In 1970, Continental Airlines agreed to buy a number of DC-10 airplanes from McDonnell Douglas Corporation (MDC). Their contract included a limited warranty in which MDC undertook certain servicing obligations and an exculpatory clause in which

Question

Continental waived "all other remedies" against MDC. On March 1, 1978, one of these DC-10s was nearing takeoff at Los Angeles International Airport when the two front tires of its left-side landing gear blew out. The pilot aborted the takeoff, but the uncushioned landing gear tore through the tarmac and broke away from the plane. This ruptured the left wing fuel tank, which burst into flames. The emergency escape slides failed, apparently due to the heat of the fire. Some passengers evacuated through the copilot's window, others jumped from the exits. Four passengers died, and over 70 suffered injuries. The plane was destroyed. It should be noted that the exculpatory clause did not prevent the passengers from suing Continental and/or MDC. Continental sued MDC and MDC defended based on the exculpatory clause. Is this type of clause enforceable? Discuss exculpatory clauses, particularly the one involved here.

Answer 1

An exculpatory clause is one that attempts to release one of the parties from liability in the event of injury. A clause is generally unenforceable when it attempts to exclude an intentional tort or gross negligence, affects activity that is in the public interest, when the parties have greatly unequal bargaining power, and unless the clause is clearly written and readily visible. Here, however, the parties are both sophisticated companies and laboriously negotiated the terms of the agreement. The clause should be enforced.