Will North Dakota enforce this clause releasing or limiting our liability, or does it run into the state's public-policy statute?
Only within real limits, and North Dakota's version of the rule is broader than the classic "fraud or willful injury" formulation found in many other states. N.D.C.C. § 9-08-02: "All contracts which have for their object, directly or indirectly, the exempting of anyone from responsibility for that person's own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law." James Vault & Precast Co. v. B&B Hot Oil Serv., Inc. confirms the third category, "violation of law", reaches ordinary NEGLIGENT violations, not just willful or fraudulent conduct: "We conclude that a contractual provision purporting to exempt anyone from responsibility for a willful or negligent violation of statutory or regulatory law is against the policy of law and not enforceable." The Court said it was deciding the point for the first time, having "previously discussed the 'fraud or willful injury' language of N.D.C.C. § 9-08-02, but we have not heretofore considered the 'violation of law, whether willful or negligent' language in that statute," and it got there because "[t]he California courts' interpretation provides persuasive authority for construing the language of N.D.C.C. § 9-08-02."
The trap
A liability release drafted to cover "any and all claims" can still be defeated without any showing of intent or fraud: James Vault held the statute's "violation of law" language is "not limited to an intentional or willful violation of law," applying it to a commercial-lease waiver clause where the alleged violation was a building/fire-code storage requirement, not a personal-injury release of the kind most exculpatory-clause disputes involve. The statute's source note traces § 9-08-02 to Cal. Civ. Code § 1668, the same Field Code lineage as North Dakota's non-compete statute, § 9-08-06: meaning California decisions construing § 1668 are treated as persuasive (though not binding) authority for construing § 9-08-02, which can pull in case law from a state whose courts have applied the "violation of law" language to safety-code and regulatory violations well beyond the personal-injury-release context most drafters have in mind. Note the order of the reasoning, because it is what makes the clause's breadth a liability rather than a shield: the Court first held that the district court "correctly construed paragraph 10 as a waiver of any and all claims by Forster/Krebs," and only then held that reading unenforceable so far as it reached a violation of law, affirming in part, reversing in part and remanding.
9 authorities
- statuteN.D.C.C. § 9-08-02enactment date not established
The words that state the rule
All contracts which have for their object, directly or indirectly, the exempting of anyone from responsibility for that person's own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
The California courts' interpretation is consistent with the plain language of N.D.C.C. § 9-08-02 that "[a]ll contracts which have for their object, directly or indirectly, the exempting of anyone from responsibility for that person's ... violation of law, whether willful or negligent, are against the policy of the law." The California courts' interpretation provides persuasive authority for construing the language of N.D.C.C. § 9-08-02. We conclude that a contractual provision purporting to exempt anyone from responsibility for a willful or negligent violation of statutory or regulatory law is against the policy of law and not enforceable.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
We further conclude the provision in the parties' lease waiving any claims against the other for any loss or damage to the leased premises or property therein is unenforceable to the extent it exempts B&B Hot Oil from responsibility for a willful or negligent violation of law.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
the plain language of N.D.C.C. § 9-08-02 applies to "violation of law, whether willful or negligent," and is not limited to an intentional or willful violation of law.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
The source note for N.D.C.C. § 9-08-02, N.D.C.C., states it is derived from Cal. Civ. Code § 1668 . Because of that common derivation, California decisions construing Cal. Civ. Code § 1668 , while not binding, are entitled to respectful consideration and may be persuasive and should not be ignored.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
Here, Forster/Krebs' crossclaim alleged B&B Hot Oil improperly stored the hot oil truck inside the leased building in violation of applicable code requirements. Forster/Krebs argue the explosion was caused by the improper storing of the "knockoff" truck in the leased building and the improper construction of the "knockoff" truck without a failsafe control valve to shut off the flow of propane if the manual control valve failed to close. [¶36] Section 18-09-02, N.D.C.C., authorizes the state fire marshal to adopt rules for the regulation of liquefied petroleum gas, which includes propane. See N.D.C.C. § 18-09-01. Fire prevention regulations in N.D. Admin. Code § 10-07-01-04 for the storage and handling of liquefied petroleum gases incorporate the national fire protection standards.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
We have said " 'the law does not favor contracts exonerating parties from liability for their conduct.' " Hillerson v. Bismarck Pub. Schs. , 2013 ND 193 , ¶ 11, 840 N.W.2d 65 (quoting Kondrad v. Bismarck Park Dist. , 2003 ND 4 , ¶ 6, 655 N.W.2d 411 ). We have previously discussed the "fraud or willful injury" language of N.D.C.C. § 9-08-02, but we have not heretofore considered the "violation of law, whether willful or negligent" language in that statute.
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
When the language of the lease is read as a whole, we conclude the district court correctly construed paragraph 10 as a waiver of any and all claims by Forster/Krebs
- case927 N.W.2d 452James Vault & Precast Co. v. B&B Hot Oil Serv., Inc.N.D.decided 2019read it at the source ↗
The words that state the rule
We affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.