I have previously written about the concept that courts can refuse to enforce a contract because either the procedure to create the contract, or the terms, are grossly unfair. (<https://danielreitman.wordpress.com/2013/08/26/gross-unfairness-in-contracts/>) This rule is designed to prevent abuse of unequal bargaining power. In a recent opinion, the Oregon Supreme Court applied the rule and threw out a common provision in ski resorts’ ticketing agreements: that the customer agrees not to hold the resort liable for its own negligence.
An experienced snowboarder bought a season pass to a ski resort. As part of the terms of the pass, he agreed to release the resort from all liability resulting from the resort’s negligence, recklessness, or willful (but not intentional) conduct. When the snowboarder was paralyzed in a fall while jumping an artificial mogul, he sued the resort, arguing that the release could not be enforced either because it was simply not acceptable as a matter of public policy or because it was grossly unfair. He lost at every stage until he appealed to the Oregon Supreme Court, which ruled that the release was grossly unfair.
The court reviewed previous cases discussing the gross unfairness rule, and noted that it had considered a number of factors in deciding whether to apply the rule. It then discussed each factor as it applied to the case before summarizing its decision.
Three factors involved the procedure of making the agreement. Of these, the court found one factor favored the resort and the other two favored the snowboarder. The release was prominently called to the snowboarder’s attention both when he bought the pass and when he used the lift, so he was not surprised by the term. This was not a “fine print” situation. On the other hand, in an agreement between a commercial operation and a consumer, a provision presented on a take-it-or-leave-it basis could lead to gross unfairness. This was underscored by the absence of reasonable alternatives for the snowboarder. He wasn’t allowed to buy out of the release, and none of the other resorts in Oregon offer different terms. If he wanted to snowboard, he was stuck with the release.
The parties, and the court, also discussed three factors regarding the terms of the agreement itself. The first factor was whether the result of enforcing the release would be harsh and inequitable. Because the risk was substantial and the ability to prevent the harm was in the hands of the resort, the court found that the result would be harsh. The question of equity was influenced by an Oregon law that imposes the “ordinary risks of skiing” on customers. The general safety and maintenance of the artificial mogul was not considered to be an inherent risk because that risk was not part of the ordinary expectation of the average customer. Because the resort was otherwise required to use reasonable care in its operations, the court ruled that applying the release would cause an inequitable result.
The next factor was whether ski resorts are an essential public function. Courts in other states have disagreed whether an essential public function is more or less likely to lead to a ruling that a release by a recreational business is grossly unfair. The court decided that even though the resort claimed its services were not essential, that did not mean that it could demand releases with impunity. Agreeing with the reasoning of courts in Vermont, Connecticut, and North Carolina, and noting that the law generally required businesses to make their premises reasonably safe for the public, the court ruled that it could find the release potentially unenforceable.
The final factor was the breadth of the release. Normally, releases for negligence are considered valid in a large number of contexts. In this case, however, the release attempted to go well beyond negligence, which normally isn’t allowed as a matter of general law. Even though the snowboarder’s suit was based on a claim of negligence, the court decided that it didn’t think it should limit the scope of the release to negligence if it was going to rule the clause grossly unfair.
The court summarized the factors in making its final conclusion. Focusing on the imbalance of bargaining power, the large customer base of the resort that might be endangered, the breadth of the release and the general requirement of the law to protect against negligence, it ruled that even in a highly unessential recreational activity, it could not accept the release. As a result, it allowed the suit to go forward and sent the case back to be tried. In a footnote, however, the court noted that it could be possible to make the release enforceable, possibly by allowing buy-outs, limiting the release to situations out of the resort’s control, or restricting access to the resort.