§7.2 Contractual Waiver of Liability

§7.2 Contractual Waiver of Liability

The Case: Olson v. Molzen , 558 S.W.2d 429 (Tenn. 1977).

The Basic Facts: Doctor sought to avoid liability to patient because of an exculpatory clause he had her execute at the time she 

engaged his services.

The Bottom Line:

• "The courts of Tennessee have long recognized that, subject to certain exceptions, parties may contract that one shall not be liable for his negligence to another. Moss v. Fortune, [340 S.W.2d 902 (Tenn. 1960)]." 558 S.W.2d at 430.
• "While these cases are relevant and make it clear that as a general rule a party may contract against his or her own negligence, they do not afford a satisfactory solution in a case involving a professional person operating in an area of public interest and pursuing a profession subject to licensure by the state." Id.
• "Moss points us in the direction of a controlling consideration, i. e. whether the exculpatory provision affects the public interest by recognizing the exceptions made for the benefit of the public. Generally our cases uphold exculpatory contracts between private contracting parties but, aside from those involving common carriers, no case has been decided wherein the public interest consideration has been discussed." Id. at 431.
• "This was the primary factor that led the California Supreme Court in Tunkl v. Regents of University of California, [383 P.2d 441 (Ca. 1963)], to hold that a release from future liability, as a condition of admission to a charitable hospital, was invalid. There the Court enumerated and discussed what it deemed to be the controlling characteristics of the transaction, as follows:

a.     It concerns a business of a type generally thought suitable for public regulation.

b.    The party seeking exculpation is engaged in performing a service of great importance to the public, which is often a matter of practical necessity for some members of the public.

c.     The party holds himself out as willing to perform this service for any member of the public who seeks it, or at least for any member coming within certain established standards.

d.    As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.

e.     In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.

f.      Finally, as a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

[383 P.2d at 445-446]." Id.

• "We think these criteria are sound and we adopt them. It is not necessary that all be present in any given transaction, but generally a transaction that has some of these characteristics would be offensive. Here, we think all characteristics were present." Id.
• "A professional person should not be permitted to hide behind the protective shield of an exculpatory contract and insist that he or she is not answerable for his or her own negligence. We do not approve the procurement of a license to commit negligence in professional practice. [ Id. at 432(footnote omitted)]. Under the guidelines herein adopted, we hold that an exculpatory contract signed by a patient as a condition of receiving medical treatment is invalid as contrary to public policy and may not be pleaded as a bar to the patient's suit for negligence." Id.

Other Sources of Note : Crawford v. Buckner, 839 S.W.2d 754 (Tenn. 1992) (striking down a clause in a residential lease that attempt to eliminate a residential landlord's liability for negligence); Houghland v. Security Alarms & Services, Inc., 755 S.W.2d 769 (Tenn. 1988) (upholding exculpatory clause in home security contract in the absence of fraud, deceit or misrepresentation); Carey v. Merritt, 148 S.W.3d 912 (Tenn. Ct. App. 2004) (voiding exculpatory clause in residential home inspection contract); Buckner v. Varner, 973 S.W.2d 939 (Tenn. Ct. App. 1990) (a contractual waiver of liability will not protect a person guilty of gross negligence); Rogers v. Donelson-Hermitage Chamber of Commerce, 807 S.W.2d 242 (Tenn. Ct. App. 1990),perm. appeal denied, (Mar. 11, 1991) (holding release signed by mother was effective to waive any claim mother had in her own right as a result of the wrongful death of her daughter, but holding release was not effective to release her daughter's cause of action against defendants for their negligence and daughter's resulting death); Childress v. Madison County, 777 S.W.2d 1 (Tenn. Ct. App. 1989), perm. app. denied, (Aug. 7, 1989) (finding parents and guardians of incompetent persons "cannot on behalf of an infant or incompetent, exculpate or indemnify against liability those organizations which sponsor activities for children and the mentally disabled," and holding release signed by mother was effective to relieve defendant county of liability to the mother, but did not relieve liability as to her mentally incompetent child); Parton v. Mark Pirtle Oldsmobile-Cadillac- Izuzu, Inc., 730 S.W.2d 634 (Tenn. Ct. App. 1987) (excellent discussion of whether to enforce exculpatory language in a boilerplate contract for automotive repair).

Recent Cases: Stewart v. Chalet Village Properties, Inc. , No. E2007-01499-SC-R11-CV, 2009 WL 275767 (Tenn. Nov. 3, 2009) (holding trial court failed to apply factors adopted in Olson v. Molzen, 558 S.W.2d 429, 431 (Tenn. 1977) for determining whether an exculpatory clause violates public policy, and remanding for further proceedings consistent with this opinion); Maggart v. Almany Realtor's, Inc., 259 S.W.3d 700 (Tenn. 2008) (affirming Court of Appeals' reversal on alternate grounds finding pre-injury release signed by employee releasing employer for liability for injuries was a specific release not a general release and finding injury at issue fell outside scope of release); Thrasher v. Riverbend Stables, LLC, No. M2008-02698-COA-RM-CV, 2009 WL 275767 (Tenn. Ct. App. Feb. 5, 2009) (holding services provided by the defendants in training and boarding horses do not fall under public policy exception in Olson v. Molzen, 558 S.W.2d 429, 431 (Tenn. 1977) prohibiting exculpatory clauses); Underwood v. National Alarm Services, Inc., No. E2006-00107-COA-R3-CV, 2007 WL 1412040 (Tenn. Ct. App. May 14, 2007) (holding limitation of liability clause in alarm contract limiting recovery to $250 is valid); Jones v. Tennessee Riders Instruction Program, Inc., No. M2006-01087-COA-R3-CV, 2007 WL 393630 (Tenn. Ct. App. Feb. 5, 2007) (defendant did not commit gross negligence as a matter of law and therefore waiver signed by plaintiff barred claim).