Exculpatory Clauses in TN

Practice Areas - Business and Contract LitigationI’m often asked whether a party can disclaim negligence in a contract. The answer is “yes” unless you are providing professional services, such as legal services, medical treatment or home inspections.  The following is a brief highlight of the law that applies.

It is well settled in Tennessee that parties may contract that one shall not be liable for his negligence to another but that such other shall assume the risk incident to such negligence. It is not necessary that the word “negligence” appear in the exculpatory agreement and public policy in Tennessee favors freedom to contract against liability for negligence. Empress Health and Beauty Spot Inc. v. Turner, 503 S.W.2d 188 (Tenn. 1973).

There are exceptions to this general rule. In Olson v. Molzen, 558 S.W.2d 429 (Tenn. 1977), the Court held that certain relationships require greater responsibility which would render such a release “obnoxious.” The Court adopted six criteria to be applied in determining whether an exculpatory provision should be held invalid as contrary to public policy. These criteria are as follows:

  1. It concerns a business of a type generally thought suitable for public regulation.
  2. 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 members of the public.
  3. The party holds himself out as willing to perform this service for any member of the public who seeks it or at least for any member coming within certain established standards.
  4. As a result of the essential nature of the service, in the economic setting of the transaction, the party invoking exculpation possesses a decisive advantage of bargaining strength against any member of the public who seeks his services.
  5. In exercising a superior bargaining power the party confronts the public with a standardized adhesion contract of exculpation, and makes no provision whereby a purchaser may pay additional reasonable fees and obtain protection against negligence.
  6. As a result of the transaction, the person or property of the purchaser is placed under the control of the seller, subject to the risk of carelessness by the seller or his agents.

In the recent case of Copeland v. Health South Methodist Rehab Hospital LP, No. W2016-02499–COA–R3–CV (Tenn. Ct. App., June 29, 2017), the court made a review of Tennessee law and found the exceptions adopted in Olson have generally been restricted to those situations involving professional services, such as legal services, medical treatment and home inspections.  In this case, the court was considering a wheelchair van agreement that contained an exculpatory clause for negligence. The agreement signed by the appellant was strictly for non-emergency transportation services. There was no pre-existing relationship of trust and the driver was simply making himself available to the appellant for transportation to appellant could have called another transportation service or reschedule his appointment. Considering these facts, the court found the trial court’s decision to dismiss the case on summary judgment was appropriate.

If you have questions regarding the forms you’re using in your business, please do not hesitate to contact me directly at (615) 630-7727.

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