CHAPTER 1: COMMON LAW CONTRACTS 1.1 FORMING CONTRACTS

1.1.1 INTRODUCTION Commercial law begins with forming contracts. You can review the elements of contract formation here (Section 9.1). Most gyms require you to sign a liability waiver before using the facilities. What happens if you dont read the entire waiver before you sign?

1.1.2 THE CASE: HINKAL V. PARDOE Melinda Hinkal (Appellant) appeals from the January 7, 2014 order entered in the Court of Common Pleas of Union County granting summary judgment in favor of Gavin Pardoe (Pardoe), Golds Gym, Inc. (Golds Gym), Golds Gym International, Inc. and TRT holdings, Inc. (collectively Appellees). Following review, we affirm. In this appeal, Appellant challenges whether agreements she signed for membership at Golds Gym released Appellees from liability for injuries she alleged she sustained while under the direction of Pardoe, a personal trainer, at Golds Gym. Appellant asserted claims of negligence against Pardoe, and negligence against Golds Gym premised upon respondeat superior liability. In its opinion, the trial court explained: [Appellant] alleges she sustained a serious neck injury while using a piece of exercise equipment under [personal trainer] Pardoes direction. [Appellant] alleges that she suffered a rupture of the C5 disc in her neck requiring two separate surgeries.

[Appellant] alleges that Pardoes negligence included, inter alia, putting too much weight on the piece of equipment that injured [Appellant] and by instructing [Appellant] to continue the workout without recognizing that [Appellant] had sustained a serious injury. [Appellants] allegations of negligence against the remaining [Appellees] are based upon vicarious liability for Pardoes negligence as well as the negligence of unidentified employees, agents and servants.

At the conclusion of the six-day guest period, Appellant signed a membership agreement that included the provisions in effect on August 24, 2010, the date Appellant alleges she was injured due to Appellees negligence. [These provisions were:]

WAIVER OF LIABILITY; ASSUMPTION OF RISK: Member acknowledges that the use of Golds Gyms facilities, equipment, services and programs involves an inherent risk of personal injury to Member.... Member voluntarily agrees to assume all risks of personal injury to Member ... and waives any and all claims or actions that Member may have against Golds Gym, any of its subsidiaries or other affiliates and any of their respective officers, directors, employees, agents, successors and assigns for any such personal injury (and no such person shall be liable to Member ... for any such injury), including, without limitation (i) injuries arising from use of any exercise equipment, machines and tanning booths, (ii) injuries arising from participation in supervised or unsupervised activities and programs in exercise rooms ... or other areas of Golds Gym, (iii) injuries or medical disorders resulting from exercising at any Golds Gym, including heart attacks, strokes, heat stress, sprains, broken bones and torn or damaged muscles, ligaments, or tendons and (iv) accidental injuries within any Golds Gym facilities....

The Golds Gym Membership Agreement signed by Appellant further instructs:

Do not sign this Agreement until you have read both sides. The terms on each side of this form are a part of this Agreement. Member is entitled to a completely filled in copy of this Agreement. By signing this Agreement, Member acknowledges that (A) This Agreement is a contract that will become legally binding upon its acceptance by Golds Gym, (B) Member has examined the gym facilities and accepts them in the present condition, (C) Golds Gym makes no representations or warranties to Member, either expressed or implied, except to the extent expressly set forth in this Agreement and (D) The effective date of membership hereunder shall be CHAPTER 1: COMMON LAW CONTRACTS 4 within six months after the date of Members signature below. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements, whether written or oral, with respect to such matter.

The signature line follows immediately and the words Notice: See other side for important information appear in bold typeface below the signature line. In its thorough and well-reasoned opinion, the trial court reviewed the language of the waiver and conducted a review of case law addressing exculpatory clauses, recognizing:

It is generally accepted that an exculpatory clause is valid where three conditions are met. First the clause must not contravene public policy. Secondly, the contract must be between persons relating entirely to their own private affairs and thirdly, each party must be a free bargaining agent to the agreement so that the contract is not one of adhesion. Once an exculpatory clause is determined to be valid, it will, nevertheless, still be unenforceable unless the language of the parties is clear that a person is being relieved of liability for his own acts of negligence. In interpreting such clauses we listed as guiding standards that: 1) the contract language must be construed strictly, since exculpatory language is not favored by the law; 2) the contract must state the intention of the parties with the greatest particularity, beyond doubt, by express stipulation, and no inference from words of general import can establish the intent of the parties; 3) the language of contract must be construed, in cases of ambiguity, against the party seeking immunity from liability; and 4) the burden of establishing the immunity is upon the party invoking protection under the clauses.

The trial court concluded that the exculpatory language at issue cannot be said to violate public policy because it was an agreement between a private individual and entities, and because it did not address matters of interest to the public or the state. Therefore, the first two prongs of the standard were satisfied.The trial court further determined that the membership agreement did not constitute a contract of adhesion. [Appellant] was under no compulsion to join Golds Gym as a member and execute the Membership Agreement. Exercising at a gym with equipment and availing oneself of the expertise of a personal trainer is purely voluntary recreational activity.Therefore, the third prong of the standard also was satisfied.

Persuaded that all conditions for evaluating the validity of an exculpatory clause were met, the trial court concluded that the Waiver of Liability; Assumption of Risk provision of the membership agreement was valid.

Appellant contends the waiver is invalid because the waiver language appeared on the back of the agreement, she never read or was told to read the back of the agreement, and the clause was not brought home to her in a way that could suggest she was aware of the clause and its contents. Id. However, as the trial court recognized, Appellant admitted she did not read the agreement prior to signing it. She did not allege fraud or a confidential relationship. Id. Although she was ostensibly attacking the validity of the waiver, Appellant did not present any basis for finding the waiver provisions invalid or unenforceable. Her failure to read her agreement does not render it either invalid or unenforceable. The law of Pennsylvania is clear. One who is about to sign a contract has a duty to read that contract first.

As a general principle, minimum conspicuity standards are not a requirement to establish the formation of a contract. While it is true the legislature has prescribed conspicuity requirements for certain types of contracts,1 conspicuity per se is not an essential element of contract formation. See Restatement (Second) of Contracts 17(1) (a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration). Sufficient proof of this exists by virtue of the law recognizing and enforcing oral contracts between parties. Nonetheless, in cases where the existence of a contract, or a meeting of the minds, cannot be determined as a matter of law, conspicuity has been resorted to as a means of proving the existence or lack of a contract. The existence of a valid written contract cannot be supplanted by imposing undefined conspicuity requirements as essential elements to all contract formations. To do so would substantially alter the landscape of contract formation and allow a properly executed contract to be set aside through one partys failure to do what the law requires: to read the contract before signing.

1.1.3 CASE QUESTIONS

1. Give an example of an exculpatory clause that would not be valid.

2. Footnote 1 gives examples of when, under Pennsylvania law, parts of a contract must be "conspicuous", meaning written in such a way that a person will notice them easily, such as with large bold fonts. Why might the legislature require these specific things to be conspicuous? Why shouldnt the gyms entire contract be "conspicuous"?

3. Hinkal argues that the exculpatory clause was not really communicated. Why did Hinkal lose here?

4. What is the "Restatement (Second) of Contracts?