Adding An Exculpatory Clause To A Commercial Agreement Can Protect A Business Owner

The court’s opinion in the recent case Garcia v. D/Aq Corp. (2020) 57 Cal. App. 5th 902 is illustrative. In Garcia plaintiff was the tenant under a lease for a commercial premises. The lease contained an exculpatory clause providing that the lessor “shall not be liable for injury … to the person … of Lessee” and others, whether resulting from conditions arising on the premises or from other sources.

Plaintiff fell down a staircase after hitting his head on a beam in the doorway at the top of the staircase. He sued the landlord, alleging causes of action for premises liability and negligence. He alleged his fall was caused by the inherently dangerous condition of the staircase due to numerous building code violations. The landlord moved for summary judgment and the trial court granted the motion, based on the exculpatory clause in the lease. The court of appeal affirmed, stating that while “Civil Code section 1668 ordinarily ‘invalidates contracts that purport to exempt an individual or entity from liability for future intentional wrongs [citation] and gross negligence’ . . . [and] ‘prohibits contractual releases of future liability for ordinary negligence when ‘the “public interest” is involved or … an exemption from liability ‘located within a commercial lease between business entities’ does not implicate the public interest . . ..” (Garcia at 907.)

Other cases have enforced exculpatory provisions in residential leases to a limited extent. While courts have consistently held that residential leases do in fact implicate the public interest, limited exculpatory agreements relating to certain non-essential aspects of a residential lease, such as a gym in an apartment complex, do not.

In Lewis Operating Corp. v. Superior Court (2011) 200 Cal. App. 4th 940 the plaintiff tenant was injured while using a treadmill at an exercise facility operated by the landlord. The lease agreement contained an exculpatory clause whereby the tenant agreed to assume all risk of harm resulting from, and to waive claims against the landlords relating to, his use of the exercise facility. The court held that case law prohibiting exculpatory clauses affecting the public interest did not invalidate the exculpatory provision of the lease agreement because recreational activities, such as the tenant's use of the exercise facility, were not essential services or necessities affecting the public interest.

As with releases in other contexts, to be enforced the release must be conspicuous, clear and unambiguous. If inserted as an exculpatory clause into a residential or commercial lease, the landlord would be wise to require a separate initial for the release in order to satisfy the conspicuous requirement. With respect to residential leases, the landlord should make it clear that the release applies only to specific non-essential portions of the leased premises such as on site gyms.