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Comment on negligence voids exculpatory clause / Contract update
December 21,  2019
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Comment on negligence voids exculpatory clause from December 13, 2019
            This is interesting as we just installed a fire panel in a county building and the assistant county attorney dug into our contract and found 21 points they don’t like.
One of which was exactly this point along with several others that violate Montana Law.
            Looking forward to how this one turns out. Please let us know if you and when you find out the court’s decision.
Please withhold name
            The decision on this one is out and on our website under Montana leading cases.
            The Exculpatory clause is essential in the security and fire contracts and we need to be careful not to have the provision declared void because it violates public policy.  Almost all states will enforce the Exculpatory clause, unless the wording of the provision goes too far.  “Too far” has different meaning in different states.  What we learn from the case in Montana is that “too far” includes trying to exculpate yourself from liability when you “negligently violate a legal duty”.  I am actually not comfortable with that criteria.  Attorneys are welcome to comment.  Does it mean a negligent violation of a statute that causes harm?  Does it mean a negligent violation of a law?  Negligent violation of a legal duty may include a duty created by contract, but we know that there is no cause of action for "negligent breach of contract"; the proper cause of action would be "breach of contract".  I've gone back and forth on whether to include "negligent violation of a legal duty" but I am not comfortable that a judge won't decide that a contract can create a legal duty and a "negligent breach" is therefore excluded from the Exculpatory clause.  If you think this is nit-picking and confusing, welcome to contract law.  
            I think the Montana statute means negligent violation of a statute; a statute that creates a legal duty.  How one may do that is probably more easily found in connection with fire alarms that are mandated by law.  “Negligent violation” of a “legal duty” might mean failing to comply with a fire alarm code.  I am hard pressed for an example with a security system.  But the problem is that a challenge to the Exculpatory clause may lead to heightened attention to other “protective” provisions or a judge finding that the contract, as a whole, is unconscionable.  
            The Exculpatory clause has been modified, updated, in the Standard Form Agreements for 2020, and all contracts we provide now will have the newest updates.  The change in the provision essentially excludes application to the provision when we know the Court will not enforce the provision for these situations:  gross negligence and willful misconduct.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301