Business Degree Certification Practice Test

Which statement is true about an exculpatory clause?

1. It excuses one party from liability for their own tortious conduct

2. Courts may nullify it if one party has superior bargaining power

3. It may be unenforceable for unconscionability

4. All of the above are true

The correct answer is: All of the above are true

An exculpatory clause is a provision in a contract that seeks to relieve one party from liability for certain acts or omissions, particularly in relation to negligence or other tortious conduct. The first statement is true because such clauses do indeed excuse one party from liability for their own tortious conduct under specific circumstances, as long as that liability is explicitly covered in the contractual terms. The second statement holds that courts may nullify an exculpatory clause if there is a significant disparity in bargaining power between the parties. This is rooted in the principle of fairness; if one party had no real choice but to accept the terms presented by another with more power or influence, a court may deem the clause unenforceable to prevent unjust outcomes. The third statement pertains to the concept of unconscionability, which refers to contracts that are overly one-sided or oppressive in terms of the obligations imposed. If a court finds that an exculpatory clause is unconscionable, it can determine the clause is unenforceable. Thus, all of these statements accurately describe various aspects and considerations regarding exculpatory clauses, making the choice that claims all are true the correct one. Each element illustrates the complexities involved in the enforceability of these clauses in