above addressed by the court was as follows: progress of the Work by any act or ne- provisions, the Indemnifying Party shall “It is agreed that Company is not an in- glect of Owner or by any contractor em- obtain the prior written consent of the surer and that the payments hereinbe- ployed by Owner, or by changes ordered Indemnified Party before entering into fore named are based solely upon the in the scope of the Work, or by fire, ad- any settlement of such Third Party value of the services herein described verse weather conditions not reasonably Claim, if the settlement does not ex- and it is not the intention of the parties anticipated, or any other causes beyond pressly and unconditionally release the that Company assume responsibility for the control of the Contractor, then the Indemnified Party from all liabilities and any loss occasioned by malfeasance or required completion date or duration set obligations with respect to such Third misfeasance in the performance of the forth in the progress schedule shall be Party Claim or the settlement imposes services under this contract or for any extended by the amount of time that the injunctive or other equitable relief loss or damage sustained through bur- Contractor shall have been delayed against the Indemnified Party. The In- glary, theft, robbery, fire or other cause thereby. However, to the fullest extent demnified Party shall be entitled to par- or any liability on the part of Company permitted by law, Owner and Marriott ticipate in the defense of any Third Party by virtue of this Agreement or because Corporation and their agents and em- Claim and to employ counsel of its choice of the relation hereby established. If ployees shall not be held responsible for for such purpose. The fees and expenses there shall, notwithstanding the above any loss or damage sustained by Con- of such separate counsel shall be paid by provisions, at any time be or arise any tractor, or additional costs incurred by the Indemnified Party; provided, how- liability on the part of Company by vir- Contractor, through delay caused by ever, that the Indemnifying Party shall tue of this Agreement or because of the Owner or Marriott Corporation, or their pay the reasonable fees and expenses of relation hereby established, whether due agents or employees, or any other Con- such separate counsel (i) incurred by the to the negligence of Company or other- tractor or Subcontractor, or by abnor- Indemnified Party after it shall have wise, such liability is and shall be lim- mal weather conditions, or by any other given notice of such Third Party Claim ited to a sum equal to the rental service cause, and Contractor agrees that the to the Indemnifying Party and (ii) prior charge hereunder for a period of service sole right and remedy therefor shall be to the date, the Indemnifying Party shall not to exceed six months, which sum an extension of time.” 26 F.3d at 1067. fail or refuse to acknowledge that it will shall be paid and received as liquidated 68 Id. have an indemnity obligation for such Third Party Claim (and any losses, liabili- damages. Such liability as herein set 69 FLA. STAT. §47.025(2001). ties, costs and expenses relating thereto) forth is fixed as and 70 FLA. STAT. §95.03(1982). not as a penalty and this liability shall 71 11 U.S.C. §365(e) (1993); In re Com- as provided hereunder or (iii) if represen- be complete and exclusive. That in the puter Communications, Inc., 824 F.2d tation of both the Indemnifying Party and event Subscriber desires Company to 725 (9th Cir. 1987). the Indemnified Party by the same coun- assume greater liability for the perfor- 72 Example language: Duty to Cooper- sel would, under applicable code or rules mance of its services hereunder, a choice ate, Provide Documents and Defend of professional conduct or responsibility, is hereby given of obtaining full or lim- “The parties hereto, at any time and create a conflict of interest. ited liability by paying an additional from time to time, following the execu- “Each party shall cooperate, and amount under a graduated scale of rates tion hereof shall execute and deliver all cause its Affiliates to cooperate, in the defense or prosecution of any Third proportioned to the responsibility, and an such further instruments or documents Party Claim and shall furnish or cause additional rider shall be attached to this and take all such further action as may to be furnished such records, informa- Agreement setting forth the additional be reasonably necessary or appropriate tion and testimony, and attend such con- liability of Company and additional in order to more effectively carry out the ferences, discovery proceedings, hear- charge. That the rider and additional ob- intent and purpose of this Settlement ings, or appeals, as may be ligation shall in no way be interpreted Agreement. reasonable requested in connection to hold the Company as an insurer.” “Subject to the limitations set forth therewith.” (Emphasis added.) Luria, 384 So. 2d at in this Section, the Indemnifying Party 948. shall assume control of the defense of 63 Valhal Corp. v. Sullivan Associates, any Claim asserted by any third party Inc. 44 F.3d 195, 198 (3d Cir. 1995), (“Third Party Claim”) and, in connection Florida Power & Light Co. v. Mid-Val- with such defense, shall appoint lead ley, Inc.., 736 F.2d at 1316 (11th Cir. counsel for such defense, in each case at 1985). In Valhal, the exculpatory clause its expense. limited the ’s liability to the fee “Notwithstanding anything appear- paid or $50,000 but provided an option ing to the contrary in this Agreement, to increase insurance liability by the the Indemnifying Party shall not assume Steven B. Lesser is a shareholder owner paying a surcharge for the in- or maintain control of the defense of any in Becker and Poliakoff, P.A., Ft. Lau- creased insurance premiums. Third Party Claim but shall pay the fees derdale, where he devotes his practice ex- 64 Id. at 1318. and expenses of counsel retained by the clusively to and litiga- 65 Id. at 1319. Indemnified Party if (i) the Third Party tion. He is a member of the Council for 66 Florida recognizes the validity of “no Claim relates to or arises in connection the American Bar Association and damage for delay” clauses, Triple R Pav- with any criminal proceeding, action, in- Insurance Practice Section and the ing, Inc. v. Broward County 774 So. 2d dictment, allegation or investigation, (ii) American Bar Association Forum on the 50 (Fla. 4th D.C.A. 2001); Marriott Corp an adverse determination with respect Construction Industry Steering Commit- v. Dasta, 26 F.3d 1057 (11th Cir. 1994), to the Third Party Claim would, in the tee on Owners and Lenders. Mr. Lesser reh’g denied, 37 F.3d 639 (11th Cir. business judgment of the In- is a graduate of Ohio University and the 1994); Newbury Square Development demnified Party, be detrimental in any Cleveland-Marshall College of Law and Corp. v. Southern Landmark Inc, 578 So. material respect to the Indemnified is admitted to practice in Florida and 2d 750 (Fla. 1st D.C.A. 1991); Harry Party’s reputation or future business Ohio.

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