Exculpation Clause | Practical Law - Westlaw

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Exculpation Clause | Practical Law https://content.next.westlaw.com/practical-law/document/I5c2bdf20313e11e598dc8b09b4f043e0/Exculpation-Clause?viewType=FullText&transitionType=Default&contextData=(sc.Default) Exculpation Clause Exculpation Clause
  • Practical Law Glossary Item w-000-4830
  •  (Approx. 3 pages)
GlossaryExculpation ClauseA clause in a contract, lease or loan document where one party waives or limits the other party's liability.A landlord often includes an exculpation clause to limit its liability under the lease to the landlord's interest in the property. A pro-landlord lease may also disclaim any landlord liability except for cases of the landlord's gross negligence or willful misconduct. Most commercial mortgage loans are structured as nonrecourse loans. An exculpation clause in the loan agreement, mortgage, or note provides that:
  • The borrower has no personal liability for the loan.
  • The borrower's liability is limited to the value of the collateral for the loan (in most cases, the real property).
Carveouts to the limitation of borrower's liability are typically found in a bad boy guaranty. An exculpation clause providing for the exculpation of its shareholders or members may also be found in:
  • Corporate by-laws.
  • Limited liability company agreements.
For a sample exculpation clause in a lease, see Standard Document, Office Lease Agreement (Multi-Tenant Base Year Model Gross Lease) (Pro-Landlord Long Form) (NY): Section 38.02.

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