Liability waivers: when courts wave them goodbye

A liability waiver looks airtight on paper; a client signs it before a ski race, a gym class, or a commercial contract. However, it is rarely that simple whenever courts look at them and decide whether to wave them goodbye or to enforce them.

In this article, we’ll discuss the legality of liability waivers, what it actually protects against, and what courts look at when reading them. While this can be used by personal injury lawyers, this can also be used by clients to learn more about these waivers.

What is protected by a liability waiver?

A liability waiver is a written agreement where one party gives up the right to sue another for loss or injury. They also go by other names, such as:

• indemnity waiver
• general release

In recreational settings, participants typically sign one before an activity. In commercial transactions, waivers appear in the form of exclusion clauses and are usually embedded in larger contracts.

The core purpose of a liability waiver is risk allocation. The party asking for the signature wants protection if something goes wrong, and the person signing it acknowledges that risk.

For instance, in Karroll v. Silver Star Mountain Resorts, 1988 CanLII 3094 (BC SC), a release and indemnity agreement used in a 1986 ski race at Silver Star Mountain Resort in British Columbia covered “all claims, actions, costs and expenses and demands in respect to death, injury, loss or damage… howsoever caused… notwithstanding that the same may have been contributed to or occasioned by any act or failure to act (including, without limitation, negligence).” This liability waiver was then upheld and enforced by the court.

The language in a liability waiver is broad by design. The question courts ask is not what the waiver says, but whether the person who signed it can realistically be said to have agreed to it.

Here’s a video explaining the enforceability of liability waivers, specifically under the laws in British Columbia:

Check out our article on “Personal injuries proceedings act: Limits, notices, and traps” to learn about the factors that lawyers and litigants should not miss in these cases.

Are liability waivers legally binding in Canada?

Yes, a liability waiver is legally binding in Canada, but there are conditions for it.

The default rule in Canadian contract law comes from the English case L’Estrange v. F. Graucob Ltd. [1934] 2 K.B. 394. It states that if a person signed a document knowing it affects their legal rights, they are bound by it, even if they did not read it. That principle has been consistently applied to liability waivers by Canadian courts.

The duty to apprise the signing party

The more interesting question is when that rule gives way. In Karroll, the court set out the governing standard that Canadian courts still apply today, which is unless the circumstances are such that “a reasonable person should have known that the party signing was not consenting to the terms in question.”

When that threshold is crossed, a duty arises on the party presenting the document to take reasonable steps to bring the relevant terms to the signer’s attention. Staying silent in those circumstances, the court held, is effectively misrepresentation by omission.

Factors when the duty is triggered

Several factors determine whether that duty to apprise the signing party is triggered:

• whether the exclusion clause is consistent with the overall purpose of the contract
• the length and format of the document, including font size and readability
• how much time the signer had to review it
• whether the signer had prior experience with similar documents

Applying these factors, the waiver was upheld in Karroll. It was short, clearly headed in capital letters, consistent with the purpose of entering a hazardous ski race, and the plaintiff had signed similar releases in prior years.

If you’re a business owner who wants to learn more about the enforceability of liability waivers, watch this video:

Check out Canadian Lawyer’s Special Report on Canada’s Best Personal Injury Law Firms for a list of the country’s leading personal injury boutiques and firms.

What makes an indemnity waiver unenforceable in court?

The Supreme Court of Canada’s decision in Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, replaced the old fundamental breach doctrine with a cleaner three-stage framework. Every court in Canada now applies this test when a party seeks to escape an exclusion clause:

• Interpretation
• Unconscionability at formation
• Public policy

Each stage will be discussed below.

Stage 1 – Interpretation

The first question to ask is “does the clause actually cover what happened?” Courts further read exclusion clauses in the context of the whole contract, and not just in isolation.

In Tercon, the Supreme Court found that a clause barring claims “as a result of participating in this RFP [request for proposals]” did not cover a situation where the Province of British Columbia had allowed an ineligible bidder to compete. The closed list of eligible bidders “was the foundation of this RFP.”

As such, a process contaminated by an ineligible participant was simply not the process that the clause in this case was designed to address.

Stage 2 – Unconscionability at formation

The second question is “was the clause unconscionable when the contract was made?” Here, the courts look at unequal bargaining power between the parties, and whether the term was so harsh that no one would freely agree to it.

This is a high bar in commercial settings; in Tercon, the Supreme Court found no unconscionability because the contractor was large and sophisticated.

By contrast, in consumer or recreational contexts involving individuals, courts have shown more willingness to engage with this argument, particularly where the contract was standard-form with no room for negotiation.

Stage 3 – Public policy

Even if it’s valid, an applicable clause may be refused enforcement if a sufficiently serious public policy concern is at stake.

The Court set the threshold deliberately high: “conduct approaching serious criminality or egregious fraud” are the kinds of considerations “that are substantially incontestable and may override the public policy of freedom to contract and disable the defendant from relying upon the exclusion clause.”

Reckless commercial misconduct can also reach that bar. This was shown in Plas-Tex Canada Ltd. v. Dow Chemical of Canada Ltd., 2004 ABCA 309, where the defendant knowingly supplied defective resin used in natural gas pipelines while relying on exclusion clauses.

When do courts refuse to enforce a general release?

There are three situations that recur in Canadian case law where courts have consistently refused enforcement of a general release, regardless of how it was worded:

• gross negligence
• minors
• ambiguous language

We’ll discuss them below.

Gross negligence

Canadian courts have drawn a firm line between ordinary carelessness and reckless or wanton disregard for safety. A liability waiver that excludes “negligence” or “any act or failure to act” has repeatedly been held insufficient to capture gross negligence.

Courts across multiple provinces have found that excluding gross negligence requires language that is explicit and unmistakable, at the minimum. Where the conduct is sufficiently egregious, the public policy stage of the Tercon framework provides an additional avenue to challenge the waiver’s enforcement.

Minors under 18 years

A contract signed by a person under 18 is generally voidable at their election. A parent or guardian’s signature on a liability waiver does not bind the child.

This is one of the most consistent limitations on waiver enforceability in Canadian law, and is particularly relevant for recreational operators running camps, sports programs, and youth activities.

Ambiguous language

Where a clause is genuinely unclear, the contra proferentem principle applies, i.e., ambiguities are resolved against the party who drafted the document.

The Supreme Court in Tercon confirmed that if a clause could reasonably be read to exclude liability for the relevant conduct, but could also reasonably be read not to, the drafter loses. The Court also held that even if the exclusion clause were ambiguous, it should be construed in favour of the contractor and against the Province.

Liability waiver: when fine print is never the final word

A signed liability waiver is not an automatic barrier to recovery. The same courts that have long respected the freedom to contract have also made clear that waivers come with limits. When those limits are reached, Canadian courts have shown little hesitation in waving them goodbye.

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