Richards v. Richards

ABRAHAMSON. . . The circuit court granted summary judgment to Monkem Company, the defendant, dismissing the complaint with prejudice. It held that the form signed by Jerilyn Richards, the plaintiff, was an exculpatory contract that was not void or unenforceable as contrary to public policy. It further held that the plaintiff’s claim for injuries suffered while riding as a passenger in a truck operated by Leo Richards, her husband, and owned by Monkem Company, her husband’s employer, was clearly within the contemplation of the parties at the time the exculpatory contract was executed. The circuit court thus foreclosed the plaintiff’s claim as a matter of law. The court of appeals affirmed the judgment of the circuit court. We reverse and remand for further proceedings.

The issue before this court is whether the form the plaintiff executed constitutes a valid exculpatory contract releasing the plaintiff’s claims against Monkem Company, thereby barring this lawsuit. This issue arose in a motion for summary judgment, and this court is reviewing a decision affirming the summary judgment. Therefore the standard of review is the same as the standard used by the circuit court to determine whether to grant the motion for summary judgment. . . . If an exculpatory contract is found to be invalid on its face, the defendant’s motion for summary judgment will be denied. . . . Thus, this court must determine whether, as a matter of law, the form was a valid exculpatory contract that bars the plaintiff’s claim.

We conclude that the form at issue here is an exculpatory contract void as against public policy. As is often the case, neither a prior decision of the court nor the facts of a prior case is directly on point. An examination of the principles underlying the determination of the validity of exculpatory contracts leads us to the conclusion that the form is an unenforceable exculpatory contract due to a combination of three factors. None of these factors alone would necessarily invalidate the release; however, taken together they demand the conclusion that the contract is void as against public policy. First, the contract serves two purposes, not clearly identified or distinguished. Second, the release is extremely broad and all-inclusive. Third, the release is in a standardized agreement printed on the Company’s form, offering little or no opportunity for negotiation or free and voluntary bargaining.

The facts relevant to our determination of the validity of the form as an exculpatory contract are not in dispute. In February of 1990, Leo Richards was hired by Monkem Company as an over-the-road truck driver. Shortly thereafter, the plaintiff and her husband discussed the possibility of her riding as a passenger with him. Before the plaintiff could accompany her husband, however, Monkem Company required that she sign a form entitled “Passenger Authorization,” and she did so on or about May 22, 1990.

The “Passenger Authorization” form used by Monkem Company appears to have two purposes. First, it served as Monkem Company’s authorization to the passenger to ride in a company truck. Second, it serves as a passenger’s general release of all claims against the Company. The language of release attempts to transform the “Passenger Authorization” form into an exculpatory contract relieving Monkem Company and all of its affiliated companies, partnerships, individuals and corporations (as well as others) from any and all liability for harm to the person signing the form. . . .

On June 14, 1990, the plaintiff accompanied her husband on one of his scheduled trips. When the truck, negotiating a left curve, overturned, the plaintiff was pinned inside the vehicle. The injuries she sustained as a result of this accident are the basis for the current lawsuit.

The principles applicable to the determination of the validity of exculpatory contracts were recently set forth by the court in Dobratz v. Thomson . . . , which incorporated, explained, and elaborated on the principles set forth in several earlier cases. . . .

We now reiterate several of the principles from these cases which are relevant to the case at bar. Exculpatory contracts are not favored by the law because they tend to allow conduct below the acceptable standard of care applicable to the activity. Exculpatory contracts are not, however, automatically void and unenforceable as contrary to public policy. . . . Rather, a court closely examines whether such agreements violate public policy and construes them strictly against the party seeking to rely on them. . . .

In determining whether an exculpatory agreement violates public policy and is therefore void, courts recognize that public policy is not an easily defined concept. The concept embodies the common sense and common conscience of the community. Public policy is that principle of law under which “freedom of contract is restricted by law for the good of the community.” . . . An exculpatory agreement will be held to contravene public policy if it is so broad “that it would absolve [the defendant] from any injury to the [plaintiff] for any reason.” . . .

In reviewing an exculpatory agreement for violation of public policy, a court attempts to accommodate the tension between the principles of contract and tort law that are inherent in such an agreement. The law of contract is based on the principle of freedom of contract; people should be able to manage their own affairs without government interference. Freedom of contract is premised on a bargain freely and voluntarily made through a bargaining process that has integrity. Contract law protects justifiable expectations and the security of transactions. The law of torts is directed toward compensation of individuals for injuries resulting from the unreasonable conduct of another. Tort law also serves the “prophylactic” purpose of preventing future harm; tort law seeks to deter certain conduct by imposing liability for conduct below the acceptable standard of care. . . .

Applying these principles to this case we conclude that the exculpatory contract at issue is void as against public policy. In this case, the public policy “of imposing liability on persons whose conduct creates an unreasonable risk of harm” outweighs the public policy of “freedom of contract.” . . . Accordingly we conclude that it would be contrary to public policy to enforce the exculpatory language in Monkem Company’s “Passenger Authorization” form. A combination of three factors in this case leads us to this conclusion.

First, the contract serves two purposes, not clearly identified or distinguished. As we stated previously, those purposes appear to be: (1) the Company authorizes the passenger to ride in a Company truck, and (2) the passenger releases the Company and others from liability. This dual function, however, is not made clear in the title of the contract; the form is designated merely as a “Passenger Authorization.” The written terms clearly state that the document is a release of liability. A person signing a document has a duty to read it and know the contents of the writing. . . . Nevertheless it is not reasonably clear to the signer of a form entitled “Passenger Authorization” that the document would in reality be the passenger’s agreement to release the Company (and others) from liability. Rather the title “Passenger Authorization” implies that only the Company is making the concessions and only the Company is bound. We conclude that in this case the release should have been conspicuously labelled as such to put the person signing the form on notice. Moreover, to prevent confusion under these circumstances, the passenger’s release of the Company from liability should have been carefully identified and distinguished from the Company’s authorization for a passenger to ride along. Identifying and distinguishing clearly between those two contractual arrangements could have provided important protection against a signatory’s inadvertent agreement to the release.

Second, the release is extremely broad and allinclusive. It purports to excuse intentional, reckless, and negligent conduct not only by the Company but by another entity (Joplin Hiway, Inc.) and by all affiliated, associated, or subsidiary companies, partnerships, individuals, or corporations, and all other persons, firms or corporations. Further, although the passenger’s release is combined with the Company’s authorization to the plaintiff to ride in a specified Company vehicle during a specified period, the release does not refer to an injury the plaintiff may sustain while riding as a passenger in the specified Company vehicle during the specified time period. It purports to release the Company from liability for any and all injury to the plaintiff while the plaintiff is a passenger in any vehicle (not necessarily one owned by the Company) at any time and while the plaintiff is on any and all Company property at any time. The release, unlike the authorization, is not limited to a specified vehicle or to a specified time period. Had the Company intended that it be released from liability to the plaintiff while she was riding with her husband in the Company truck during the period the Company authorized, that is not what the release says. The very breadth of the release raises questions about its meaning and demonstrates its one-sidedness; it is unreasonably favorable to the Company, the drafter of the contract. . . .

Third, this contract is a standardized agreement on the Company’s printed form which offers little or no opportunity for negotiation or free and voluntary bargaining. According to the record, when the Company forwarded the form to the plaintiff its cover letter did not advise her that the document was a release of all claims and did not advise her of the legal significance attached to her signing of the document. The employee handbook advised employees that Company authorization was needed for a passenger to ride along but did not advise employees that the passenger would have to release all claims against the Company.

The fact that a release is printed in a standardized form is not, by itself, enough to invalidate it. However, the plaintiff’s lack of an opportunity for discussing and negotiating the contract is significant when considered with the breadth of the release. If her plans to ride with her husband were to go forward, the plaintiff simply had to adhere to the terms of the written form. While the Company had the time and resources to draft the provisions and plan their effect, the plaintiff did not. Had the plaintiff been afforded the opportunity to negotiate a release, she might have declined to release the Company from liability for intentional or reckless actions or the driver’s negligence, or from liability for its defective equipment. Because the Company probably derives some benefit from allowing family members to join drivers on the road, such as improving employee morale, the Company might not necessarily have rejected such proposals out of hand.

As we have said, none of these factors alone would necessarily have warranted invalidation of the exculpatory contract. Under the circumstances in the case at bar, a combination of these factors demonstrate that adherence to the principle of freedom of contract is not heavily favored. The principle of tort law, to compensate persons for injuries resulting from unreasonable conduct of another, prevails. Accordingly, we conclude that the document contravenes public policy and is void and unenforceable. The decision of the court of appeals is reversed and the cause remanded for proceedings not inconsistent with this opinion.

By the Court. — The decision of the court of appeals is reversed and the cause remanded to the circuit court. . . .