## Facts

- American Oil Company leased a gasoline service station to Howard Weaver, the station operator, using a preprinted, company-drafted form lease.
- The lease contained a broad “hold harmless” provision stating that the lessor and its employees would not be liable for injuries and that the lessee would indemnify the lessor for claims, including those arising from the lessor’s own negligence.
- An American Oil employee performed repairs on station equipment and allegedly sprayed gasoline on Weaver and his assistant, causing burns and injuries on the leased premises.
- American Oil and its local representative, Homer Hoffer, filed a declaratory judgment action seeking a ruling that Weaver must indemnify American Oil under the lease for liability arising from American Oil’s negligence.
- Weaver had limited education and there was no showing that the indemnity/exculpatory clause was explained to him, highlighted, or understood by him when he signed the form lease.

## Issues

1. Whether a standardized lease clause requiring the lessee to exculpate and indemnify the lessor for the lessor’s own negligence is enforceable when imposed by a party with superior bargaining power on an unsophisticated party who lacked meaningful awareness of the term.
2. Whether the absence of proof of actual, voluntary assent to an unusual, harsh risk-shifting term renders the clause unconscionable or contrary to public policy.

## Decision

- The Indiana Supreme Court reversed the trial court’s declaratory judgment enforcing the clause against Weaver.
- The court held the hold-harmless/indemnity clause unenforceable under the circumstances.
- The court remanded with directions to enter judgment for Weaver.

## Legal Principles

- A contract term may be unenforceable as unconscionable and contrary to public policy when a party with superior bargaining power uses a form contract to impose an extreme risk-shifting provision that is not knowingly accepted by the weaker party.
- When a party seeks to enforce an extraordinary clause that exculpates it from, or requires indemnity for, its own negligence, the enforcing party bears the burden to show the provision was brought to the other party’s attention and there was real, voluntary assent.
- Clauses purporting to relieve a party from liability for its own negligence, or to require indemnity for that negligence, are subject to close judicial scrutiny, particularly in adhesion-type transactions involving unequal bargaining power.

## Conclusion

Because the lease was a standardized, take-it-or-leave-it form drafted by the oil company and the record did not show that Weaver knowingly and voluntarily accepted an unusually harsh obligation to indemnify the company for its own negligence, the Indiana Supreme Court refused to enforce the clause as unconscionable and against public policy.


Weaver v. Am. Oil Co., 257 Ind. 458, 276 N.E.2d 144 (Ind. 1971)