EXCULPATORY CONTRACTS: CUMBERLAND VALLEY CONTRACTORS, INC. V. DEL RIO (SCOKY 1/25/2007)

CUMBERLAND VALLEY CONTRACTORS, INC. V. DEL RIO
BUSINESS:  Exculpatory clauses in contract
2000-SC-000951-DG.pdf
PUBLISHED: REVERSING; MINTON
DATE RENDERED: 1/25/2007

As a general rule, a party cannot contract away liability for damages caused by that party’s failure to comply with a duty imposed by a safety statute.

This case presents the question of whether this general rule applies to void a liability-shifting clause in a contract between parties to a coal mining agreement where one side claims economic damages resulting from the other’s failure to comply with statutory mine-mapping duties presumably imposed to further mine safety.

SCOKY found that the clause was clearly written as part of an arm’s-length transaction between two sophisticated parties who actually shared the statutory mapping duties .  Since there was no apparent gross imbalance of bargaining power, SCOKY saw no reason to invalidate the exculpatory clause, which clearly bars the claims of Cumberland Valley Contractors, Inc ., and its assignee, Del Rio, Inc. and reversed the Court of Appeals.

SCOCKY had recently stated in Hargis v. Baize that an exculpatory contract for exemption from future liability for negligence, whether ordinary or gross, is not invalid per se . . . . However, such contracts are disfavored and are strictly construed against the parties relying upon them. . . . The wording of the release must be so "clear and understandable that an ordinarily prudent and knowledgeable party to it will know what he or she is contracting away; it must be unmistakable ."’

It is noted that exculpatory clauses have been enforced by federal courts applying Kentucky law in regard to personal injuries produced by recreational pursuits on the bases that "the races affected only private interests, that participation was voluntary, that the parties possessed equal bargaining power, and that the races could not continue without such protection from liability." 

This is a contract case, however, and the interpretation and legal effect of a contract is a matter of law.  The trial court’s and Court of Appeals’s construction of statutes is also entitled to no deference on appeal because statutory construction is a matter of law subject to a de novo standard of review.

Summarized by Michael Stevens.

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