Property II, Pages 476–483

Ransburg v. Richards

Court of Appeals of Indiana, 2002

Facts:

Plaintiff leased an apartment from defendant. The lease provided that defendant would gratuitously maintain the common areas but that they would be used at her own risk as defendant was not liable for them under any circumstance, including negligence.

One morning it snowed ~2 inches, and defendant had the sidewalk and parking lot cleared. Yet plaintiff slipped on snow-covered ice on the way to her car. Plaintiff then sued defendant for negligence.

Procedural History:

Trial court denied defendant's summary judgment motion.

Issue:

Is defendant's exculpatory clause enforceable?

Defendant's Argument:

Indiana allows exculpatory clauses, exculpating parties of their obligations of care and removing their liability for negligent conduct. Plaintiff agreed to this clause.

Rule:

Indiana does allow exculpatory clauses. However, a court may declare a valid contract unenforceable if it contravenes the public policy of Indiana.

Courts refuse to enforce contracts on public policy grounds when:

  1. They contravene statute.
  2. They clearly tend to injure the public in some way.
  3. They are otherwise contrary to the declared public policy of Indiana.
    • In this case, five factors must be balanced:
      1. The nature of the subject matter of the contract
      2. The strength of the public policy underlying the statute
      3. The likelihood that refusal to enforce the bargain or term will further that policy
      4. How serious or deserved would be the forfeiture suffered by the party attempting to enforce the bargain
      5. The parties relative bargaining power and freedom to contract

Reasoning:

Many states have held similar exculpatory clauses to be unenforceable. If allowed, it would become commonplace, hurting the public. In addition, the landlord and tenant have unequal bargaining power. Going further, the landlord has a duty of reasonable care to maintain the premises in tort law, which this clause would go against the policy for.

Holding:

No, this exculpatory clauses in a residential lease is contrary to public policy. Affirmed.

Dissenting Opinion:

Najam: Indiana law says a contract is to be construed the same as any other contract. This court has already decided that contracts can be unconscionable, but only when it would not be signed by any sensible person not under delusion, duress, or in distress, and not be accepted by any honest and fair person. Just because the lease benefits the landlord, does not make it unconscionable. Plaintiff was a trained paralegal and had an opportunity to terminate or renegotiate the terms.

The legislation should be the one to consider these public policy concerns. The court should not usurp its authority. The state Senate recently removed such a clause from a bill, showing that they have considered and rejected such a rule.

Public policy should only nullify a private agreement as a last resort where the legal justification is clear, compelling, and unavoidable. Tinkering with these contracts jeopardizes the freedom citizens have to make agreements and allocate their rights, risks, and responsibilities.


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