An exculpatory clause is language in an agreement which relieves one or both parties from liability under certain conditions. A common example is a parking lot ticket stub that states that the parking lot owner is not responsible for theft or damage to the vehicle. Exculpatory clauses are not automatically enforced by courts and can be voided if determined to be unreasonable or if parties to the contract did not have equal bargaining power.
Recommendation: Exculpatory clauses, as with hold harmless and indemnity provisions, inserted into agreements by vendors can have negative consequences for an association. Accordingly, boards of directors should have all contracts reviewed by legal counsel.
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