exculpatory clause

(1) A clause in a contract or agreement that holds a party harmless in the event of a default. (2) A lease provision that usually seeks to limit the liability of a landlord to a tenant. (3) A clause found in an investment loan document that relieves the borrower of personal liability for a deficiency judgment if the sale of the mortgaged property does not provide enough funds to repay the loan. Also called a nonrecourse clause.