Sidler, B.

English

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Chicago-Kent Law ReviewVolume 42 | Issue 1 Article 8April 1965Contracts - Exculpatory Clause - ContractualExemption from Liability for Negligence HeldAbsolute DefenseB. SidlerFollow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreviewPart of the Law CommonsThis Notes is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion inChicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contactdginsberg@kentlaw.iit.edu.Recommended CitationB. Sidler, Contracts - Exculpatory Clause - Contractual Exemption from Liability for Negligence Held Absolute Defense, 42 Chi.-Kent L. Rev.82 (1965).Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol42/iss1/8CHICAGO-KENT LAW REVIEWtions wherein the injured party was actually aware that some injury hadbeen sustained before the end of the statutory period. On that basis theyare to be distinguished from the Mosby case.Therefore, Mosby v. Michael Reese Hospital was a case of first impres-sion at the appellate level in the Illinois Courts. As such, it is bound toserve as precedent for later hearings of similar cases in the state, and it islikely that under the existing statutory law of Illinois the result will be thesame in subsequent cases. However, Mosby did not make any changes in theexisting case law of the state; it merely extended that rule which alreadyprevailed.It is important to note, however, that the court was not pleased with theopinion it felt constrained to hand down in the principal case. JusticeDempsey, speaking for the court, expressed the opinion that a more equit-able result could have been obtained by commencing the statute of limita-tions at such time as the plaintiff became aware of the malpractice. Thatthe court felt this to be beyond the scope of its power, however, was expressedby Justice Dempsey's final comment that, "Relief must come from the legis-lature and not from the courts."31In Mosby, while the resulting decision was harsh on the plaintiff, it wasthe only decision at which the court could arrive. The "end of treatment"rule could not have been employed as Mrs. Mosby had not remained withinthe care of the hospital long enough to bring her action within the statutorytime period under the provisions of that rule. And, for the court to allowthe suit on the ground that the plaintiff was merely ignorant of her causeof action would have been to flout the statute, as interpreted by this writer,by not setting it in motion when the cause of action accrued. Therefore, thecourt was compelled to apply the rule which starts the statute of limitationsimmediately upon the infliction of the injury. In this instance that wasimmediately upon the completion of the operation.Until there is a legislative reform, the courts shall continue to beobliged to issue judgments which are inequitable in cases where the plain-tiff, though not defrauded by the plaintiff, remained ignorant through nofault of his own, that a cause of action existed for him.E. WM. BEDRAVACONTRACTs-EXCULPATORY CLAUSE-CONTRACTUAL EXEMPTION FROMLIABILITY FOR NEGLIGENCE HELD ABSOLUTE DEFENSE-The case of Owen v.Vic Tanny's Enterprises, 48 Ill. App. 2d 344, 199 N.E.2d 280 (1st Dist. 1964),provides an opportunity to reexamine the question of the validity of con-tractual clauses which purport to exempt one of the contracting partiesfrom the legal consequences of his own negligence.3' Mosby v. Michael Reese Hospital, 49 Ill. App. 2d 336, 342, 199 N.E.2d 633, 636(1st Dist. 1964).DISCUSSION OF RECENT DECISIONSThe Owen case is almost identical to that of Ciofalo v. Vic TannyGyms,1 a New York case, decided in 1961. In both cases, the plaintiff was amember of the defendant's gymnasium, and sought to recover for personalinjuries resulting from a fall on the slippery floor near the defendant's swim-ming pool. In each case, as a condition of membership, the plaintiff hadsigned a membership contract which contained an exculpatory clause read-ing in part as follows:Member, in attending said gymnasium and using the facilities andequipment therein, does so at his own risk. Tanny shall not beliable for any damages arising from personal injuries sustained byMember in, on or about the premises of any of said gymnasiums.Member assumes full responsibility for any injuries or damages...and he does hereby fully and forever discharge Tanny . . . fromany and all claims . . . resulting from or arising out of Member'suse or intended use of the said gymnasium ... 2The Illinois Appellate Court, First District, held in Owen, as did theNew York Court of Appeals in Ciofalo, that the exculpatory clause includedin the membership contract was valid and effectively prevented the plain-tiff's recovery. In so holding, the court pointed out that exculpatory clausesare to be construed strictly and, in cases of ambiguity or lack of clarity, areto be construed against the party seeking to exculpate itself-which isalmost invariably also the party responsible for drafting the agreement.3However, the court found that the language used in the Vic Tanny member-ship agreement was clear, explicit, and unequivocal.4Since the court found no problem in the construction or interpretationof the exculpatory clause, it was forced to decide the question of its validity.In so doing, it relied primarily on two earlier Illinois decisions in whichthe validity of exculpatory clauses in leases had been upheld.In the first of these cases, Jackson v. First National Bank,5 the IllinoisSupreme Court held that contracts by which one seeks to avoid the legalconsequences of his negligent behavior are generally enforceable in Illinois,unless (1) it would be against the settled public policy of the State to enforcethem, or (2) there is something in the social relationship of the partiesmilitating against upholding the agreement.These criteria are neither so definite nor so independent as they may atfirst appear. Very frequently, the social relationship of the parties deter-mines the nature of the public policy with respect to them. However, an1 10 N.Y.2d 294, 177 N.E.2d 925 (1961). In both cases, the locale of the accident, thenature of the injury, the language of the membership agreement and the identity of thedefendant were the same.2 Owen v. Vic Tanny's Enterprises, 48 111. App. 2d 344, 345, 199 N.E.2d 280, 281(lst Dist. 1964).3 Ibid. The court cited Moss v. Hunding, 27 Ill. App. 2d 189, 169 N.E.2d 396 (lstDist. 1960).4 48 I1. App. 2d at 347, 199 N.E.2d at 281.5 415 Ill. 453, 114 N.E.2d 721 (1953).CHICAGO-KENT LAW REVIEWexamination of cases suggests that the criterion of "settled public policy" isthe more conservative, and the criterion of "social relationship" is the moreliberal. In other words, if a court can be shown by sufficient clear precedentthat exculpatory clauses have been invalidated in situations similar to theone in question, or, alternatively, if a legislative enactment has declaredthem to be contrary to the public policy of the State, as in Illinois withrespect to leases,6 the court may well hold the clause to be invalid as con-trary to settled public policy.In the case of O'Callaghan v. Waller & Beckwith Realty,7 the secondcase relied upon by the court in deciding Owen, the Illinois Supreme Courtreviewed a variety of situations in which the settled public policy of theState had been used to invalidate exculpatory clauses. These includedcontracts between common carriers and shippers,8 regulated public utilitiesand their customers,9 and employers and employees.' 0 These categoriescorrespond to those which the Restatement of Contracts includes as agree-ments in which exculpatory clauses are illegal," although the Restatementalso includes a provision that "a bargain by a common carrier or otherperson charged with a duty of public service limiting . .. damages ... islawful."12The reasons given for the invalidation of exculpatory provisions onpublic policy grounds are varied. They include, among others, the conceptthat certain relationships create duties between the parties above andbeyond the duties expressed in the contract between them, or, as expressedby an Illinois appellate court, "One cannot exempt himself by contract fromnegligence in cases of public duty imposed by law."' 13 The California CivilCode expresses the same idea in these words:Anyone may waive the advantage of a law intended solely for hisbenefit. But a law established for a public reason cannot be contra-vened by a private agreement. 14The concept of public duty imposed by law has been applied to com-6 Ill. Rev. Stat. ch. 80, § 15a (1963). "Every covenant, agreement or understandingin . . . connection with . . . any lease of real property ...exempting the lessor fromliability for damages for injuries . . . caused by or resulting from the negligence of thelessor ... shall be deemed to be void as against public policy and wholly unenforceable."7 15 Ill. 2d 436, 155 N.E.2d 545 (1958).8 Crane v. Railway Express, 369 Ill. 110, 15 N.E.2d 866 (1938); Chicago and N.W. Ry.v. Calumet Stock Farm, 194 Ill. 9, 61 N.E. 1095 (1901); Chicago and N.W. Ry. v. Chapman,133 Ill. 96, 24 N.E. 417 (1890).) Tyler, Ulman & Co. v. Western Union Tele., 60 Ill. 421 (1871).10 Campbell v. Chicago, R.I. & P. Ry., 243 Ill. 620, 90 N.E. 1106 (1910).11 Restatement, Contracts § 575 (1932).12 Ibid.13 Cerny Pickas & Co. v. C. R. Jahn Co., 347 Il1. App. 379, 106 N.E.2d 828 (1st Dist.1952).14 Cal. Civ. Code § 3513.DISCUSSION OF RECENT DECISIONSmon carriers,15 professional bailees, 16 public utilities, 7 innkeepers,18 andbanks.19 A fairly certain yardstick in years past was whether or not a businesswas sufficiently important to the public welfare to qualify for regulation.If so, it would be denied the right of exculpation, or it would be permittedthat right only under certain fairly well defined circumstances, usuallyincluding regulations permitting merely limitation of liability.In the background in decisions concerning common carriers and publicutilities, and clearly present in decisions involving the landlord-tenantrelationship, was the criterion of the degree of monopoly in the market.If the court found monopoly, the clause was invalidated. If it did not, theclause was upheld. For example, in O'Callaghan the court, upholding thevalidity of an exculpatory clause in a lease, said:The relationship of landlord and tenant does not have the monop-olistic characteristics that have characterized some other relationswith respect to which exculpatory clauses have been held invalid.20Since "settled public policy" solves the problem for those engaged inpublic callings, for regulated businesses, for enterprises which are clearlymonopolies, for employer-employee situations, and in Illinois-by statute-for landlord-tenant contracts, we are left with a variety of miscellaneoussituations, of which Owen v. Vic Tanny is one, to which Illinois courtsapply the criterion of "social relationship of the parties."Contractual agreements of the kind for which public policy has notbecome settled, either by statute or case law, arise under a great manyvaried circumstances. For example, there is the case of the inexperiencedhorseback rider who, after explaining her need for a gentle horse, is given acontract with an exculpatory clause-and a wild horse.21 There is also thecase of the charity patient who signed an exculpatory agreement in order tosecure emergency medical treatment at a hospital operated by the Universityof California,22 and there is the case of the woman who signed an agreementwith such a clause in order to park her car.23 In all three of these cases, the15 Santa Fe P. & P. Ry. v. Grant Bros. Constr. Co., 228 U.S. 177, 33 Sup. Ct. 474 (1912).16 Miller's Mutual Fire Ins. Ass'n v. Parker, 234 N.C. 20, 65 S.E.2d 341 (1951); Palottov. Hanna Parking Garage Co., 68 N.E.2d 170 (Ohio App. 1946); Gulf Transit Co. v. UnitedStates, 43 Ct. Cl. 183 (1908).17 Denver Consol. Elec. Co. v. Lawrence, 31 Colo. 301, 73 Pac. 39 (1903); Emery v.Rochester Tele. Corp., 156 Misc. 562, 282 N.Y. Supp. 280 (Sup. Ct. 1935), aff'd, 246 App.Div. 787, 286 N.Y. Supp. 439 (1935).18 Oklahoma City Hotel Co. v. Levine, 189 Okla. 331, 116 P.2d 997 (1941).19 Thomas v. First Nat'l Bank of Scranton, 376 Pa. 181, 101 A.2d 910 (1954); Speroffv. First Central Trust Co., 149 Ohio St. 415, 79 N.E.2d 119 (1948).20 O'Callaghan v. Waller & Beckwith Realty Co., 15 Ill. 2d 436, 440, 155 N.E.2d 545,546 (1948).21 Palmquist v. Mercer, 263 P.2d 341 (Cal. App. 1954), modified, 43 Cal. 2d 92, 272P.2d 26 (1954).22 Tunkl v. Regents of Univ. of Calif., 23 Cal. Rptr. 328 (1962), rev'd, 32 Cal. Rptr.33, 383 P.2d 441 (1963).28 Miller's Mutual Fire Ins. Ass'n v. Parker, 234 N.C. 20, 65 S.E.2d 341 (1951).CHICAGO-KENT LAW REVIEWexculpatory clause was declared void; in the first on the theory that thecontract was fraudulent and in the second and third because of the relativebargaining power of the parties. In 1955, the United States Supreme Courtdeclared void such a clause in a contract between a tugboat company andthe owner of a number of barges. This decision also rested on the relativebargaining power principle.2 4In cases involving hairdressers and their customers,2 5 toboggan slidesand their customers, 26 laundries and their customers, 27 and automobilerental agencies and their customers,28 the courts in a number of states haveupheld exculpatory clauses either on the theory that the plaintiff couldsecure the goods or services elsewhere (absence of monopoly in the market)or that he really did not need them anyway (a purely voluntary, privateagreement toward which public policy is neutral).The Court of Appeals of New York and the Appellate Court of Illinoisdetermined in the Vic Tanny cases that:... [T]here is no special legal relationship and no overriding pub-lic interest which demand that this contract provision . . . berendered ineffectual. Defendant . . . was under no obligation orlegal duty to accept plaintiff as a "member" or patron. Having con-sented to do so, it had the right to insist upon such terms as itdeemed appropriate. Plaintiff, on the other hand, was not requiredto assent to unacceptable terms or to give up a valuable legalright.29This language suggests that the court will consider (1) whether or notthe defendant has a legal duty to accept the plaintiff as a customer; (2) theconverse, whether or not the plaintiff would lose a valuable legal right bydeclining to sign an agreement which contained an exculpatory clause.The type of social relationship which might, in an Illinois court,invalidate an exculpatory clause is implied in another case in the follow-ing language:There is no rule of public policy which makes such provisions in-effective, particularly when the obligee is under no disadvantageby reason of confidential relationship, disability, inexperience orthe necessities of the situation.30If the people of the State of Illinois feel that agreements of this typeare undesirable as a matter of policy, they will apparently find it necessary24 Bisso v. Inland Waterways Corp., 349 U.S. 85, 75 Sup. Ct. 629 (1955), discussedin 42 Il. B.J. 229 (Nov. 1955).25 Barrett v. Corrigan, 302 Mass. 33, 18 N.E.2d 369 (1938).26 Broderick v. Ranier Nat'l Park Co., 187 Wash. 399, 60 P.2d 234 (1936).27 Manhattan Co. v. Goldberg, 38 A.2d 172 (Mun. Ct. App. D.C. 1944).28 Ostando v. U-Dryvit Auto Rental Co., 296 Mass. 439, 6 N.E.2d 346 (1937).29 10 N.Y.2d 294, 177 N.E.2d 925, 926 (1961).30 Charles Laebman Co. v. Hercules Powder Co., 79 F. Supp. 206, 207 (E.D. Pa. 1948).DISCUSSION OF RECENT DECISIONSto secure legislation to that end. The courts of this State are reluctant toinvalidate such provisions except in those situations in which statute orprecedent gives them no alternative.MRS. B. SIDLERTRADE REGULATION-TRADE SECRETS-Ex-EMPLOYEE'S USE OF FORMEREMPLOYER'S TRADE SECRET MAY BE ENJOINED--In the case of Schulenburgv. Signatrol, Inc., 50 Ill. App. 2d 402, 200 N.E.2d 615 (4th Dist. 1964), theAppellate Court of Illinois was confronted with the question of whetheran ex-employee's use of a former employer's trade secret constituted unfaircompetition so as to necessitate the issuance of an injunction.The plaintiff purchased plans for producing electrical flashers' fromhis previous employer in 1945 at a cost of under three thousand dollars,2and began manufacturing and selling these devices. The four defendantshad been employees of plaintiff for many years (two of the defendants wereemployed nearly twenty years) during which time they learned the processfor manufacturing such flashers. In 1959, one defendant, having disagreedwith the plaintiff over company policies, decided to terminate his employ-ment, form his own company and compete with the plaintiff in thebusiness of manufacturing flashers. The remaining defendants terminatedtheir employment with the plaintiff and joined the competing firm. Theplaintiff filed suit in October, 1959, seeking to enjoin the defendants onthe basis of unfair competition from using the plaintiff's alleged tradesecret. The Circuit Court granted an injunction restraining defendantsfrom the further manufacture and sale of competing flashers.On appeal, the plaintiff alleged that its manufacturing know-how wasa trade secret which had been imparted in confidence to the defendantswhile employees, and that the defendants had abused that confidence byusing the trade secret in manufacturing a competing product to the plain-tiff's financial detriment. The defendants contended that the plaintiff wasnot possessed of a trade secret and that the defendants used only generalskills and knowledge of the plaintiff's operation acquired through em-ployment. The Appellate Court affirmed the lower court's judgment, find-ing that the plaintiff's blueprinted know-how qualified as a trade secret,8that the defendants copied and memorized the plaintiff's trade secret, andI A mechanical device for automatically making and breaking electrical circuits andthereby causing lights of signs to alternately flash on and off in various patterns. Brieffor Appellees, p. 2, Schulenburg v. Signatrol, Inc., 50 Il1. App. 2d 402, 200 N.E.2d 615 (4thDist. 1964).2 The cost of developing information is a factor to consider in determining whetheror not a trade secret exists. Restatement, Torts § 757, comment b (1939).3 Plaintiffs considered their know-how a trade secret and attempted to keep itconfidential; the secret was disclosed to defendants as select employees; the secret was notdivulged or abandoned by marketing the finished product; and the secret was notconnected with business. Schulenburg v. Signatrol, Inc., supra note 1.

Contracts - Exculpatory Clause - Contractual Exemption from Liability for Negligence Held Absolute Defense

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Contracts - Exculpatory Clause - Contractual Exemption from Liability for Negligence Held Absolute Defense

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