The Enforceability of Exculpatory Clauses in Commercial Leases in Pennsylvania

January 18, 2014

A recent decision by the Philadelphia Court of Common Pleas is useful in illustrating Pennsylvania’s approach to the enforcement of exculpatory clauses in commercial leases. In Eagle Truck Serv’s v. Wojdalski, Nos. 00546 and 00213, 2013 Phila Ct. Com. Pl. LEXIS 376 (C.P. Philadelphia Cty. Dec. 23, 2013), two tenants brought suit against their landlord after their leased premises were damaged by a fire. The tenants alleged that the landlord, who was responsible for roof repairs under the lease, had been negligent in hiring the roofing contractor who caused the fire. As a defense to the tenants’ claims, the landlord sought to invoke an exculpatory clause in the leases. In relevant part, the exculpatory clause, which was contained in the “Indemnification” provision of the lease, stated: “To the extent of the law, Lessor shall not be liable for any damage or injury to Lessee, or any other person, or to any property, occurring on the demised premises or any part thereof.” The court concluded that this language was ambiguous and therefore did not absolve the landlord from responsibility under Pennsylvania law.

The court began its analysis by noting the standard under which an exculpatory clause is evaluated under Pennsylvania law. For an exculpatory clause to be enforceable, “the clause must not ‘contravene’ public policy, the contract must be between persons and relate to their private affairs, and, the contract must not be a contract of adhesion.” Because the lease was a bargained-for agreement between private parties that did not directly implicate any interest of the public at large, the threshold requirement for validity was met. As the court proceeded to note, however, the fact that the clause is valid does not necessarily mean that it is enforceable as a matter of contract law. Citing the Pennsylvania Supreme Court’s decision in Topp Copy Products Inc. v. Singletary, 626 A.2d 98, 99 (Pa. 1993), the court held that a four-prong test must be satisfied before the clause will be enforced. Essentially, that test requires the party seeking to enforce the clause to prove that the contract language unequivocally establishes the parties’ intent to relieve him or her from liability, with any ambiguities to be resolved in favor of the releasing party. Applying this test to the clause in question, the court determined that the term “demised premises,” as used in the clause, was ambiguous. Specifically, the court concluded that it was not clear whether the term included damage or injury to the roof, which the landlord was responsible for repairing under the lease.

As the court’s approach illustrates, parties to commercial leases must be very specific with respect to their intentions when they include an exculpatory clause in a commercial lease, especially where the lease elsewhere allocates responsibility between the landlord and tenant for certain repairs. In this scenario, the court most likely will not read the exculpatory clause in isolation, but will interpret it in light of the repair provisions in the lease. This approach was actually first taken by the Pennsylvania Superior Court in Richard’s 5 & 10, Inc. v. Brooks Harvey Realty Investors, 399 A.2d 1103 (Pa. Super. 1979), which, interestingly, was not cited by the court in Wojdalski. In that factually similar case, the court held that the exculpatory clause at issue was ambiguous because it was not clear whether the damage to the roof was within the scope of the clause, particularly since the lease contained a specific provision requiring the landlord to make repairs to the roof. But see Princeton Sportswear Corp. v. H & M Associates, 507 A.2d 339 (Pa. 1986) (enforcing exculpatory clause in commercial lease that specifically referenced the “demised premises” and types of damages to be excluded from liability). Considered as a whole, these cases tend to suggest that drafting an enforceable exculpatory clause in a commercial lease is more art than science. The key, however, is making sure that the parties’ intentions are clearly expressed in light of other potentially conflicting provisions in the lease.

Recent Insights