Johns Hopkins Undergraduate Law Review

June 11th 2024 | Natalie Bernstein

This conversation has been edited and condensed for clarity.

Natalie Bernstein, JHU Class of 2027  

Hello, my name is Natalie Bernstein, and I’m a writer for The Johns Hopkins Undergraduate Law Review. I’m here today with Professor Edward K. Cheng, Hess Chair in Law at Vanderbilt University. Professor Cheng specializes in evidence law, law and statistics, and damages, and has been published in the Journal of Legal Studies, the Yale Law Journal, and the Stanford Law Review, among other reputable publications. He also hosts the Excited Utterance Podcast, which interviews top legal scholars in evidence and proof, and runs the Evidence Summer Workshop, the nation’s leading annual evidence conference. Today we will discuss his article on unenforceable waivers. Professor Cheng, thanks for agreeing to do this!

Professor Edward K. Cheng, Hess Chair in Law at Vanderbilt University 

Thanks for having me.

Bernstein  

No problem! So in your article, you first go over the problem of unenforceable waivers. Could you explain what defines a waiver, and what makes a waiver unenforceable?

Cheng  

Sure. So, a waiver, I think we’re all familiar with these things that you have to sign when you go participate in various activities. Waivers normally are agreements that you have as a consumer with a business, where they say that you will not sue them under various conditions. Oftentimes, these waivers are extremely broad, saying that you will not sue the business under almost any circumstance. Sometimes they can be a bit more limited, where they say they’re not responsible for certain kinds of risks, but sometimes they acknowledge that they will be responsible for other types of risks. 

These waivers are, of course, extremely ubiquitous — this is why we’re all familiar with them. They are also often unenforceable, depending on the jurisdiction that you’re in. There are certain kinds of waivers that are almost universally or largely unenforceable, such as any waiver that waives liability for things like intentional torts and reckless behavior. Usually, the extent to which waivers can be enforceable is where they waive liability for common negligence. For anything more than that, though, it’s almost universally held to be unenforceable. 

Another place where waivers are largely unenforceable is in the context of child waivers or parental waivers of liability for their children. These tend to be highly disfavored, although they’re allowed in some jurisdictions, and then you’ve got all kinds of other places where more specific types of waivers are unenforceable. For example, there are various states (including New York) that have statutes that do not allow waivers in health clubs or other recreational contexts for certain kinds of torts. 

Even aside from actual legislation, you always have court cases where courts will hold specific waivers unenforceable anyway. You might not have a statute, but you could have a case from the state Supreme Court, saying that certain kinds of waivers are enforceable. Some of the more well-known examples of these waivers are the ones that are commonly featured in torts textbooks for law school. Both of the most commonly taught cases involve winter sports; there’s a famous case from the Killington ski resort in Vermont, where the waiver was held unenforceable, as well as another case that involves snowboarding, which was also held to be unenforceable.

Bernstein  

Thank you; that’s a great explanation. To expand on that more, why do such waivers persist, and why are they so pernicious?

Cheng

That particular question was the primary impetus for the article. The article was not about trying to determine which ones are unenforceable or whether or not they’re unenforceable in certain jurisdictions–that work has been done previously. The thing that drove this article is that we discovered that defendants frequently use waivers that have previously been held to be unenforceable, and for a lot of this work, I have to credit my co-author, Ehud Guttel, who really was a bulldog looking for all of these examples. 

What we found was that you could find a case where a defendant’s waiver was declared unenforceable, and then go to the defendant’s website today and look at their waiver. In that waiver, you would find language that was either identical to the waiver that was declared unenforceable or language that was effectively equivalent to that language. In other words, defendants would have case-specific knowledge that their waiver was unenforceable in their jurisdiction – they would have been subject to the lawsuit that declared their waiver unenforceable, so they couldn’t claim that they didn’t know, or they were just following industry practice. Yet, the defendants would continue to use exactly the same waiver! That was something of a shocking finding that we found, and then we had to think about what that meant, or what the implications were for that.

Bernstein

That’s really interesting – it’s unfortunate that there’s so much intentional flouting of the law. So, why do you believe that consumers are not more aware of the unenforceability of these waivers? Is it because they’re so widespread that everyone just assumes they must be legally sound? Or is it a failure of elected officials, the media, or other issues? Why is it that consumers don’t think twice about these waivers?

Cheng  

That’s a really interesting question. I think it’s an empirical question as to what people actually think these waivers do, and whether or not it would in fact deter them significantly from bringing suits when they get injured. I think there have been some studies in other areas; there’s been an increase in the literature about these kinds of unenforceable terms. 

There’s been some really interesting work done on leases – those of you college students who have leases, you might want to check whether or not all of the terms of your lease are actually enforceable. There’s also been work done on non-compete agreements, which are sometimes enforceable and sometimes not. In both those cases, I think there are probably some effects as to whether people think that they are able to disregard that agreement or not. 

For the most part, you can just think about the psychological measure; if you know nothing about the law, and you sign an agreement that says that you will not sue a business for various torts, I think all of us, including intellectual and sophisticated people, immediately think, “Oh, well, I now have this contractual term hanging over my head, it’s not going to be worthwhile to litigate this case.”

Bernstein  

That makes sense, and is understandable on the behalf of consumers. One thing you previously mentioned is that there’s a widespread disregard for waivers signed by parents on behalf of their minor children. I’m sure this varies state by state, but is this because it’s thought that parents cannot consent on the minors’ behalf? Or is there a particular interest in protecting the safety and well-being of minors? If it’s the former, I know it’s not your area of expertise, but does it say anything about minor rights more generally? And if it’s the latter, might waivers also be declared unenforceable to protect other vulnerable groups, such as people with disabilities?

Cheng  

I think in the case law, both of those rationales are given for why parental waivers are unenforceable. The idea is that the state has an interest in protecting children, and while parents are normally thought to operate in the best interests of their children, it’s thought that it is not in the best interest of the child to waive their legal rights in this particular context. Regarding the concern about other vulnerable groups, that is often something that is explicitly considered in determining the enforceability of any of these waivers. 

One place where waivers have been held unenforceable is in the medical context. Imagine if you went to a hospital and the hospital made you sign a waiver— there’s actually a case from Memphis, where there was an ambulance that required that the patient sign a waiver form prior to getting in the ambulance. Now, the facts are not as bad as you might think they are— it wasn’t that the person was bleeding to death and then the medical staff asked the person to sign the waiver. It was more like the person was disabled and needed medical transport. Still, the court said that the waiver was unenforceable. Why is that? Well, again, there’s no bargaining power there, you’re effectively over a barrel. Whatever the person tells you to sign, you sign it. 

This also raises an issue that I forgot to mention earlier, which is that all of us tend to sign these waivers as nuisances without actually really reading any of the text or thinking about it because you have no choice anyway. It’s not like you’re going to not go bowling because they put a waiver in your face, and you have to tell your entire group, “Today, we’re not going to go bowling anymore because they’re asking me to sign the waiver.”

Bernstein

That’s a funny example, and makes a lot of sense. While you talked about the cases of these firms that continue to hold the exact same language after the cases have already gone to court, what about the firms that do in fact change the language of their waivers after they’ve been determined unenforceable? Is there anything distinct about them, or any commonalities?

Cheng  

Yeah. I don’t think we have enough cases to draw trends beyond the fact that there are many defendants who continue to use the same language and that there are some who seem to have changed their language. Some of the examples we found where the defendant actually changed its behavior are actually quite impressive. There was one case where a court held that even though a waiver might be unenforceable, the consumers or participants in an activity are still liable for the inherent risks of that activity. You can imagine that there are sports where there are inherent risks, so either the court or the state statute would say, “Look, participants are actually responsible for those inherent risks. We want to be very clear about that, and we don’t want to have litigation over this.” For example, skiing has inherent risks, and rock climbing has inherent risks. In this case that we found, the new waiver focused entirely on inherent risks, which is heartening. That’s good consumer protection and good consideration of the consumer. In this case, the business was just telling the consumer exactly what the law says, as opposed to trying to grab more than the law allows or trick consumers into not vindicating their rights.

Bernstein  

That makes sense. It’s somewhat heartening that at least some firms decide to take this seriously, but it’s still quite the issue that a lot of firms don’t. I want to ask you about potential solutions to the problem of the firms that don’t. The first solution you propose is that courts focus on the contract doctrines of partial enforcement and severability to resolve this issue. Could you explain these doctrines and how they apply to the case of waivers, as well as why you thought this was not the best solution?

Cheng  

Let me briefly back up and talk about the solutions as a whole. The basic idea behind the solutions to this problem I have is a pretty simple one. This is just an idea of incentives. At the moment, the problem with unenforceable waivers is that, on the whole, there are no incentives not to engage in this behavior. If you think about it, if I am a potential defendant, it’s costless for me to include the unenforceable waiver. If it discourages litigation, I gain because I’m not subject to those cases, and if it’s declared unenforceable, I have lost nothing. Basically, the problem is that there are no incentives for insurers to not engage in this behavior. 

The first set of solutions we talk about involves contract doctrines. The idea behind severability is that when there is a clause in a contract that the law finds repugnant or unenforceable for some reason, you simply cut that term out of the contract. Another related doctrine (called partial enforcement) says that when a clause is unenforceable, you reform that particular clause until it is enforceable. For example, if you have a waiver that contains an over-broad clause, you interpret that clause in a way that maximally benefits the party that the clause benefits, but not beyond where the law allows you to go. A good example of this is interest rates; if you charge beyond the maximum interest rate in the jurisdiction, what the court will often do is take your, say, 50% interest rate and cut it back to like 25-26%, which is usually the maximum interest rate that is allowed. That’s the partial enforcement piece. 

Our proposal here is that when courts target over-broad waivers with partial enforcement, or they just sever the liability waiver clause, they have to be mindful that they’re not actually penalizing the defendant or the business that is imposing the waiver on the consumer. If you reform the contract in a way that would be more advantageous to plaintiffs and tort victims, then you would actually create incentives to fix the contract. For example, say you have a health club contract which has an unenforceable waiver. We all hate health club contracts because they bind you for the whole year. If the solution to the unenforceable clause is that once you have an unenforceable waiver clause, the entire contract is void and all of your customers can get out of their contract at any time, that will create lots of incentives for health clubs to get the waiver clause right. That’s the basic idea behind using those contract doctrines. 

Now, the problem with those contract doctrines is that they don’t work in all cases. For example, the health club example works great, because you’re actually a long-term customer, so we incentivize health clubs to get it right by allowing consumers to get out of their health club contract. However, say you go to a health club on a day pass. Well, in that case, there is no long-term relationship where you can create that kind of penalty. So the contract solution is a limited solution, but I actually think in some ways it may be the least controversial solution because when you have an unenforceable clause, courts are already in the position of reforming the contract. All we’re saying is that judges should be careful about how they reform the contracts to ensure that there are some proper incentives.

Bernstein  

That makes sense. Perhaps because I’m a political science major, I’m inclined to turn towards legislative solutions, so I was just wondering why not have some sort of punitive mechanism on the legislative side after the contract or waiver has been severed? For example, if your waiver has gone to court, and it’s been determined that you have to sever a certain part of it to make it function legally, then why not have some damages after the fact if they don’t obey that ruling?

Cheng  

There are definitely legislative schemes that handle some of these unenforceable clauses. I think what you’re proposing here is some sort of department of consumer protection that would sue the defendants for these kinds of waivers. Potentially, you could have statutory damages where if the defendant offers an unenforceable waiver term then they’re subject to a fine – the fine could be $2500, or something like that. I’ve seen some of those. That’s totally fine, you can do that, but remember, legislators are busy. Consumer protection agencies are busy. The question is, when do they get the most bang for their buck? One of the premises of the tort system is that private enforcement is an important part of creating proper incentives for would-be injuries. While we have tort liability for getting into a car accident, we rely on private parties to actually sue you. You often want to also create private mechanisms for enforcing these kinds of public policy goals.

Bernstein  

That’s understandable. So, that’s a potential solution, an administrative one, and that leads us on to the third solution, which is punitive damages. Could you explain that more in depth as well?

Cheng  

Yeah, so we suggest that punitive damages are actually a practical and theoretical solution to this problem of unenforceable waivers. The problem with unenforceable waivers that deter plaintiffs from bringing litigation is that, first of all, certain victims will not receive compensation. However, the other piece is that defendants (businesses) will end up with insufficient incentives to take care. If you cause harm to 100 plaintiffs because of your negligence, and 50 of those plaintiffs do not bring suit because they think that the waiver is valid, the defendant has only paid half of the damages that they have caused. 

You can use punitive damages as the leveling mechanism. Imagine that in a case, it was shown that an unenforceable waiver caused half of plaintiffs not to bring suit. What you would do is make up for that through punitive damages; every plaintiff that actually brings suit would now receive double their compensatory damages as punitive damages in replacement for plaintiffs that don’t bring suit. Now, the defendant no longer has incentives to use the unenforceable waiver, because one way or another, they’re going to pay all the damages that are involved. The idea behind punitive damages is to kind of level up the damages that the defendants pay. We think that that may be the simplest solution, because you already have those cases in court, and you are able to achieve the correct level of deterrence or at least estimate the level of deterrence you want using the punitive damages.

Bernstein  

Right, that makes sense. One question I had is it seems like the solution of punitive damages might have similar issues to the other solutions. For instance, it could also potentially target defendants like small businesses, who are not super aware of the fact that these waivers are actually unenforceable. Furthermore, it also may not compensate potential plaintiffs who don’t realize that the waivers are unenforceable.

Cheng  

I think you’re right in your critique. The last problem that you raised was, what about the plaintiffs that don’t bring suit? You’re just enriching the plaintiff that brings suit. That’s absolutely true, although I think if you look at the system dynamically, the punitive damages should create proper incentives for defendants to not engage in this behavior at all. At that point, everyone will have the protection of not having the unenforceable waiver in their rental agreement or their participation agreement. 

When it comes to entities that don’t intentionally put up these waivers, punitive damages doctrine itself has mechanisms for dealing with this kind of consideration. When you impose punitive damages, there are a bunch of factors that are often used, including one that has to do with the reprehensibility of the defendant’s behavior. It’s not always just about how many plaintiffs have you wrongfully deterred. 

One way to do this is sort of a get-out-of-jail-free card. The first time a violation happens, you may not be subjected to punitive damages, because you can claim that you don’t know. After that, though, other types of litigation can show that well, no, you actually have knowledge that these waivers are unenforceable. Then, the plaintiff’s attorney will go after the punitive damages. You can imagine ways to tailor it further. I think that the punitive damages mechanism works well in this situation, because courts have thought about these kinds of problems before in other contexts. 

You raise a good point about how sometimes these waivers are not necessarily done for nefarious purposes. I think there’s a cultural aspect to the waivers, which may cause some business owners to think that, “Oh, I better have a waiver, because that’s the responsible thing to do to protect myself.” However, the real focus of the article was on these really blatant flouting cases where, look, you just went through a litigation that said that you can’t have this waiver, and you’ve put it back in. Those are the cases where it’s pretty clear that the punitive damages solution is appropriate.

Bernstein  

Makes sense. To close, do you have anything that you’d like to say to potential consumers—including college students who might have rental leases they’re thinking about—to think about in these situations?

Cheng  

I think one of the biggest takeaways of this paper and, in many ways, things that we learned as authors was just to be aware that these kinds of terms exist out there in the world, often as boilerplate. They’re just everywhere. Sometimes, in fact, as we were just discussing, the defendant doesn’t even know that this language is in there. So, when you have a legal issue, you should not immediately read the contract and assume that all of the terms are enforceable, because oftentimes there are statutory overlays or case law that suggests that certain kinds of terms are not places where defendants can go—in the case of a lease, where your landlord can go, or in the case of a non-compete clause, where your former employer can go—and it behooves you to seek some legal counsel or legal advice to decide whether or not you actually have a claim.

Bernstein

Okay! Professor Cheng’s advice: always talk to a lawyer! 

Thank you so much for talking to me today. This was a fascinating discussion about a really widespread and pernicious issue. It honestly really surprised me because waivers are so ubiquitous that I just assumed that they must be legally enforceable. Thank you again so much for talking to me, Professor Cheng, and hope you have a great rest of your week!

Cheng

Thanks! I really enjoyed having a chance to share some of these ideas, and thanks for inviting me!