Brief Fact Summary.
Broadley (Plaintiff) was injured at the Mashpee Neck Marina, Inc. (Defendant), where his boat was docked. He sued, alleging ordinary negligence, despite an exculpatory clause in the contract between the two. Defendant claimed the suit was precluded by the clause while Plaintiff argued that the clause was overbroad and unenforceable under admiralty law.
Synopsis of Rule of Law.
1) Under admiralty law, as with the common law, agreements to waive claims of mere negligence are generally enforceable where the parties have equal bargaining power. 2) Neither reformation or severance of an exculpatory clause is appropriate where the language of the clause is overbroad, the clause was not bargained for, and the clause lacks any express reference to negligence.
Plaintiff docked his boat at the Defendant’s marina. He was permanently injured when his foot was caught in a gap between the main dock and a floating dock. Plaintiff brought suit, alleging negligence, despite a clause in the seasonal mooring contract that precluded boat owners from making any claims against Defendant “arising out of any damage, loss, personal injury or death” the owners suffered. Defendant argued that the contract clause barred Plaintiff’s suit. Plaintiff claimed that because admiralty law governed the contract, that law only allowed parties to limit liability for ordinary negligence, but not to eliminate it entirely. He also argued that the clause was overbroad and unenforceable because it would preclude a finding of liability even for gross negligence, although he conceded that his injuries were not caused by Defendant’s gross negligence. The trial court reformed the exculpatory clause to limit it to ordinary negligence. As a bar to claims of ordinary negligence, the clause then operated to preclude Plaintiff’s claim and the court granted summary judgment in favor of Defendant. Plaintiff appealed.
1) Does admiralty law prevent the inclusion of an exculpatory clause for mere negligence where the parties are of equal bargaining power? 2) Is reformation or severance of the exculpatory clause appropriate where the clause is overbroad, was not bargained for, and lacks an express reference to negligence?
(Boudin, C.J.) 1) No. Under admiralty law, as with the common law, agreements to waive claims of mere negligence are generally enforceable where the parties have equal bargaining power. Plaintiff relies on Bisso v. Inland Waterways Corp., 349 U.S. 85 (1955) for his argument that admiralty law does not allow for complete immunity from liability in ordinary negligence cases. However, that case does not create a flat rule forbidding exculpation for mere negligence in all cases. It could be read to apply only to cases where the parties are not of equal bargaining power. This would be in accord with common law, where agreements to waive negligence claims are generally found to be valid, unless special circumstances apply, such as unconscionability, contracts of adhesion, unequal bargaining power, or inadequate disclosures. The federal courts’ of appeal are split on this issue, but this circuit has upheld exculpatory clauses in ordinary negligence cases when they are expressed clearly and where, as here, the parties are of equal bargaining power. The clause here, however, is overbroad and against public policy as it extends beyond mere negligence, and appears to absolve gross negligence, recklessness, and even intentional wrongdoing. The court must then determine whether the trial court correctly reformed the clause to limit it to ordinary negligence, making it enforceable under the law in this circuit.
2) No. Neither reformation or severance of an exculpatory clause is appropriate where the language of the clause is overbroad, the clause was not bargained for, and the clause lacks any express reference to negligence. Reformation is appropriate in cases where the contract language does not adequately reflect the parties’ mutual and actual intent and the court alters the language to coincide with what was intended. That is not the case here. A more appropriate modification might be severance of part, or all, of the clause under the contract’s severance clause. However, the clause here was not bargained for in good faith, because it is a boilerplate provision. The disclaimer itself never even mentions negligence, and so may not be an effective warning to a boat owner of what liability is being disclaimed. Because of these issues, the severability clause cannot be used to save the exculpatory clause. It would be unjust to uphold this clause as valid. Although Plaintiff did not make all of the arguments put forth here, this court has discretion to avoid forfeiture of these claims in the interest of justice. Reversed and remanded.
The Restatement (Second) of Contracts § 184 states that “A court may treat only part of a term as unenforceable… if the party who seeks to enforce the term obtained it in good faith and in accordance with reasonable standards of fair dealing.” Where the parties actually negotiated a broad exculpatory clause that clearly includes negligence, it may be appropriate to narrow the application to only negligence. § 184, illus. 4. On the other hand, “[t]he fact that the [overbroad] term is contained in a standard form supplied by the dominant party argues against aiding him in his request.” § 184 cmt b. The court here applied the second of these principles in finding the exculpatory clause at issue unenforceable.