*1 Dist., Aug. Div. No. 24731. Fourth One. 1982.] [Civ. CO., Plaintiff, Respondent, Cross-defendant
A & M PRODUCE CORPORATION, Defendant, Cross-complainant Appellant. *5 Counsel Walker, Claudia A.
Paul, C. Douglas Conroy, & Hastings, Janofsky Andrew S. Sturdevant, & Krutzsch and Carver, Caldwell Pinney, Byrd, Defendant, and Appellant. Cross-complainant Krutzsch for Plaintiff, Cross-defendant Benitez for Thomas M. Heim and T. Roger and Respondent.
Opinion (FMC) from appeals
WIENER, J. Corporation Defendant (A M) in Co. & A & M Produce plaintiff entered in favor of judgment $255,000 $45,000 the net sum of plus fees.1 this attorney’s Although case has a rather humble origin arising business trans- simple action in 1974 when FMC Asold & M an agricultural weight-sizing $32,000, machine for the issues now our require traversing labyrin- Code, thine complexities of the Uniform Commercial only partially illuminated case, California Because of the nature precedent. of this we believe it helpful to state the facts before the issues and describing the manner in which are resolved. they
I M, A & a farming Imperial company Valley, solely owned C. Alex Abatti who has been all of his farming life. In late after talking two of his employees, Mario Vanoni and Bill Billings- he decided to ley, tomatoes. grow Although had they grown produce before, had they never tomatoes or grown other a crop requiring weight-sizer were not familiar with At the weight-sizing equipment. suggestion first with a Billingsley, they spoke salesman from Decco Equipment Company regarding purchase the necessary equip- ment. The salesman A & M would need explained a hydrocooler addition $60,000 $68,000 to a and submitted weight-sizer a bid of for the equipment. Abatti thought Decco bid was high, Billings- ley Abatti contact FMC suggested for a competitive bid. A January & M called FMC representative, whose John
Walker, met with them at A & M’s office. Walker admitted he was not an expert on the specifics capacity weight-sizing equipment. Later he Isch of FMC brought Edgar into the to assist in negotiations making the determination on the proper type equipment. Isch did not say hydrocooler Abatti, was required. Isch According recommended *6 FMC equipment because it so fast operated that a was un- hydrocooler $25,000. A necessary & M about thereby saving The parties discussed the of the capacity recom- sizing equipment mended Isch. Walker and Isch proposed a bid of preliminary the interest at the rate of 7% from shall have sonable on his interest at the 1 For figures cross-complaint convenience, attorney’s judgment here rate as elsewhere in the fees from defendant of 7% we have set out on its as on offset complaint September June against plaintiff’s judgment only against opinion. 24, the sum of the net 1974.” 18, 1976; defendant The amount $45,000; judgment [If] in the sum of Plaintiff shall recover as rea of [11] the itself the sum of defendant shall recover judgment rounding provides: $269,235.30 $14,320 “Plaintiff with with off to a $15,299.55 signature obtained Abatti’s They for the weight-sizer. the consent” order the to “secure Abatti’s order” for equipment “field all the nor list did the final price The field order not state equipment. form, a standard order was on material and The necessary equipment. written sides, identical to the the terms of which were on both printed order, Abatti de- with the Along later received. which Abatti contract a of the $5,000 and Isch left copy a Walker deposit. livered his check as to in the which had been referred chart for weight-sizers capacity negotiations. layout proposed sent to FMC where the
The field order was a and final department, shed was packing analyzed engineering received a copy was Abatti then compiled. list of essential materials list equipment contained a of all the the form contract in the mail. It in blanks on the front of typed materials either purchased, being contract, order sheet. The total bill handwritten on an attached as $32,041.80. appen- of the contract an appears was for An exact copy opinion. dix to this post.) which are impor- provisions agreement
For our purposes 3, buyer’s outlining “Seller’s Remedies” paragraph tant are: with fees connection reasonable obligation attorney’s seller’s pay dis- containing the buyer; “Warranty” defaults by paragraph warranties, “Disclaimer paragraph in bold print; claimer of that “Seller print in somewhat smaller Consequential Damages” stating of or in arising out consequential damages event shall be liable for in no ” .. agreement.. connection this check it to FMC with his and returned signed agreement Abatti He never $5,680.60 paid as a down payment. an additional for FMC deliv- $21,361.20 April “on delivery equipment.” due & to A M’s extension A 20-foot machinery. ered and installed the A M’s problems & equipment. to house the required house was packing when it May, the third began during with the FMC equipment week singula- in front of the up piled the tomatoes. Tomatoes pick started Overflow weight-sizing. for belt which tomatoes separated tor damage causing through machinery again, had to be sent tomatoes were not the tomatoes because crop. damage aggravated to the *7 with- quickly more spread a to allowing fungus aby hyrdocooler, cooled to control and managed was called out fruit. Walker damaged in the effort was machine. This starting stopping and the overflow by however, pro- reduced significantly because it counterproductive, the FMC did speed. Unlike the Decco cessing machinery, equipment have a not control. speed
Abatti to attempted get additional unsuccessfully equipment FMC was time to set up pack- Decco. There insufficient a new and/or Moreover, shed to the tomatoes. a search other ing hand-pick for operators to handle A & M’s On packing unavailing. tomatoes June A & M its shed return on the closed because the fruit—some of which had damaged—was been cover costs. Some to- inadequate matoes were were plant; sold to a most because canning rejected they were cannery tomatoes. thereafter, &
Shortly A M offered return the weight-sizer FMC provided FMC would refund A & M’s down and payment pay and freight FMC this offer demanded full charges. rejected pay- ment the balance due.
A & M then filed action against this for FMC for breach of damages warranties, express of implied warranty particular breach for a and use M misrepresentation. A & dismissed the misrepresentation cause of ac-
tion at trial. By stipulation trial was bifurcated to permit judge to decide FMC’s cross-complaint for the due balance on the purchase and price the issue of fees after the returned attorney’s jury its verdict on the complaint.
This appeal is the of a result third In the trial. earlier two cases spe- cial verdict forms were used. The first resulted case in a hung jury; new trial was ordered in the second.2
After and hearing presented evidence to the jury, additional evidence absence of the the nature of the contract’s jury formation of the bargaining position respective court parties, ruled: “[I]t would be unconscionable to enforce waivers of warranties [the waiver consequential damage] provisions fur- agreement, and ther that are not set out in a they fashion. conspicuous
“The Court’s is based on all ruling of the circumstances in this case conducted, connection with the negotiations how were the fact 2 This court has this granting also seen case before. The order a new was af trial firmed in A & M Corporation Produce Co. v. (Aug. 1979) Civ. [unpub. opn.]. *8 $5,000 payment down of—a substantial payment a down initially the Accordingly, jury was signed.” later the contract was made and on contract, side with its not the reverse the the viewed front of only lengthy provisions. $281,326 the parties which verdict for
The returned a general jury FMC to for $12,090.70, already paid amount to the reduce agreed but cross-complaint, its The found for on the court machinery. interest $45,000 fees and attorney’s prejudgment in awarded plaintiff from 1976. September
II and time grueling consuming The of this reveals history litigation to re- successfully two earlier trials jury The in path. inability The evidentiary the in is not totally surprising. solve issues dispute the commercial agricultural record is and intricacies of long complex; difficulties, To the compound are not to easy comprehend. technology court make fact determinations required preliminary the to several extent, To a as the for motions. predicate ruling legal significant be- the critical factual issues questions overlap these factual preliminary the trial importance fore the and increase the correspondingly jury factual of the issues substan- role. We wish to stress the nature judge’s key the of several legal limits our role. Where resolution tially appellate the we drawn from facts presented, issues turns on inferences largely of the trial court. are with the sound judgment hesitant to interfere the of FMC’s purported The issues this case involve validity major to on the recover buyer’s ability disclaimer of warranties and limitation Resolution a breach of resulting warranty.3 consequential damages disclaiming war concept of some confusion between the 3 There exists considerable warranty. (See limiting excluding concept or remedies for breach ranties 12-11, Summers, (2d 1980) Code ed. discussion in White and Uniform Commercial § 471-472.) attempt deals limit the situations subject The seller’s pp. former subject a' breach has assumes for which he can be held liable for breach. latter complaining party. to the limit remedies available attempts been established but contract, “Warranty” example, language much located in In the instant for we find buyer. When available to the actually to limitations on remedies section which amounts out, written document only warranty appearing properly terms sorted are for will be free from defects workmanship equipment new is that the material language purports to limit the specified in the section periods various of time. Other replacement parts, of defective remedy single warranty repair for breach of this and back at seller’s equipment to the seller buyer pays shipping for provided the (See appen., post.) request. *9 of both these issues turns on the largely proper application of the doc- trine of which unconscionability, the trial court utilized in precluding enforcement of the warranty disclaimer and the consequential damage limitation. Although concedes that California Uniform Commer- cial Code section 27194 allows a court under proper circumstances to declare a consequential unconscionable, limitation damage it argues that unconscionability to disclaimers inapplicable of warranty, being supplanted the more specific policing provisions of section 2316. We otherwise, however, conclude and turn our attention to the nature of doctrine, this often-amorphous thé legal outlining framework to analytic be used in whether a determining particular contractual provision is un- conscionable. That framework is then utilized in finding that the facts case, of this contract, involving preprinted form sales the trial support court’s conclusion that both the disclaimer of warranties and the limita- tion on consequential were damages unconscionable. We also reject FMC’s that argument the consequential A & M damages alleged by were too speculative to be the basis for any damage award.
We then proceed to examine FMC’s final contentions to the relating trial court’s decision to award fees and interest attorney’s prejudgment M, to A & claimed breach of is an “ac- concluding warranty tion on a contract” within the of California’s meaning reciprocal statute, attorney’s fees Civil Code section and that the trial court exercised properly its discretion under Civil Code section subdivi- (b) sion in awarding interest. prejudgment Accordingly judgment must be affirmed.
Ill FMC’s initial attack on the judgment error alleges prejudicial trial court in not to see the allowing jury reverse side of the written agreement which contained both a disclaimer all warranties as well as a provision made, the event a stating warranty buyer was precluded from recovering consequential from a damages resulting breach of the The trial warranty. court’s decision to ex clude evidence of the contents of the reverse agreement’s side was based on its determination that the disclaimer and the warranty consequential exclusions were unconscionable and damage therefore unenforceabl is, e.5 If this determination was correct—that if the 4 Allstatutory references are to the California Uniform Commercial Code unless oth erwise indicated. ruling 5 Thecourt’s was also and ex inconspicuousness based on the of the disclaimer ante, provisions. 482.) agree clusion warranty, As to the disclaimer of we trial facts applied unconscionability court doctrine to the properly this case—then reverse side of contract was appropriately .6 withheld jury
A may that on damages a limitation Acknowledging consequential (3)),7 the trial court (§ 2719, FMC asserts be unconscionable subd. warranties. It con in that doctrine to the disclaimer of applying erred is disclaimer warranty provisions, irrelevant to unconscionability tends of section by statutory been eliminated the specific requirements having 475-481; Leff, Uncons Summers, (See White and at supra, pp. 2316.8 (1967) 115 the Code—The New Clause and cionability Emperor’s large terms of the printed type FMC a disclaimer in boldface twice as as the other that 1201, agreement (10), conspicuous. specifically provides: “A term is Section subdivision against conspicuous when it a whom it person or clause is is to is so written that reasonable ought heading (as: printed have operate capitals to noticed it. A NONNEGOTIA- body conspicuous. Language 'conspicuous’ in the a is is Lading) BLE Bill of of form (Italics by added.) This definition larger precludes contrasting type it is in or other or color." if its Murphree (5th (See Corp. v. ruling on this issue. Finance terms trial court’s FMC 1980) 419.) Cir. 632 F.2d (2), a provisions require to the subdivision which contrast of section warranty conspicuous, imposes requirement be no as to con- disclaimer the code similar sequential damage say conspicuousness such a term is limitations. This is not to of rather, irrelevant; bearing the procedural it is one of factors on unconscionabi- several (See 485-486.) lity post, It will considered in that pp. of the limitation. therefore be independent denying consequen- to the context rather than as an basis for enforcement damage tial exclusion. unconscionable, argued 6 FMC has also warranty even if the disclaimer of suggest evidence the disclaimer presence clause’s in the contract to was admissible warranty parties. assuming that no cionability warranty was ever created action of the But the uncons disclaimer, proving proposition its value toward that no factual slight, substantially outweighed was created is the disclaimer’s tenden Code, cy (Evid. unfairly prejudice jury. 352.) to and mislead the § damages may limited or “Consequential section 2719 be provides: 7 Subdivision consequen the limitation or exclusion is unconscionable. Limitation excluded unless tial person goods unless it damages injury to the in the case of consumer is invalid for consequential dam proved is Limitation of is that the limitation not unconscionable. is ages proved-that unless it is the limitation the loss is commercial is valid where unconscionable.” “(1) provides part: Words or conduct relevant to the cre 8 Section2316 relevant tending warranty express warranty negate conduct limit ation of an words or to or other; subject to the shall wherever reasonable as consistent each but be construed (Section 2202) negation or provisions parol extrinsic evidence of this division or inoperative to the extent that such construction is unreasonable. limitation is “(2) (3), modify warranty mer- Subject implied subdivision exclude or to language merchantability and in case of chantability any part of it the must mention fit- Language implied to exclude all warranties of writing conspicuous, must be ... states, which extend example, if it for that ‘There are no warranties ness sufficient is beyond description on the face hereof.’” 485, 516-528.) U.Pa.L.Rev. FMC Alternatively, suggests California Legislature’s failure adopt general Uniform Commercial Code 2-302) section on as unconscionability (§ part of California’s Uniform Commercial Code the trial court’s precludes reliance on the doctrine in this instance.9 force,
While without we that an un- argument FMC’s conclude conscionable disclaimer of be denied enforcement warranty may despite technical with the of section 2316. compliance requirements 420.) Finance 632 F.2d at Unconscionabi- Murphree, Corp. supra, is a doctrine to allow lity directly flexible courts consider designed *11 numerous which the process. factors adulterate contractual Uni- may form Commercial Code 2-302 clause specifies “any section of the contract” be unconscionable. of may policing provisions section 2316 are limited to the of disclaimers problems involving visibility conflicts with But express warranties. and unfair oppression surprise, (see principal targets doctrine unconscionability post, pp. 485-486), result may from other of types questionable commercial Moreover, practices. the subtle distinction an “implied” between war- ranty and an “express” may precious do little to warranty mitigate the exploitation of a with party inferior Yet as bargaining power. long as remains warranty “implied,” section 2316’s policing provisions are ineffective.
FMC’s contention
the status of the
regarding
doc-
unconscionability
trine in California is similarly unpersuasive.
has
Unconscionability
long
been
as a
doctrine
recognized
common law
which
been
has
consistently
applied by California courts in
absence
of specific statutory authori-
(See
Scissor-Tail,
zation.
(1981)
Graham v.
Inc.
B this We now involved in question appeal: turn the principal dis- Whether the trial court erred in that FMC’s concluding attempted consequential damages claimer of warranties and exclusion of we can answer that unconscionable and therefore unenforceable. Before however, we must first with the nature of the question concern ourselves doctrine. unconscionability
The Uniform Commercial Code does not to attempt precisely (See define what v. is or not “unconscionable.” Romain Kugler may be de accept position warranty we that a disclaimer not 10 Evenwere to FMC’s unconscionable, we trial court’s decision was harmless error under clared believe the ante, (see 8), (1) fn. which of section 2316 the circumstances of this case. Subdivision warranty prece express an takes applicable, specifically provides admits is .FMC reasonably reconcilable and attempted an where the two are not dence over where evidence of the disclaimer by the evidence rule. express warranty precluded parol is not trial, im (See 2202.) to that FMC breached both the attempted prove At A & M § 2315) negated (see may be warranty particular purpose of which plied fitness for a § 2316, (2)), express made (§ and various warranties by conspicuous a disclaimer subd. the en be after our “examination of by personnel may which disclaimed. But FMC cause, Const., VI, 13), (Cal. we do not think it including art. tire the evidence” § without implied warranty probable jury could have found breach an reasonably the 818, (1956) 46 (See v. Watson Cal.2d finding express People of an one. also breach 617, 897].) Un (1958) 625 P.2d 243]; Vanier 50 Cal.2d 836 P.2d Alarid v. [327 [299 circumstances, jury, the the disclaimer been before der such even had evidence of express disregard where conflicted the require it it section 2316 would them warranty. by a which contains supported record Our conclusion that error harmless is weight-sizing machine its ample expressly FMC warranted more than evidence that testimony dispute concerned major The pack per would 1200-1250 cartons hour. Thus, whether question was not so much warranty applied to. what size cartons the made, warranty had been express warranty but rather whether an had been addition, warranty express impediment proof no In there was breached. the preprinted not intend finding parties that the did implied view of trial court’s re- agreement with expression of their by to be the “final form contract drafted ” (§ 2202.) are therein .... spect to such terms as included 486 Nevertheless,
(1971)
640, 651].)
“surprise.” Inc. and Company, 198; Geldermann Code, 2302, supra, § Com. 571, 575.) Inc. (8th 1975) 527 F.2d Processing, v. Lane “Oppres- Cir. which results in no power arises an inequality bargaining sion” (Williams choice.” meaningful real and “an absence of negotiation 449; at p. supra, Walker-Thomas Furniture Company, F.2d (S.D.N.Y. 1975) v. Distillers Co. Ltd. Fleischmann Distilling Corp. Prob- 232; Analyzing Unconscionability see 395 F.Supp. Spanogle, 931, 944-946.) lems (1969) involves “Surprise" 117 U.Pa.L.Rev. are terms of the agreed-upon bargain extent to which the supposedly enforce seeking hidden in a form drafted prolix printed party Unconscionability Ellinghaus, terms. disputed Defense of “Essential” 764-765; Purposes On the (1969) 78 Yale L.J. Eddy, 2-719(2) UCC Section Limited Remedies: The Metaphysics of 28, 43; at 117 U.Pa.L.Rev. supra, Spanogle, 65 Cal.L.Rev. 934-935, is drafted 943.) the form contract Characteristically, pp. *13 (See and Calamari bargaining position. with the party superior Perillo, (2d 1977) 9-40, 325.) ed. p. Contracts § term is not read or under-
Of
the mere fact that a contract
course
a
occupies
that
the drafting party
stood
or
by
nondrafting party
to en-
will
authorize a court to refuse
not
superior bargaining position
that
an
can be made
contract
argument
force the contract. Although
the “circle
parties
between the
fall outside
terms not actively negotiated
(see Eddy,
supra,
actual agreement
assent”11 which constitutes the
of
11
concepts of contract
the fundamental
Murray: “One of
words of Professor
by
their volition
com
parties
idea that
exercise
assent. The basic
concept
law is the
of
provides
law
their circle
assent
action and that the
mitting themselves to future
of
any
of contracts. The two basic
discussion
private law is fundamental
the status of a
(2)
inaction?
If
agree
future action or
(1)
parties
Did the
questions raised are:
(or,
circle of as-
agreement
what is their
their
they
agree,
the terms of
did
what are
unbar-
43),
dictate that
practicalities
65 Cal.L.Rev. at
commercial
p.
they
denied enforcement where
are also
only
terms
be
gained-for
Yale L.J. at
substantively
(Ellinghaus,
supra,
unreasonable.
766-767;
748-749.)
Contracts,
No
pp.
precise
on
at
pp.
Murray
supra,
be
Cases have
unconscionability
proffered.
definition of substantive
can
(See, e.g.,
talked in terms of
harsh” or “one-sided” results.
“overly
Motors,
v.
tract drafted that the for all by the musicians’ union arbitrator provided be disputes contract was to selected the union. Graham by challenged clause, enforcement of the arbitrator was arguing that an so selected in favor presumptively biased of the musicians. adhesion,
The court first determined that the contract was one of not was a successful music ing although prominent Graham rock the union—which all musi promoter, represented nearly significant be cians—mandated that promotion agreements “negotiated” pursuant standard to In language closely contracts. union-prepared approximat ing “unequal power” procedural uncons bargaining prong factor, cionability required the court concluded that Graham . was the realities of business as a concert promoter sign his to [union] form contracts concert whom he artist with wished to do busi any (Graham, ....” 818-819, ness 28 3d in supra, pp. Cal. at italics original.) next
Moving to a discussion the “unfair paralleling surprise” prong procedural unconscionability, court determined that Graham surprised the inclusion of the It arbitration clause. relied on the course of between as well as dealing parties exper- Graham’s vast ience in the in industry music that neither the concluding inclusion of the arbitration clause nor its effect were outside Graham’s “reason- (Graham, Cal.3d, expectations.” able 821.) at supra, p.
Finally, in a discourse substantive resembling anal unconscionability the court indicated that ysis, ‘“contractual machinery operate [must] (Graham, Cal.3d, within some minimal levels of integrity.’” supra, 28 at 825, 554, Hines v. Anchor quoting Freight Motor 424 U.S. L.Ed.2d S.Ct. contract 1048].) Graham did not attain this “minimal level” because arbitration left clause the “adhering” without real and fair party opportunity prevail event of a (Ibid.) dispute. contractual In the language of substantive all the risks were unconscionability, allocated to Graham who was forced accept contract without Not negotiation. surprisingly, court’s conclusion enforcement denying to the arbitration clause on un ties conscionability grounds procedural substantive elements the view together: are the ‘minimum levels of integrity’ “[W]e are which requisite contractual arrangement for the nonjudicial resolution of disputes are not achieved by an arrangement which desig nates union the parties of one of as the arbitrator of disputes arising when, here, out employment—especially as is the arrangement (Id., indicative product 826-827.) circumstances of adhesion.” at pp. *15 C mind, we must now determine With these considerations that the in this case was correct in concluding whether the trial court warranties and ex contract all disclaiming clauses in the FMC form so, we were unconscionable. In doing cluding consequential damages ultimately question in mind that while is keep unconscionability In Royal law, question. numerous factual bear inquiries upon (S.D.N.Y. 1974) 385 Co. v. Electric demnity Westinghouse Corp. Harris Co. 520, 524; Zicari 33 App.Div.2d Joseph F.Supp. which the N.Y.S.2d The business conditions under 925].) relative parties’ bargaining pow
contract was formed affect directly er, reasonable and the commercial reasonableness of the expectations, risk allocation as in the written To the extent there provided agreement. are conflicts in the evidence or the factual inferences which be may therefrom, drawn we must assume a set of facts consistent with the court’s if finding such an is unconscionability assumption supported substantial evidence. first to the we note
Turning procedural aspects unconscionability, at the outset that this contract arises in a commercial context between (FMC) an enormous diversified and a small but corporation relatively (A M). experienced & "... courts have farming company Generally, not been solicitous of businessmen in the name of unconscionability.” (White 170; Fleisch- Summers, also, and 4-9 at see supra, § p. e.g., Ltd., mann v. Distillers Co. Distilling supra, at Corp. F.Supp. 233.) This is p. because courts view businessmen as probably possessed of a of commercial more greater degree understanding substantially Hence, economic muscle than the a businessman ordinary consumer. has a time usually more difficult unconscionabi- establishing procedural in the lity sense of either “unfair surprise” “unequal bargaining power.”
Nevertheless, are generalizations always subject exceptions With in- an substitute for categorization rarely adequate analysis. but experienced courts have creasing frequency, begun recognize un- surprised businessmen be legally unsophisticated may unfairly v. American Oil (see, Weaver conscionable contract terms e.g., Motors, Inc., 144; Schroeder v. Fageol 276 N.E.2d Company, supra, 24), supra, 544 P.2d at and that even business entities large may relatively have little on the bargaining power, depending identity other and the circumstances surrounding commercial contracting party [Aug. 1982]
490 Scissor-Tail, Inc., 28 supra, Graham v. (See, e.g., agreement. Allen v. Bell 818-819; Michigan Telephone Company at pp.
Cal.3d
Industralease Auto-
(1969)
693];
632
N.W.2d
Mich.App.
[171
etc.,
432.)
at p.
mated &
396 N.Y.S.2d
Eq. Corp.,
supra,
Scientific
associat-
conviction that the social benefits
This
rests on the
recognition
skewed where it
that
appears
ed with freedom of contract are severely
he
or
of the term to which
“agreed”
had the
been aware
party actually
matter,
never have assented to
real choice in the
he would
had he any
Romain,
(See
A.2d at
supra,
v.
Kugler
inclusion of the term.
652.)
be
present
to
unconscionability appear
Both
of
aspects
procedural
dis-
warranty
used on
printing
the facts of this case. Although
(see ante,
6),
consequential
fn.
the terms of the
claimer was conspicuous
being only slightly
particularly apparent,
exclusion are not
damage
in
appear
text. Both provisions
than most of the other contract
larger
which
form contract
long preprinted
the middle of the back
page
him, either
It
never
to
suggested
shown to Abatti. was
only casually
Abatti
testi-
in
that he read the back of the form.
verbally
writing,
thus sufficient
side terms. There was
fied he never read the reverse
sur-
that Abatti was in fact
evidence
trial court to conclude
before the
damage
and the consequential
disclaimer
prised by
warranty
to
He
dispute.
was is
some
surprise
subject
exclusion. How “unfair” his
the contract or to seek
to read the back of
had the
certainly
opportunity
matter,
complexity
a factual
given
the advice of a
Yet as
lawyer.
them, Abatti’s
his attention to
FMC’s failure to direct
the terms and
In this
the comments
regard,
unreasonable.
totally
omission
not be
may
in Weaver v. American Oil Company,
Indiana
Court
Supreme
“The burden should
apposite:
at
147-148 are
supra,
pages
276 N.E.2d
form to
printed
standard
be on the party submitting
contract]
[a
or unconscio-
unusual
knowledge
show that the other
had
party
be the same as that
should
principle
nable terms contained therein.
warranties,
sold
goods
that a
namely
package
applicable
implied
contains no harmful
intended and
to a
is fit for the
purchaser
purposes
I. Case
also Steele
J.
(See
v.
represented.”
materials other than that
Here,
910].)
P.2d
Even if we ignore any suggestion real here and a lack of any negotiation dence of unequal bargaining power it was conceded that A & M Although the terms of the contract. over standards, em Valley a large-scale farming enterprise by Imperial was to 50 seasonal at up employees 5 on a basis ploying persons regular 8,000 1974, time, acres in farming harvest and that Abatti was some category. gross is in an different 1974 Corporation entirely $40 mil Division alone amounted to Machinery sales of Agriculture the FMC form contract were lion. More terms on importantly, were authorized negotiate any standard. FMC salesmen Al the reverse side of the contract.13 appearing preprinted terms instances, individual FMC contends that in some though special A & never made aware of that option. contracts are M was negotiated, circumstances leads to the conclusion that this The sum total of these in the most sense of the word. only general contract a “bargain” v. J. I. Case 909.) Company, supra, Steele p. 419 P.2d at Although procedural aspects unconscionability are present case, this we suspect the substantive unconscionability of the disclaimer and exclusion provisions contributed equally to the trial court’s ultimate conclusion. As warranties, to the disclaimer of the facts of this case the trial support court’s conclusion that such disclaimer was commer- cially unreasonable. The breached warranty allegedly FMC went the basic performance characteristics of the product. attempting to disclaim warranties, this and all other FMC was in essence guarantying nothing about what the product would do. Since a product’s perfor- mance forms the contract, fundamental basis for a sales it is patently unreasonable to assume that a would buyer purchase standardized mass-produced product an seller industry without enforceable performance standards. From a social risk of perspective, loss is most borne appropriately best able to its party prevent occurrence. testimony reads as follows: John Walker’s transcript FMC salesman 13 The contracts, they pre- or are negotiate those right. you the terms of “Q. All Now do way you them? and that’s the use printed are exception payment terms legal department, with the by our They “A. are sent and Wherefores. negotiable, but not the ‘Whereases’ terms, back and the other negotiate the terms on the “Q. you separately don’t So payment than terms? other that, sir.” empowered to do “A. I’m not 492 (1944) 24 P.2d
(Escola Co. Cal.2d Bottling v. Coca Cola [150 (1975) (conc. J.); Co. Constr. opn. Traynor, Rodgers Kemper 456] Holmes, The Common Cal.Rptr. 143]; Cal.App.3d 117.) would the be in a better buyer position Law Rarely characteris to evaluate the performance than the manufacturer-seller tics of a machine. case, moreover, the establishes that A & M had no
In this evidence machines and was forced experience weight-sizing rely previous *18 equipment. expertise recommending necessary on the of FMC The jury necessarily FMC was aware of this fact. here abundantly a perfor- that FMC either expressly impliedly guaranteed found mance level which the machine was unable to meet. where Especially concerned, the seller’s performance represen- an is inexperienced buyer make an tations are to allow to absolutely necessary buyer A seller’s at- choice available. intelligent among competitive options disclaimer, the use of a to tempt, through prevent buyer on such calls into com- reasonably relying representations question of the well be may substantively mercial reasonableness agreement unconscionable. The trial court’s conclusion to that effect is amply sup- the record before us. ported by
As to the exclusion of
several factors com-
consequential damages,
bine to
that the exclusion was unreasonable on the facts of this
suggest
case.
are a
Consequential damages
commercially recognized type of
M
suffered
A & due to FMC’s breach.14 A
damage actually
by
party
. should be able to
on their existence in the absence
in-
rely
of being
Motors, Inc.,
(Schroeder
formed to the
...”
contrary,
Fageol
supra,
24.)
544 P.2d at
This factor is
p.
particularly important given the com-
mercial realities under which the contract was executed. If the seller’s
breached,
warranty
consequential damages were not
“rea-
merely
foreseeable”;
were
sonably
they
explicitly obvious. All
were
parties
aware that once the tomatoes
all
began
ripen,
had to be harvest-
they
ed and
within a
packed
relatively
period
short
of time.
Steele v. J.
910;
I. Case
419 P.2d at
see also
Company, supra,
p.
Wille v. South-
exclusion,
damages
provides
consequential
the code
are
14 Inthe absence of an
2715,
2714,
(3)
(2).)
general
(§§
subd.
rule re
generally recoverable.
subd.
stated
the court
in Chemetron
garding
on available remedies was
limitations
245,
(N.D.Ill. 1974)
F.Supp.
250:
Corporation
Corporation
Steel
v. McLouth
contract,
agree
policy
remedies for breach of their
parties may
“While
to limit the
specifically provides
disfavors limitations and
for
of the Uniform Commercial Code
contracting party
protection
reasonable
they
deprive
their
if
would act to
deletion
(Fn. omitted.)
against breach.”
western Bell
903,
Telephone Company
Another factor supporting risks to the allocation of and relates damages directly avoidability It has been sug- which lies at the foundation of the contractual bargain. and should not be gested shifting socially expensive “[r]isk An even better reason is re- undertaken in the absence of a reason. good (S. to a contract freely negotiated.” when to so shift is quired contrary Intern., Inc. (9th 1978) M. Wilson & Co. v. Smith Cir. 587 F.2d 1375.) But as we FMC was the only party reasonably noted previously, M inadequate able to this loss A & a machine prevent selling (See ante, 491.) there is a risk type meet its needs.15 “If expressed p. it is allocation that should be subjected special scrutiny, probably only to one a risk that the other can avoid.” party shifting party (Eddy, at italics in supra, Cal.L.Rev. original.) case, our review of the in this of circumstances summary, totality *19 the business environment within the ex- including which contract was ecuted, the court’s that the supports trial determination disclaimer of warranties and the exclusion of in FMC’s consequential damages form contract were unconscionable and therefore unenforceable. When non- terms on negotiable preprinted form combine agreements disparate bargaining power, in the allocation of commercial risks in a resulting manner, or socially unreasonable of uncons- economically concept as codified in Commercial cionability Uniform Code sections 2-302 and 2-719, (3), subdivision furnishes for enforce- legal justification refusing ment of the offensive result.
IV FMC claims if that even the disclaimer of dam consequential invalid, is set it ages award should be aside is damage because Civil Code section 3301 that can be speculative. provides damages “[n]o recovered for a in breach of contract which are not ascertainable clearly both their nature and under this statute is that rule origin.” general “... where the of an unestablished business is operation prevented recognize 15 We buyer may consequential that a be able to restrict amount damages, already mitigate damages. (See but the imposes duty Code a subd. § (2)(a).) any any artificially event there is no contention here that actions A & M consequential inflated the loss suffered. that otherwise have might profits for
interrupted, damages prospective recoverable for the reason are not made from its operation been v. uncertain, speculative.” (Grupe contingent their occurrence However, 832].) Grupe, P.2d (1945) 26 Cal.2d Glick the rule: cites, exception stands for the also “[A]ntici which where their allowed future events are upon profits dependent pated reliability.” evidence of reasonable can be shown by and occurrence nature bid.) (I court heard evidence trial that the on argue appeal
FMC does crop included size of the That evidence speculative. on the issue was itself & M & A Although A M grew. of tomato type and market price before, farmer. experienced Abatti was an never tomatoes had grown Moreover, harvest time. There condition at good itself was crop ac- to those tomatoes harvesting crop damage no evidence of evidence that transportation nor was there picked, tually excep- make the These circumstances problem. would have crop posed for the trial support provide ample rule applicable tion to the consequential damages. award court’s decision allow V an to enforce did on action prevail that A & M not FMC asserts court erred award trial written and therefore agreement fee reciprocal attorney’s & fees under California A M attorney’s ing statute, FMC relies McKenzie Kaiser- Code 1717.16 Civil section *20 an in that Cal.Rptr. arguing 84 (1976) Cal.App.3d 55 Aetna 275] [127 is warranty of either an oral express implied based on breach action within of contract” provisions an “to enforce the action [the] the written contract which 1717 since of Civil Code section meaning a warranty. about nothing fee provision says contains the attorney’s 718, 730 (1978) Cal.Rptr. 22 Cal.3d v. Turney also Stout [150 1, (1978) 27-28 637, Cal.App.3d v. 83 586 Walters Marler 1228]; P.2d Cal.Rptr. 655].) [147 (compare Wagner to one side of McKenzie merits underlying
The 27, 516]), 37 Cal.Rptr. (1980) Cal.App.3d Benson contract, con any action on a where the part: in relevant “In provides 16 Thatsection costs, incurred to enforce attorney’s fees and which are specifically provides that tract contract, parties, of or to awarded either to one that shall be provisions of prevailing party, whether is determined to be the party, party then the who prevailing not, to reasonable at shall be entitled in the contract or party specified she is the he or necessary disbursements.” fees to costs and torney’s in addition McKenzie involved misreads the case. an completely action presented to the on jury alternative theories of breach of breach of im express warranty, and plied warranty negligent misrepresentation. The returned jury a verdict general plaintiff’s favor. The court concluded that . negli an gent misrepresentation is not action to enforce the of a provisions contract. As the jury may have awarded its verdict to on the appellant of basis the negligent misrepresentation theory, appellant cannot recov (McKenzie, er attorney’s fees under section 1717.” supra, Cal. App.3d 89.) at p.
Since this case was not presented a jury negligent misrepre sentation holding McKenzie theory, is simply inapplicable. fact, McKenzie can be read to reasonably support trial court’s ac tion here in implicit its that suggestion a verdict jury based on breach an expressed or implied warranty would have supported the attor ney’s (Ibid.) fee award. That implicit is conclusion correct. entirely fact a warranty not stated in the written memorandum does not it mean is not part the contract. Section subdivision California Uniform Commercial Code itself defines “contract” broadly to include which affects the anything legal obligation of the parties.17 The parties’ “total legal obligation” be may composite written terms, oral expression responsibilities implied by law. All be may enforced by contract,” an “action on trial court here cor [the] rectly concluded Civil Code section 1717 allowed A & M’s recov ery fees.18 attorney’s
VI As its final contention, FMC the trial challenges court’s exercise of discretion under Civil Code section (b), subdivision in award ing interest prejudgment to A & M.19 on the Relying nature complex legal obligation 17 That reads: means the which subdivision “‘Contract’ total results parties’ agreement applicable as affected this code and other rules of law.” *21 nothing see cross-complaint, on we to prevailed 18 Inview of fact that FMC its the portion attorney’s for the its of in FMC’s favor of preclude application the same rule course, is, cross-complaint. of for the trial court to in the It prosecuting fees incurred determine, of on reasonable value the services rendered that proper application, the part of the case. is provides: “Every person who entitled (b) of Civil Code section 3287 19 Subdivision where damages upon based a of action in contract any judgment to receive cause under prior from a date to the may recover interest thereon unliquidated, claim was also the fix, discretion, in its but in no event earlier than judgment may, the court entry of as was filed.” date the action the 496 case, favor FMC which was over-
the the verdict in of previous jury & for a in second trial A M’s motion granted turned after the court the trial,20 of A & M’s damages new and the fact that exact amount was in that the award of interest argues prejudgment was FMC dispute, inappropriate. section) (now that 1967, (a) of 3287 subd.
Before Civil Code section damages interest where only of recovery prejudgment for provided calculation certain, by of made certain capable being “.. . were which, (b) in contrast to A subdivision 1967 amendment added ....” (a), to the trial discretion granted nature of subdivision mandatory of in where the amount to interest even cases prejudgment court allow terms, (b) Thus, subsection its very was damages “unliquidated.” trial in circumstances like those flexibility was to courts designed allow is in dispute. the exact amount of present damage in the case where 438, (1975) 50 Cal.App.3d Buena Vista Dairy Moreno Jessup (1980) Co. 393]; Zalk v. General Cal.Rptr. Exploration 448 [123 786, 647].) Cal.App.3d Cal.Rptr. 794-795 [164 court’s exer a trial by which the standards have discussed Few cases (b) are subdivision Code section Civil discretion under cise of Central, Ins. Co. Inc. v. General (See generally Esgro be judged. Nonetheless, we believe 153].) Cal.Rptr. Cal.App.3d its support the trial court decision cited by of the factors several First, between years passed over seven interest here. prejudgment award en time was judgment and the complaint its first A & M filed the time granting in the first trial or the jury The fact that the hung tered. irrele was FMC’s “fault” is trial not after the second trial motion new & FMC penalize to A M does not interest The of 7 percent vant. award an rather, merely recognition it fide dispute; a bona litigating for A as a result of FMC’s & M incurred damage amount of additional a conclusion this action reflects The warranty. judgment breach & loss A M’s 1974 A M for the economic to & liable costs, of transaction process devoid judicial Were crop. tomato can in 1974. FMC entitled to reimbursement M have been A & would it costs allowed essentially these transaction have hardly complain at 7 $325,000 years per year. A & M for 7 percent over to borrow exceedingly cognizance take permitted trial court was The its discre exercising this during period interest rates market higher to award prejudgment tion interest. jury misleading. is a bit in the second trial determined 20 Thischaracterization warranty to A M but
that FMC had breached its & concluded that this breach was reasoning damages. judge jury’s found cause of A & M’s The trial inconsistent granted A & M’s motion for a new trial. on the facts of case *22 addition, A 1974 offer settle the provides sup & M’s to case more the trial In June of that A & M port year, for court’s conclusion. FMC if weight-sizer offered to return the FMC would refund the sure, down be free charges. To was payment pay freight this to refuse offer in faith reliance on its that the dis good position claimers and on the form made exclusions contract A & M’s preprinted view, however, claim untenable. In our trial court was permitted & view FMC’s refusal A M’s as offer inter placing prejudgment est amount at (Compare risk. Elliano Assurance Co. America (1975) 45 Cal.App.3d 653].) 182-183 It Cal.Rptr. having valid, been & determined that A M’s claim was trial court properly exercised its discretion interest. awarding prejudgment
Disposition affirmed. is judgment
Reed, J.,* concurred. STANIFORTH, P. J.I concur for the Acting following reasons:
The trial court found FMC form contract clauses disclaiming warranties and were limiting damages unconscionable. The ap- issue on is whether peal this is finding substantial If supported by evidence. trial application court’s of the doctrine of unconscionability supported evidence, substantial it was correct in the reverse of the keeping side Code, contract from the comments.) Civ. 1670.5 jury. § fly Facts as “thick as autumnal leaves strow the brooks of Val- lombrosa,” in of the trial support court’s conclusion these contract clauses were oppressive, contrary to oral made representations to induce the purchase, and unreasonably favorable party a superior position. bargaining experienced $32,000 No farmer spend would for equipment which not process could his tomatoes before they rot and no fair and honest would merchant sell such equipment with representa- tions negated its own sales contract. 24, 1982,
A for a was petition rehearing September denied and appel- lant’s for a Court was denied petition hearing by Supreme Richardson, J., December 1982. that the opinion petition granted. be should
*Assigned by Chairperson of the Judicial Councill.
APPENDIX