New York Law (NYLE) Practice Exam

Which one of the following contractual provisions is enforceable?

1. A provision on a ticket to an amusement park exempting the owner from liability for negligence.

2. A provision in a commercial construction contract exempting the contractor from liability for negligence.

3. A provision in a commercial lease exempting the landlord from liability for negligence.

4. A provision in a residential mortgage providing for an interest rate of 15%.

The correct answer is: A provision in a residential mortgage providing for an interest rate of 15%.

The enforceability of contractual provisions often hinges on the context in which they are applied as well as public policy considerations. In this case, the provision in a residential mortgage that stipulates an interest rate of 15% is enforceable because it reflects a legitimate and clearly defined agreement between the lender and borrower regarding the terms of the loan. Interest rates in mortgages are generally subject to market variability, yet are permissible within the bounds of usury laws, which establish maximum allowable rates. Contrarily, the other options involve liability waivers in contexts that potentially infringe upon public safety and welfare. For instance, provisions that seek to exempt a party from liability for negligence—whether in an amusement park, a construction contract, or a commercial lease—can be viewed as invalid when they attempt to absolve a party from responsibility for their own negligent acts, particularly when such negligence could lead to injury or damage. New York courts often scrutinize these kinds of clauses closely and may find them unenforceable as they go against public policy aimed at protecting individuals from harm caused by negligence. Thus, the provision regarding the interest rate in a residential mortgage stands out as it conforms to the regulatory framework without infringing on public safety or welfare, rendering it valid and enforceable