Waivers

Waiver contracts are agreements in which one party promises not to sue the other for injuries that occur during their contractual relationship. Waivers are controversial in the consumer context, especially when presented in standard form, take-it-or-leave-it contracts. The law on waivers appears muddled, with no consistent doctrine or policy among the courts on enforceability. The aim of this paper is to offer a consistent set of policies that can form the foundation of a consistent set of doctrines, leading ultimately to a more apparently consistent treatment of waivers in the courts. The most basic piece of this paper’s framework is a contract theoretic analysis of the wealth (or welfare) created by a contractual provision. In this framework, waivers should be enforceable when they are likely to increase the welfare of the contracting parties, and otherwise not enforceable. Waivers are likely to increase the welfare of the parties when litigation is likely to reduce their welfare. Litigation is wealth reducing when the social value of the deterrence created through litigation is low relative to the costs of litigation. The social value of deterrence is low, in turn, when the productivity of precaution, in terms of accident avoidance, is low – in other words, additional precaution has little or no “bang for the buck”. These general propositions send me on a search for the factual conditions associated with low productivity precaution. The most important ones are inherency of risk and the existence of multiple causal factors. I find the cases are consistent with this precautionary productivity thesis. The immediate implication is that waivers generally are not enforceable or unenforceable according to their language. Waivers are enforceable contextually, conditional on facts indicating inherency of risk or weak causation.