For reversal -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Jacobs, J.
The plaintiff Mayfair Fabrics leased premises in Clifton from the defendants William and Jean Natell. The premises consisted of a new commercial building and the plaintiff was the first tenant. The lease was negotiated by Max Schwartz, president of Mayfair, and Joseph Salerno, attorney for the Natells. Schwartz is a member of the New York bar. Before he signed the lease on Mayfair's behalf, he consulted with a member of the New Jersey bar and discussed with him its various provisions including paragraph 28. That paragraph was in a typewritten rider attached to the printed form of lease and read as follows:
"It is mutually agreed that the landlords will insure the building against fire and the tenant agrees to carry fire insurance upon all equipment and personal property used, placed or stored in, on or near the leased premises and in no event shall the landlord be responsible or liable for loss or damage to the tenant's property by fire, explosion or otherwise. In the event that the hazards of the tenant's business makes it impossible for landlords to obtain fire insurance at standard rates covering the said building then this lease shall at the option of the landlord be null and void."
The lease was for a five-year term and the annual rental was $10,000. Under paragraph 27 the landlords were required to relocate three space heaters in the premises to accommodate a monorail hoist to be installed by the tenant. Before the tenant actually moved in, the landlords had removed two of the space heaters and had stored them. The tenant moved in during the spring of 1963 and thereafter Schwartz reminded William Natell that the heating units would have to be reinstalled before the summer was over. Natell engaged Henley who did heating installation and
service work. Henley, aided by Natell, worked at the premises in the course of the reinstallation of the heaters but their work was not fully completed by the close of business on Friday, August 9, 1963. During the ensuing weekend, while the plaintiff's factory operations were in progress, there was a fire at the premises which caused very considerable damage. The plaintiff received approximately $180,000 from insurance companies which had covered its property at the premises against loss by fire.
In December 1963 the plaintiff filed its complaint in the Law Division seeking damages from the defendants on the ground that the fire resulted from the negligent work of the Natells and Henley at the premises. The Natells filed an answer which contained various matters including a separate defense based on the exculpatory provision in paragraph 28. Thereafter the Natells moved for summary judgment with a supporting affidavit by William Natell setting forth that because of the terms of paragraph 28 he had purchased a liability policy in the sum of only $50,000 which he considered sufficient to cover "potential liabilities of others aside from Mayfair Fabrics which was the sole tenant in the premises." The trial court denied the motion in a letter opinion which expressed its view that there was a factual question as to whether the loss suffered by the plaintiff "arose out of the landlord-tenant relationship or whether the loss resulted from the defendant-landlord acting in a capacity other than a landlord." With leave granted, the Natells appealed from the denial of their motion to the Appellate Division and we certified before argument there.
The record before us leaves no room to dispute that the activity of the Natells on which the plaintiff's claim against them is grounded was in their capacity as landlords and not otherwise. They had agreed in the lease to relocate the space heaters and that is exactly what they were in the process of doing when, according to the plaintiff, they engaged in negligent conduct which caused the fire loss. If, as the Natells urge, the exculpatory clause in paragraph 28 is to
be honored as not violative of any public policy in our State, then its terms clearly afford a measure of protection to them here. See Midland Carpet Corp. v. Franklin Associated Properties, 90 N.J. Super. 42, 44-47 (App. Div. 1966); cf. W.F. Zimmerman v. Daggett & Ramsdell, Inc., 34 N.J. Super. 81, 83-84 (Law Div. 1955). In Zimmerman, Judge Foley recognized that a commercial lease provision that the landlord should not be liable for fire or explosion damage to the tenant's property would protect the landlord against a claim arising out of conduct "encompassed by the landlord-tenant relationship." 34 N.J. Super., at p. 84. However, he differentiated the case before him since it involved alleged negligence outside the leased premises in the pursuit of the defendants' own commercial operations "unconnected with and unrelated to its functions as a landlord." 34 N.J. Super., at p. 85.
Where they do not adversely affect the public interest, exculpatory clauses in private agreements are generally sustained. Globe Home Improvement Co. v. Perth Amboy, etc., Inc., 116 N.J.L. 168, 170 (E. & A. 1936). But where a party to the agreement is under a public duty entailing the exercise of care, he may not relieve himself of liability for negligence through an exculpatory clause; illustrative are common carriers, public utilities, and the like. See Horelick v. Pennsylvania R. Co., 13 N.J. 349, 357 (1953); 6A Corbin, Contracts § 1472 (1962); cf. McCarthy v. National Association for Stock Car Auto Racing, Inc., 48 N.J. 539 (1967). Similarly, in other situations where there is unequal bargaining power, the public interest may call for rejection of an exculpatory clause exacted by the dominant party; illustrative are Kuzmiak v. Brookchester, 33 N.J. Super. 575 (1955), where the Appellate Division dealt with a lease signed by residential tenants in an apartment building, and Tunkl v. Regents of University of California, 60 Cal. 2 d 92, 32 Cal. Rptr. 33, 383 P. 2 d 441 (1963), where the California Supreme Court dealt with an instrument signed by a patient on his admission to a charitable research
hospital. See 52 Calif. L. Rev. 350 (1964); 6 Williston, Contracts § 1751 (Rev'd ed. 1938, Supp. 1966); cf. Henningsen v. Bloomfield ...