Contractual Disclaimers in Illinois: Social Relationships and Uneven Bargaining Positions

Spears v. Ass’n of Illinois Electric Cooperatives, 2013 IL App (4th) 120289 summarizes the general rules and exceptions that govern exculpatory clauses in Illinois. In the case, the plaintiff college student who signed up for a utility “pole climbing” class the defendant – a non-profit entity – offered through plaintiff’s college. Before she took the class, plaintiff signed a release that immunized the defendant from all claims and injuries that could result from the class. The plaintiff sustained a serious knee injury while descending a utility pole and sued the defendant for negligence. The defendant moved for summary judgment based on the release. The trial court denied the summary judgment motion and found there was a disparity in bargaining power. The appeals court reversed finding there were unresolved fact issues as to whether there was a disparity in bargaining power between the student and school. Exculpatory Provisions: General Rules In Illinois, parties may contractually release liability for their own negligence. Spears, ¶ 24. Liability release contracts are not favored and are strictly construed against the released party because these contracts pit two public policy interests against each other: (1) a person should be liable for his negligent conduct vs. (2) contracting parties should be free to contract as they see fit. Id. A release of liability will be enforced in Illinois if (1) the terms are clear, explicit and precise; (2) the release encompasses the activity, circumstance or situations involved in the contract; (3) it is not against public policy; and (4) there is nothing in the “social relationship” which weighs against upholding the release. ¶ 25. The ‘Social Relationship’ and Disparity of Bargaining Power ExceptionsThere are several social relationship can lead a court to invalidate an exculpatory clause. These relationships include: (1) employer-employee; (2) common carrier/innkeeper/public utility – member of public; (3) bailor-bailee. Besides these special relationships, a “disparity of bargaining power” between the contracting parties can work to defeat a liability waiver. On this point, the key focus is whether the plaintiff had freedom of choice as to whether to sign the release. ¶ 26. The disparity in bargaining power factors a court considers include (1) the sophistication of the contracting parties; (2) whether plaintiff was or should have been aware of the risks involved in the activity; (3) whether plaintiff was under economic or other compulsion (was it a “take-it-or-leave-it” situation?); and (4) whether the plaintiff had a reasonable alternative. ¶ 27. The over-arching question which Spears refused to answer was whether there was a disparity of bargaining power between an educator and a student such that exculpatory releases in school-student contracts are always void. The Court said it was up to the legislature (not the courts) to decide the question. ¶ 36. Generally, if a plaintiff is free to forgo the activity and he can realistically locate a alternative service provider, the release will be upheld. In determining whether the plaintiff was free to abstain from the class, the Court considered (1) the plaintiff’s monetary and time investment in the activity; (2) whether the plaintiff’s completion of the pole climbing class was essential for future employment; (3) whether plaintiff could have obtained the same or similar instruction elsewhere; (4) would refusing to take the pole climbing class detrimentally impact plaintiff’ employment prospects?; and (5) would plaintiff’s financial aid, grants or scholarship be imperiled if she opted out of the class? ¶ 39. Epilogue: Spears common-sense take-away is that if the person signing the release had a meaningful choice as to whether to sign it or not, the release will most likely be enforced absent a special-relationship between the parties where a stronger party is trying to take advantage of a weaker one.