In real estate an exculpatory clause is a stipulation or clause in a mortgage that allows the borrower to give up the indebted property to the lender without being personally liable for the loan.

Exculpatory clause is that part of a written agreement that relieves one party to the agreement of liability as a result of actions, or lack of actions, performed in the course of executing the terms of the contract.

Example: You bought a $200,000 home with a $40,000 down payment and a $160,000 mortgage that included an exculpatory clause. If you later vacated the property or couldn't keep up with the payments, the lender could take the house back and sell it on the open market, but the exculpatory clause would prevent the bank from pursuing your other assets - like your car or savings accounts - to make up for any difference between the resale price and the amount you owe.

Many commercial leases contain a stipulation where the tenant releases the landlord from any liability in connection with damage to the tenant’s property or business as a result of an insurable casualty, such as water damage, irrespective of any negligence on the part of the landlord. The tenant insures the premises and its business; the landlord insures the building and the common areas; and each party releases the other from claims for damages arising out of insured casualties. The parties then have their respective insurance carriers waive their rights of subrogation. This avoids duplicative insurance coverage and keeps the insurance carriers from asserting subrogation rights and suing landlords and tenants.

In a trust agreement, an exculpatory clause relieves the trustee of liability resulting from any act performed in good faith under the trust agreement.