Lee R. Schroeder | The Lima News
The law includes a lot of requirements — usually legally called “duties” — regarding all kinds of things. Often, those duties are requirements that the law makes some people provide to or for the benefit of other people.
People often ask whether they can sign a contract to waive legal duties that are owed to others.
For example, Ohio business law requires that an owner of a business who manages or otherwise controls the business must regularly update any other owners of the business as to the status of the business. This updating responsibility is called a “fiduciary” duty, which is a duty to be candid and upfront with other owners of the business. This legal duty is un-waivable.
Whether a legal duty can be waived depends upon the way that the specific law is written, the way that duty has traditionally been interpreted or understood and whether there is disproportionate power between the person who owes the duty and the person who is benefited by the duty.
Some laws literally include words that state that the duty set forth in the law “cannot be waived”. Other laws state that one party owes the other party a duty, “unless the parties agree otherwise”. The waivability of the duties in these laws are obviously easy to know.
Other legal requirements are simply understood as being un-waivable. For instance, there is some traditional contract law that states that the parties to a contract must act in good faith and not actively conceal truths that could benefit the other party to a contract. This duty is called the “duty of good faith and fair dealing”, and the duty is traditionally understood to be un-waivable, especially in the context of loans.
There are other contexts where the law expects that the parties who may owe duties to each other very often have vastly different levels of power over the transaction. When there is an expected power differential, the law usually makes the duties between the parties un-waivable.
This is commonly encountered in the context of residential rentals. Tenants in houses and apartments usually have significantly less money and bargaining power than landlords. For this reason, almost all legal requirements that involve residential rentals cannot be waived by contract.
For example, the law for residential rentals requires that late payment charges be “reasonable” and is un-waivable. A landlord and tenant under an $800 monthly apartment lease may agree in writing that if the tenant is even one day late on one rent payment, the tenant will pay the landlord $20,000. Despite the landlord and tenant agreeing to this term in writing, no court will enforce that provision, because the late payment is clearly unreasonable in the context of the size of the monthly payment.
Other situations where the law presumes that parties will have disproportionately unequal bargaining power include land installment contracts for houses, publicly traded stocks in companies where the majority owners of those companies retain complete control and small businesses where there is more than one owner.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
