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Public Policy Exceptions

Whereas the general rule is that the government (legislative or judicial) cannot interfere with a party’s right to engage in contracts, such non-interference does not contemplate an unlimited right to exculpate oneself from liability. Courts will seldom uphold a clause in a contract, disclaimer, or waiver that tends to exculpate a party from liability as a result of intentional, wanton, or reckless conduct. Most states limit exculpatory clauses to acts of ordinary negligence. Moreover, most states do not permit parties to limit liability for loss or harm under circumstances normally requiring strict liability (e.g., the handling of dangerous materials like explosives, radioactive materials, etc.)

When courts interfere with the private contractual rights of parties by not enforcing a limitation of liability clause, it is often under the auspices of protecting persons from violations of public policy which effectively void such clauses. Courts will generally strike unconscionable terms that are oppressive because of grossly unequal bargaining power between the parties; are improper because of the imposition of strict liability; or are unenforceable because they are contrary to state-imposed standards of care (as for certain professional licenses or permits). The justification most often cited for the court’s interference in private contractual relations is that such a limitation-of-liability clause is “void as against public policy.” Public policy is that which tends to safeguard and support the good or betterment of all, as opposed to the individual rights of contracting parties.

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