Article by Blake D. Morant
This Article proposes that the law governing contracts that limit liability, and perhaps all voluntary transactions, should employ a more accurate, uniform, and balanced methodology to evaluate the enforceability of such agreements. The present framework explicitly tends to emphasize public policy concerns related to paternalism. This emphasis should be clarified and expanded to include an evaluation of the possible benefits provided by such agreements.
Public policy concerns, which presently focus on paternalistic goals, should not be narrowly construed so as to thwart potential agreements that maximize the utility of scarce resources and promote overall efficiency. Public policy considerations must encompass the evaluation of the societal benefit provided by the parties' agreement. The inclusion of these positive, and perhaps implicit, factors that relate to the concept of “public policy” may already constitute an inherent element in the evaluation of indemnity agreements between common carriers. These notable positive benefits, together with the minimization of certain negative concerns that focus on paternalism, contribute to the validity and enforceability of indemnity agreements between common carriers. Consequently, the benefits of positive attributes should be explicitly incorporated in the evaluation of all contracts that seek to limit liability, and moreover, in voluntary transactions generally. Subsumption of this evaluative factor in the decisionmaking process should lead to more consistent enforcement of such bargains and afford greater certainty to parties that their original bargains and concomitant expectations will be maintained, thereby causing the economy to operate smoothly.
Part II of this Article presents the conventional model that currently governs the enforceability of contracts limiting liability. This section delineates the present policies relevant to such bargains. Concerns relevant to contracts that limit liability include policy considerations that tend to restrict the enforceability of these agreements. This Article then specifically elucidates the law governing indemnity agreements between common carriers. While public policy considerations concerning adherence to public duty contribute to the skepticism of indemnity agreements in general, such agreements between common carriers tend to have an enhanced probability of enforcement given the characteristics of the parties and the nature of their bargains.
Part III of this Article analyzes the present law governing contracts limiting liability, closely scrutinizing the public policy factors that fuel concern for paternalism. The present model's preoccupation with paternalism actually focuses on negative factors that have been explicitly articulated as a basis for limiting such agreements. In addition to an analysis of the traditional public policy considerations governing indemnity agreements, Part III continues with an examination of policy considerations relevant to indemnity agreements among common carriers. Notwithstanding the negative factors inherent in the explicit concern for paternalism, the seeming tolerance for such agreements among common carriers primarily must be due to a tacit consideration of the residual benefits of these agreements. These benefits or positive factors can often include the probability that the agreement will foster the efficient, and perhaps optimal, use of existing scarce resources.
About the Author
Blake D. Morant. Associate Professor of Law, The University of Toledo College of Law. J.D., B.A., University of Virginia. Former Assistant General Counsel, Washington Metropolitan Area Transit Authority, 1987-92.
Citation
69 Tul. L. Rev. 715 (1995)