Synopsis of Rule of Law. The ultimate determination of what constitutes the public interest must be made considering the totality of the circumstances against the backdrop of current societal expectations, including transactions that are so important to the public good that an exculpatory clause would be patently offensive such that the common sense of the entire community would pronounce invalid.
Issue. Whether an exculpatory clause found in a fitness club’s contract is enforceable such that plaintiff expressly assumed the risk of the fitness club’s negligent acts?
Held. Yes, where a transaction does not provide an essential public service (important or of practical necessity to the public as a whole), an exculpatory clause contained in an agreement will not be found to patently offensive, i.e., void against public policy.
Discussion. Given the language of the provision, the court found that it clearly expressed the intent to release Defendant from liability for all acts of negligence. Although it was a contract of adhesion, such fact alone does not demonstrate grossly disparate bargaining power (procedural unconscionability). Furthermore, because health club services are not deemed of great public important or a practical necessity, no special legal relationship or overriding public interest exists which would render the provision void against public policy.
Plaintiff was not required to assent to the terms and did not give up a valuable legal right to do so (cf. a condition of obtaining employment or making use of public carrier or utility services). Instead, she was free to choose any club which would provide the same services, but voluntarily applied for a membership to Defendant’s private club and agreed to the terms upon which the membership was bestowed.
There are three exceptions that arise where an exculpatory clause will be unenforceable: 1) when the party protected by the clause intentionally causes harm or engages in acts of reckless, wanton, or gross negligence; 2) when the bargaining power of one party to the contract is so grossly unequal as to put that party at the mercy of the other’s negligence; and 3) when the transaction involves the public interest.
Quoting Tunkl v. Regents of the Univ. of California (60 Cal. 2d 92), in public interest cases, a transaction affects the public interest when it exhibits some or all of the following characteristics: 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 public members; c) the party holds himself out as willing to perform such services for any member who seeks it; d) as a result of the essential nature of the service, the party invoking exculpation possesses a decisive advantage in bargaining strength against any member of the public who seeks such services; e) the party confronts the public with an adhesion contract with no provision whereby purchaser may pay additional fees to obtain protection against negligence; and f) as a result of the transaction, the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.
When determining whether a plaintiff expressly assumes a risk in a contract, you must determine whether the injury risk that affected plaintiff fell within the unambiguous terms of the agreement and whether the contract itself does not violate public policy.