Liverant, Spencer R.

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Penn State Dickinson Law: IDEAS

Volume 37 Issue 1 Dickinson Law Review - Volume 37, 1932-1933 11-1-1932 Validity of Contracts Limiting Liability for Negligence as Between Private Individuals Spencer R. Liverant Follow this and additional works at: https://ideas.dickinsonlaw.psu.edu/dlra Recommended Citation Spencer R. Liverant, Validity of Contracts Limiting Liability for Negligence as Between Private Individuals, 37 DICK. L. REV. 71 (1932). Available at: https://ideas.dickinsonlaw.psu.edu/dlra/vol37/iss1/6 This Article is brought to you for free and open access by the Law Reviews at Dickinson Law IDEAS. It has been accepted for inclusion in Dickinson Law Review by an authorized editor of Dickinson Law IDEAS. For more information, please contact lja10@psu.edu. DICKINSON LAW REVIEWIt is for these reasons that incontrovertible physicalfacts should be supported by some means of credible evi-dence as pointed out in (3) above.Nicholas UnkovicVALIDITY OF CONTRACTS LIMITING LIABILITYFOR NEGLIGENCE AS BETWEEN PRIVATEINDIVIDUALSThe decisions of -Pennsylvania as to contracts gen-erally which limit liability for negligence are apparentlymuch in conflict. The law is well settled that carriers andinnkeepers cannot so contract., The reason is sound.These are businesses so affected with a public interest thatthe protection of public safety and of public propertydemand this safeguard. The individual does not deal withthem on a basis of equality. Use of them is oftentimes anecessity. Consequently, he cannot afford to haggle. Heprefers rather to accept any terms, often indeed (especiallywhere the contract is created by notice) without knowingwhat contract he does make.Where railroads have contracted, however, not in theircharacter as common carriers but as individuals, a differ-ent conclusion has been reached. Thus, contracts by arailroad not to be held liable for fires negligently caused onpremi-ses leased to individuals along the right of way oralong purely private sidings, have been upheld,2 on theground that "the railroad owes no duty to the public inconnection therewith". 3A similar result was reached where mining companiescontracted not to be held liable for collapse of surface sup-'Grogan v. Express Co., 114 Pa. 523 (1887); Express Co. v. Sands,55 Pa. 140 (1867); Hoyt v. Clinton Hotel Co., 35 Pa. Super Ct. 97(1907).2Rundall & Co. v. R. R. Co., 254 Pa. 529 (1916); Stoneboro v. R.R. Co., 238 Pa. 289 (1912).gStoneboro v. R. R. Co., 238 Pa. 289 (1912).DICKINSON LAW REVIEWport, though due to the company's negligence.4  And thesame result was reached in landlord and tenant cases,where the lessee agreed he would not hold the lessor liable"for loss of property however occurring" from lessor's oc-cupancy above him. 5  In Rose v. Finance Co.,6 Magill, J.said:"We have been referred to no case and in our ex-amination have found none, in which it has been heldthat such a contract between persons conducting astrictly private business and relating to their personaland private affairs, is opposed to public policy".Moreover, by implication, several times it has beenlaid down that in a purely private transaction, individualscould release themselves from liability for their ownnegligence. 7 In these cases, the courts have construedthe contracts as not covering the situation involved, buthave intimated strongly that the contracts were valid.The statement of Justice Sadler in Schroede' v. Gulf Refin-ing Co.,8 is typical of this line of cases:-"A party may contract for indemnity against theresults flowing from his own acts, but the intent ofboth parties must be clear; precise and unequivocal".Were these the sum total of Pennsylvania decisions,the conclusion would be irrefutable that, except when madeby common carriers and innkeepers, contracts limitingliability for negligence are valid. However, in Lancaster4Atherton v. Coal Co., 267 Pa. 433 (1920); Mahon v. Pa. Coal Co.,274 Pa. 489 (1922); Jordan v. Coal Co., 270 Pa. 216 (1921), and casesthere cited.5Lerner v. Heickler, 89 Pa. Super Ct. 234 (1926); Rose v. FinanceCo., 21 Dist. Ct. 490 (1912); for same conclusion where provisionwas against "any and all" damage for water, see Cannon v. Bresch,160 Atl. 595, (1932), (Pa.), and cases there cited.621 Dist. Ct. 490 (1912).7Schroeder v. Gulf Refining Co., 300 Pa. 406 (1930); CamdenCo. v. Eavenson, 295 Pa. 357 (1928); Perry v. Payne, 217 Pa. 252(1907); Crew v. Bradstreet, 134 Pa. 161 (1890); Duncan v. Dun, 7 W.N. C. 246 (1879); see Cannon v. Bresch, 160 Ati. 595, (1932), (Pa.).8300 Pa. 406 (1930).DICKINSON LAW REVIEWBank v. Smith, in a suit against the bank for negligentlyhanding over the contents of a safe deposit box to thewrong person, the court, first deciding that there was noevidence of a contract limiting liability for negligence,added "We have more than once held that a bailee cannotstipulate against liability for his own negligence".This broad dictum was repeated in several carrier andinnkeeper cases." Also, in Balone v. Heavey," in which agarage-keeper set up a contract limiting liability as a de-fense to a suit charging negligence in permitting an auto-mobile to be stolen, Glass, J., held that "the law in thisstate is well-settled that a bailee cannot stipulate againstliability for his own negligence".RECONCILING THE DECISIONSThe question thus arises whether these latter decisionscan be reconciled with the right-of-way, the mining, thelandlord and tenant, and the implication of the other cases,supra. One distinction is that in those cases where thecontract has been upheld, there is a passage of propertyfrom the indemnitee. Simplified, the situation is this: Xpasses his property to Y for Y's use with the proviso thatsubsequent acts of X in connection therewith shall not ex-pose X to liability for negligence. This, it might be sug-gested, justifies a different rule than where X passes hisproperty to Y for some services to be rendered thereon byY and Y contracts not to be liable in rendering these ser-vices. But such a distinction has no application here.There is no basic difference as regards the validity of con-tracts between leasing one's property with the provisothat the lessor shall not be liable for his negligence in con-nection therewith; and the leasing of one's services withthe same provision.The ground upon which contracts limiting liability for962 Pa. 55 (1869).10Hoyt v. Clinton Hotel Co., supra; Farnham v. Camden R. R.Co., 55 Pa. 53 (1867).1115 D. & C. 437 (1931); affirmed in 103 Pa. Super Ct. 529(1932).DICKINSON LAW REVIEWnegligence have been declared invalid is public policy;12 tomaintain a legal deterrent to negligence that might other-wise become widespread. Applying that test, for example,to the case of the garage-keeper 3 and the railroad rightof way" we find the following:The garage-ma 1 has ample reason to be careful asidefrom his legal liability. He is selling his services to thecommunity. Negligence costs him further business fromthe particular customer and probably from others also.Few men speak as convincingly and as frequently as aninjured one. Moreover, the garageman's negligence in per-mitting the car to be stolen will, at the utmost, result indamage to property only; no life will be endangered. Onthe other hand, where a railroad leases property along itsright of way to an individual, there is no incentive for therailroad to be careful once its legal liability is released. Ithas nothing to lose. Its business will not be harmed bydamage caused the lessee. In addition, fire endangers notonly property but lives also. Thus, there is much morereason for insisting upon the legal liability in the case ofthe railroad than of the garage.There is, however, a valid distinction between thecases where contracts limiting liability for negligence havebeen upheld and those where such contracts have beenheld invalid. It is the difference that exists where a businessof quasi-public character deals with considerable membersof the public as contrasted with a transaction between twoindividuals. Where the contracts have been held invalid,it will be noticed first, that invariably the business is onedealing with a large number of persons; and second, thatnon-liability for negligence really constituted not a par-ticular contract but the condition on which the serviceswere offered to the public. In such a case the public isnot dealing on an equal basis; there is little or no oppor-tunity for choice; and the situation closely approximates22Cases cited in notes 1, 9, 10.13Balone v. Heavey, supra.U'Rundall & Co. v. R. R. Co., supra; Stoneboro v. R. R. Co.,supra.DICKINSON LAW REVIEWthat of carriers, innkeepers and warehousemen. Con-versely, where two individuals deal at arms' length, thereis equality. A clear-cut contract is entered into by bothwith their eyes open, the lesser liability probably beingcompensated with a lesser price. For that reason, thefreedom to contract should not be unnecessarily narrowed.ON PRINCIPLEThe -question remains whether, apart from the deci-sions, all contracts limiting liability for negligence shouldnot be invalid.The freedom of contract is a constitutional rightlimited in some instances by public policy, the right of theState to protect the Common Weal. Thomson, J., in Paynev. National Transit Co.," points out:"Many cases have held, -in substance, that thepower to declare a contract void as being in contraven-tion of public policy is a very delicate power and shouldbe exercised only in cases free from doubt."Decisions relative to contracts limiting liability fornegligence are very sparse in their discussions. For themost part, there is a bald statement that such an agree-ment is contrary to public policy. Evidently, they proceedon the assumption that once legal liability is released,negligence will be tremendously increased. But that con-clusion is based on two false premises:, first, that the onereleasing the other from negligent liability is unable tomake a different contract and preserve the legal safeguard;and second, that those thus released will become negligent,as a matter of course. But, in the first place, the partiesare free to contract otherwise. A party not wishing toassume the risk is free to refuse it. Secondly, at least anequal incentive to the exercise of care is the demandv ofgood business. Damaged goods mean a dissatisfied cus-tomer resulting in loss of business to the negligent party.It is incumbent upon him as much from the business view-point as from the legal viewpoint to exercise due care of15300 Fed. 415 (1921).DICKINSON LAW REVIEWothers' property. Also it is fair to assume that those whowould take undue advantage of such a contract wouldavail little satisfaction in a suit.But why should a party wish to contract away hisliability for negligence? There is ample reason. It maybe the honest desire to save himself the trouble and litiga-tion of flimsy or trumped-up charges of negligence. Theindividual may generally exercise due care since it is goodbusiness to do so, but there is always the possibility of afinical or dishonest customer making unwarranted com-plaints. It is against these instances that such a contractis useful. Because of this such contracts do not neces-sarily tinge of fraud.Consequently, contracts limiting liability for negli-gence as between individuals are valid because as in thewords of Bradly, J., in Railroad Co. v. Lockwood:' 6"If the customer had any real freedom of choice,if he had any reasonable and practicable alternative,and if the employment were not a public one, it couldwith reason be said to be his private affair, and noconcern of the public."A concluding word of warning might not be amiss.The Courts of Pennsylvania have more than once held thatcontracts which limit liability that would otherwise be im-posed are regarded with disfavor and will be construedstrictly.1 7 Therefore, those who contemplate releasingnegligent liability would do well to examine closely thecases where such contracts have been upheld, in additionto particularizing, as far as possible in the contract thesituations sought to be covered.Spencer R. Liverant1617 Wallace 368 (1873)."Cases cited in note 7.

Validity of Contracts Limiting Liability for Negligence as Between Private Individuals

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Validity of Contracts Limiting Liability for Negligence as Between Private Individuals

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