Guest Column - August 2010
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Contracts

Muscling Up an Effective Contract

By David S. Blatteis, Esq. and Andrew D. Linden, Esq.


The trial court found in favor of the defendant, reasoning that the exculpatory agreement protected the defendant from liability. The trial court stated that the defendant had no duty to the plaintiff and it was no consequence that the plaintiff failed to read the agreement. The plaintiff appealed, asserting that the exculpatory agreement was contrary to public policy and unenforceable. The plaintiff further claimed that the defendant's actions were grossly negligent and, therefore, the defendant could not disclaim liability from such acts.

The Appellate Division began its review by noting that a fitness center generally owes a duty of reasonable care to invitees and must provide a safe environment to conduct the business. A fitness center and its employees are in a better position than its members to ensure that equipment is provided in safe condition. A fitness center also has a duty to correct and warn its members about any dangerous conditions.

Recognizing a fitness center's duties, the court addressed whether the defendant's exculpatory agreement would shield it from liability. The court began its analysis by describing the physical attributes of the exculpatory agreement. The agreement was a two-page document that was one of several pre-printed forms. The top of the first page displayed the words "Waiver & Release Form" in larger font. It contained only three phrases in bold-faced font and there were no places for an individual to initial particular sections of the form, except for the signature line which the plaintiff admitted to signing.

The court then explained that because the exculpatory agreement was non-negotiable and those who did not sign it could not use the gym's facilities, the agreement constituted a contract of adhesion. Although the agreement was a contract of adhesion, that fact alone did not make the agreement unenforceable. A court typically will consider four factors when determining whether the adhesion contract is "unconscionable" and, therefore, unenforceable: the subject of the contract; the parties' bargaining power; the degree of economic compulsion motivating the adhering party; and the public interest implicated by the contract. A court also will consider the procedure that led to the execution of the contract.

In this case, the court had reservations concerning the "procedural context of the plaintiff's execution of the exculpatory agreement;" more specifically, the defendant failed to explain the terms of the agreement to the plaintiff at the time she signed it, the agreement lacked examples of events that would have helped her understand its scope and the agreement did not have any spaces to initial the form. Nevertheless, the court found that the agreement was not unconscionable; this was not a situation of manifestly unequal bargaining power. The plaintiff could have found a different gym, or another place to exercise. Additionally, she could have left with the agreement and had it reviewed by counsel.

Finding that the agreement was not inherently unenforceable, the court then considered the specific provisions of the agreement. The agreement's first paragraph primarily concerned personal health, and the general risks associated with any form of strenuous exercise. For example, the agreement stated that: "[I]f you engage in any physical exercise or activity or use any club amenity . . . you do so entirely at your own risk." The court explained that such provisions informed a prospective member that the fitness center did not guarantee a patron's medical health.

The next paragraph went beyond health and physical fitness, extending the disclaimer of liability to the safety of the gym's equipment, training and instruction from the gym's employees, and safety of the premises. The defendant specifically relied on the provision providing a waiver and release for "the sudden and unforeseen malfunctioning of any equipment [and] our instruction, training or supervision . . . ."

The Appellate Division was clear that "there is no doubt that the exculpatory agreement, in several respects, covers the substance of the plaintiff's bike accident." The agreement's language adequately informed a prospective member about the risks one assumed by using the fitness center's facilities, including a "spin" bike. Therefore, the court had to determine whether the agreement was legally enforceable, and whether it covered the defendant's actions, if any, that went beyond ordinary negligence.