November 22, 2007

The Law and Bike Rentals: What you can do to help protect yourself from legal liability

Article reprinted with permission from the June 1995 edition
The Newsletter of the National Bicycle Dealers Association

By Steven W. Hansen, Esq.

EDITOR'S NOTE: The NBDA recently looked into developing a "model" bicycle rental release form which members could use, and which would provide some protection from legal liability. We soon realized there were numerous sticky legal issues involved. We commissioned attorney Steve Hansen to review the legal issues involved. His report follows.

This article is an attempt to demonstrate the complex and evolving nature of the problems in drafting bicycle rental releases. Many states have similar laws although they can vary in subtle but important differences which can prove costly, which has been the subject of recent Velo News editorial regarding the USCF standard participant release used nationwide. This article concentrates on strictly California law as it tends to be the most progressive and well developed.

"Activity releases" such as those used for bike riding and racing events, have had some degree of success, especially in California with the re-emergence of assumption of the risk doctrine. "Product sale releases" on the other hand, which attempt to disclaim liability for a "defective" product, have not met with much success. Rental releases are somewhat of a hybrid of the two since the renter is looking for a product to fill a specific need. Much of the success of the defense will depend upon the cause of action alleged by the plaintiff. Negligence allegations against the retailer are easier to defeat with a good release. Product defect allegations and failure to warn allegations are harder to defeat. Product liability allegations can be asserted against product renters and sellers of used products. However, express and implied warranty claims can be disclaimed by express waiver. Westle v. Look Sports (1993) 17 Cal.App.4th1715. If the manufacturer is also brought into the case, the defense could be that the rental bicycle was not properly maintained by the retailer, which would have greater impact than if alleged against the plaintiff, as retailers are presumed to know the maintenance requirements of the bicycle.

The rental situation is a lot like a sale except the transaction gets repeated over and over for the same bike which may have been unknowingly abused or modified by other renters. There may also be less time spent on the rental because there is less financial incentive. This can create problems as the proper fit and use instructions are just as important for the novice renter as the novice purchaser.

No release is perfect and one release could never cover every unusual circumstance that could possibly arise. And of course, following Murphy's Law, the one time the release does not hold up is when the exposure is the greatest. As indicated in the discussions concerning the now infamous Bicycle Buyers Agreement, (BBA) the idea is to fully inform the purchaser (or in this case, renter) of the possible areas where safety problems can arise and at the same time discourage suits by plaintiffs who sign such documents. It also has the added benefit of making the renter a safer rider by knowing more about the bike. Plaintiffs are nonetheless more likely to sue if their injuries are severe and they lack medical insurance or they consult with an aggressive attorney.

Some general information should be gathered from the renter; why is he renting the bike, where is he going with it and is he familiar with other similar products. Indicate that the bike may not be used after dark (unless you want to offer to rent a light setup; full CPSC reflectors already should be on the bike);that the bike may not be used in certain dangerous geographical areas, trails or streets; that traffic laws must be obeyed (i.e.. wrong way riding, driveway/parked car dangers); a Snell/ANSI helmet is required (or will be provided for a small fee) and that jumping is prohibited. All of the BBA items should be reviewed and riders should be cautioned about excessive downhill speeds. Shoe and toe clip/clipless pedal compatibility should be reviewed, as well as shifting, braking and quick release use (during the test ride if possible). Try to include a fairly complete and descriptive list of unusual (and expected) things that can cause injury. Have the renter acknowledge his representations in writing.

All adjustments should be made by the retailer. Return of the bike should cover any "problems" (including crashes) encountered by the renter during the ride. These problems should then be remedied (and checked by a mechanic test ride) and noted on the bikes permanent maintenance history.

The ski industry has long been involved in the rental business and I have reproduced a copy of a rental release agreement (below) used by some shops in California. As pointed out above, however, this agreement is not of much help in a case alleging the rented product was defective. There was an extensive discussion of a standard ski binding release form discussed in Westle v. Look Sports where a binding release failure allegedly caused an accident. The case presents some interesting points in recreational releases. Overall it is a strong case in favor of releases and discusses a number of legal theories advanced by plaintiff.

The distributor / manufacturer defendants tried to argue that the ski shop’s release applied to them although they were not specifically named in the release(it is not clear if even a general reference to them was made). The court citing Civil Code sec. 1558 noted that the parties to the contract must be identified and that this burden rests on those who claim the benefits of the release. Although the parties need not be specifically named it must be shown that they are within a class of persons for whose benefit the contract was made. The manufacturers argument that the express assumption of risk contained in the release was good "as against the whole world" also failed as the court said that the issue was still governed by express contract rules, unlike the implied assumption of the risk doctrine under Knight v. Jewett (1992) 3 Cal.4th 296,which is a completely separate analysis. In addition, strict products liability is a risk that cannot be impliedly or expressly assumed. Milwaukee Electric Tool Corp. v. Superior Court (1993) 15 Cal.App.4th 547

The court also dismissed the plaintiffs' claim that the contract was unconscionable under Civil Code section 1670.5 partly because plaintiff failed to meet his burden on the issue and because of a factually sparse record on the issue.

Most importantly the court held that an agreement relieving a product supplier(or anyone in the chain of distribution including retailers) from strict products liability is void as against public policy.

Activity releases are generally viewed more liberally by the courts. The biggest obstacle that a participant will have to overcome in trying to negate a release is that cycling in general is not a transaction or event affecting the "public interest". Civil Code section 1668 provides "all contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his 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." The courts have interpreted this section to only apply to contracts which affect the public interest. Tunkl v. Regents of the University of California (1963) 60Cal.2d 92.

If the release does not exculpate the retailer for active and/or passive negligence, the court will probably overturn the release in favor of the plaintiff without ever reaching the "public interest" test.

Both Okura v. USCF 186 Cal.App. 3d 1462 (1986) and Buchan v. USCF 227 Cal. App.3d 134 (1991) hold that cycling, including racing (and impliedly non-race riding)do not fall within the protection of section 1668 and for that reason the releases are usually upheld in the recreational sports context. In Okura the court found in favor of defendants. Negligence was specifically mentioned in both USCF form releases.

Buchan involved an appeal and reversal after Plaintiff received over $1 million at trial notwithstanding an identical release. Buchan tried to distinguish Okuraby arguing that she was a top cyclist on her way to the Olympics and for that reason the transaction (the race) was one affecting the public interest. The dissent agreed but the majority did not, summing up in note 12 that "there is no pervading public interest in amateur bicycle racing." [Spoken as a true enthusiast no doubt] Interestingly, Buchan involved an injury caused by another rider who should not have been allowed to race at Plaintiff's level.

Another important point emphasized in Buchan is that the court implied it would be easier to overturn a release involving an express assumption of the risk if the cyclist was a novice as opposed to a seasoned cyclist who clearly knows the risks associated with cycling and racing.

Bennett v. USCF (1987) 193 Cal. App. 3d 1485 makes some good points concerning releases. The first is that print size of the release is an important factor but not necessarily the only one to be considered in assessing the adequacy of the release. Bennett tried to argue the because the print size was less than eight point it was, per se, unenforceable. The court while acknowledging that eight to ten point type is generally required by the Civil code for various contracts (not including releases), the important factor was that the release be readable and not buried behind other provisions making it difficult to find.

The release in Bennett only discussed that there were "risks" associated with bicycle racing, that serious accidents "occasionally" occur and that he was releasing the parties for their own negligence. However, the release did not mention the specific risk that injured Bennett. A car had been allowed onto the closed criterium course after Bennett and others were told that the course was closed. He did not see any cars before the race started. The car was allowed in by a USCF attendant and it collided with Bennett in the race.

The court distinguished Okura which had involved an identical release, on the basis that the accident was an "unexpected risk" not contemplated by the releasing party. Okura had fallen on some loose debris which the court reasoned was a typical hazard reasonably foreseeable in a bicycle race conducted on city streets. The court pointed out that as this was a summary judgment and the issue raised a triable issue of fact.

The court cited all of the general language stating that the release must be clear, unambiguous and explicit, but most importantly in order for an agreement to assume the risk to be effective it must appear that the terms of the release were "intended by both parties to apply to the particular conduct of the defendant which has caused the harm."

Celli v. Sports Car Club of America (1972) 29 Cal.App.2d 511, (injury of pit spectators due to inadequate barriers) involved a release which was not upheld because it did not specifically state that releasees (defendants) were released for their own negligence. The fact that the release was in six point type and not eight or ten also was a factor. If the release does not specifically mention negligence the courts hold that only passive negligence is waived, not active negligence. The distinction between these two forms of negligence is vague and therefore a phrase such as "active, or passive negligence" should be used consistently and repeatedly throughout the release so that there is no question about what is intended, even though most people (and the courts) don't understand or agree on what those terms mean anyway.

Ferrell v. Southern Nevada Off-Road Enthusiasts, Ltd. (1983) 147 Cal.App.3d 309,(driver injured in an off-road dune buggy race when he crashed into a parked spectator on a course maintained by defendants) involved a different and more perplexing problem. The release mentioned negligence but failed to mention such words as "release", "remise", "discharge", "waive" or similar words in the 147word sentence that comprised the release. The document was entitled "Release of Liability", but the court held that as this was the only mention of the word it would not be clear enough to the average person that he was waiving or releasing potential claims for injuries caused by negligence.

The issue of minors also arises in casual rides. Civil Code sections 1556 and1557 limit the ability of minors and incompetents to contract and Family Code section 6710 (formerly Civil. Code section 35) allows a minor to disaffirm a contract at any time before majority. Celli noted that the minor plaintiff William Ribbs signed the same pit pass as his father, but because the father did not sign on the minors behalf on the same form that the minor signed, the minor could disaffirm the contract which he did merely by filing the action with his father. Hohe v. San Diego Unified School Dist. (1990) 224 Cal.App.3d 1559distinguished Celli on this basis holding that a hypnosis release could not be disaffirmed by the minor where both the plaintiff and her father signed it because section 6710 was not intended to affect contracts entered into by adult son behalf of their children. The USCF release contains a guardian release form. Minors should sign the release with their parents present who should then also sign their child's form and their own. Driver's license numbers should also be written down for tracking purposes.

However, Hohe did confuse the issue further by noting that "magic" words could not be used to overcome ambiguity in a release and that the presence of the word negligence is not dispositive. Instead the court wanted to look to the "intent of the parties" [a slippery term].

The issue of foreign language releases is particularly important in California due to our multi-cultural population. Civil Code 1632 requires some business contracts to be in Spanish but does not seem to apply to releases. There is a California Supreme court decision holding that aspirin warnings need not be in Spanish, but the decision was based upon Federal drug regulation preemption doctrine. I have not seen any cases on the subject but can imagine a scenario where someone who does not speak English well will claim to have been mislead(either unintentionally or otherwise) into signing a release and the court could conceivably overturn the release on that basis.

Finally, all of the releases should be kept in a secure, locatable fashion for at least four years (or more in the case of a minor) or they will be of no use whatsoever.

Steven W. Hansen is an attorney in Los Angeles who defends bicycle manufacturers, distributors and retailers in product liability lawsuits. He wrote an occasional column "A Legal Viewpoint" in Bicycle Retailer and Industry News for a number of years. The information in this article is derived primarily from California law and is subject to change. It is a discussion of general legal principles and is not meant as a substitute for actual legal advice on a specific situation or incident.

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