A Waiver of Liability: Will it stand up in Court?

A waiver and release of liability, properly drafted and brought to the attention of the signor, may absolve a defendant from liability. Earlier this year, the Ontario Superior Court of Justice dismissed the case of Isildar v. Kanata Dive Supply, [2008] O.J. No. 2406, on the grounds that the deceased had signed a waiver of liability prior to embarking on a scuba diving certification program and that such release was sufficient to exempt the defendants from liability despite their negligent acts.

It is a principle of contract law that where a party signs a document which he knows affects his legal rights, they will be bound by it even if the party did not read or understand that document, so long as there was no fraud or misrepresentation.

However, the courts have also determined that in obtaining a person’s agreement to an exclusion of liability, the party must take reasonable steps to bring the exclusion clause to the other party’s attention. What will be considered reasonable will depend on factors such as normal expectations in a contract of such nature, the length and format of the contract, and the time available for reading and understanding it.

In Isildar, the court adopted a three-step approach for assessing a release of liability clause. First, the court looks at whether the plaintiff knew that he was signing a release of liability and whether reasonable steps were taken to bring the release to the attention of the signor. For instance, a waiver written in small print on a registration form would probably not be sufficient.

Secondly, the release is examined for its scope and will only protect a defendant if it is worded broadly enough to cover the harmful conduct of the defendant. In Isildar, the release was apparently very broad, specifically referring to any negligence on the part of the defendants.

A third and more problematic question is whether the waiver should not be enforced because it is unconscionable. A waiver and release of liability will be unconscionable if it is sufficiently divergent from community standards of commercial morality.

A further ground for rejecting a waiver is that of fundamental breach, where the effect of the breach is to deprive the other party of substantially the whole benefit that the parties intended to be obtained from the contract.

The concepts of unconscionability and fundamental breach appear to introduce uncertainty into the law of releases; however the decision in Isildar suggests that it will be difficult to overturn an otherwise valid release on either of these grounds. It would therefore be prudent for businesses and consumers alike to pay careful attention to any such exclusion of liability clauses.

This article was originally published in the December 16, 2008 edition of the Ottawa Business Journal.