*1 FUNDING SYSTEMS LEASING
CORPORATION, Respondent, INTERNATIONAL, INC.,
KING LOUIE al., Appellant.
et
No. KCD 28435. Appeals,
Missouri Court
Western District.
June *3 Penner, D.
Roger Lay, Howard Reed- W. Penner, C., er, Griffin, Taylor & P. Dysart, appellant. City, Kansas for Schwindt, Berman, DeLeve, Thomas A. Alvin D. Chapman, Shapiro, Kuchan & Stinson, Fizzell, Mag Goldberg, J. Samuel & respondent. Kansas City, SWOFFORD, J., and C. PRITCH- Before SHANGLER, ARD, DIXON, WASSER- CLARK, STROM, JJ. SOMERVILLE WASSERSTROM, Judge. litigation presents the multiparty This financing question responsibility agreement for party under a malfunctioning of the covered financing held ment. The trial court any legal responsibility party here free of objections which Rich malfunctioning, lessee-pur- concerning for the and the certain By chaser appeals. proposed made to the terms. letters 1970, April 24 and April dated 1970, King In International early modifications de- Systems agreed to certain Incorporated (“King Louie”) was owner Rich, thereupon King manded of radio KBEA. It desired to auto- station documents, in- signed mate the station order to conserve cluding May lease dated manpower. surveying cost of After differ- months, term was 60 called market, types ent on the $1097.91, monthly payments in favor of equipment Louie decided offered option buy an at the end Louie had Music, (“IGM”). International Good Inc. of the term for one dollar. presented Equipment Proposal dat- ed supplemented March one of its This also set out as 1, 1970, April under which there were cash letters capital terms on page the front *4 lease, terms and also terms for a 60 month following: and in red color the at the King end of which Louie could ac- “THAT THE LESSEE REPRESENTS quire for one proposal title dollar. The also THAT THE HAS SELECTED LESSEE terms following contained as one of its EQUIPMENT LEASED HEREUNDER express warranty: “All equipment manu- REQUESTED THE PRIOR TO HAVING carry year factured IGM shall a full one THE LESSOR TO PURCHASE SAME warranty after delivery.” King LESSEE, TO THE AND FOR LEASING 6,1970, April accepted letter dated the lease THAT THE LESSEE AGREES LESSOR terms and enclosed check for the down REPRE- HAS MADE AND MAKES NO payment. The acknowledged by order was OR WARRANTIES OF SENTATIONS April IGM letter dated NATURE, DIRECTLY WHATSOEVER IGM did not have for carry- facilities INDIRECTLY, OR EXPRESS OR IM- ing the financing of the lease SUITABILITY, PLIED, THE AS TO general itself. Its practice respect DURABILITY, USE, FITNESS FOR such lease-purchase arrangements was to MERCHANTABILITY, CONDITION, broker, utilize the services of a finance In- QUALITY, ANY OR OTHERWISE OF Financing Incorporated, ternational SUCH UNIT. LESSEE SPECIFICAL- in turn did business with some 17 finance LY ALL MAKE WAIVES RIGHTS TO companies, each special- of which tended to CLAIM THE LESSOR AGAINST ize in a type equipment certain and size HEREIN BREACH OF ANY WAR- FOR case, particular transactions. In this RANTY OF ANY KIND WHATSOEV- contemplated King submitted the Lou- LESSOR, ER AND OR AS TO LES- ie transaction Financing to International ASSIGNEE, LESSEE LEASES SOR’S 1,1970, April concurrently with the submis- EQUIPMENT THE ‘AS IS’. LESSOR sion of Equipment Proposal its written AND SHALL LESSOR’S ASSIGNEE King response Louie. In approach NOT BE LIABLE TO FOR LESSEE IGM, Financing from International wrote LOSS, ANY DAMAGE OR EXPENSE 15, 1970, April requesting Louie on OF ANY KIND OR NATURE CAUSED signature to various forms which Interna- OR INDIRECTLY BY ANY DIRECTLY Financing arrange tional would need to UNIT HEREUNDER OR THE LEASED necessary financing. At about this same USE OR MAINTENANCE THEREOF time, Financing International submitted the THE FAILURE OF OPERATION OR proposed to Funding Systems transaction REPAIRS, THEREOF, OR THE SER- Leasing Corporation (“Funding Systems”). THERETO, VICE OR ADJUSTMENT BY ANY DELAY OR FAILURE TO submitted its standard OR THEREOF, Louie, lease-purchase forms OR BY PROVIDE ANY place discussions then took between it and ANY INTERRUPTION OF SERVICE Rich, Mr. Marvin THEREOF OR FOR attorney OR LOSS OR USE proper- DAM- has never functioned ANY OF OR LOSS BUSINESS malfunction, AND has never ly AGE WHATSOEVER HOWSOE- and continues to VER accepted by CAUSED.” the lessee and the lessee been make in connection any payments will not Immediately following quoted provi- until the is said appears following: sions also there carry out the proper in the condition to “Lessor, Lessor’s or Lessor’s As- Successor it functions for which was leased.” install, signee obligation no shall have erect, test, adjust equipment. service July, the Federal Com- Sometime ** * No defect or unfitness of approved finally munications Commission equipment shall relieve Lessee of the obli- who KBEA Intermedia obliga- gation pay rent or of other purchase completed then * * Closely tion under Lease this pay- made Louie. Thereafter Intermedia that, capital appears there let- following ments under the lease to Chase A heavy type: ters and black “THIS IS Manhattan, continued with its while IGM FOR THE NON-CANCELLABLE LEASE the defects in the leased remedy efforts to TERM ABOVE.” INDICATED efforts were so ineffec- equipment. Those half Intermedia year tual that after a and a signed documents leasing
Another of the dated Manhattan wrote letter Chase by King financing Louie was a statement 17, 1971, stating, “This letter December duly by Funding Systems which was filed paid KBEA that the to advise Secretary with the of Missouri on State 1, 1971 and *5 on or about December 18,1970. Funding Systems Radio May Thereupon pay- last December 1971 will be the due payment by May made its check dated Intermedia, Inc. d/b/a by ment made pur- of the to IGM for balance Good Mu- $44,520.91. KBEA Radio until International chase in the amount of price due in satis- equipment gets was then sic the automated Delivery equipment of the made * * * This May early factory working late condition. by King IGM to Louie in equipment bought from International June, (By part mistake a small * * * Good Music previously had been delivered Funding Systems Leas- ISC, arrangement with subsidiary IGM to whose Intermedia * * Despite that ing Corporation had entered into a contract in 1969 for the letter, Louie, attempt remedy IGM continued King of KBEA from con- of 1972 when the defects until the summer the Federal tingent upon approval of Com- up, any ceased at- finally gave Intermedia Commission.) soon munications Sometime equipment, and stored it thereafter, tempt to use the Funding assigned the Systems away. lease-purchase obligation to Chase Manhat-
tan Bank. refused to make After Intermedia Funding Systems com- payments, from the further malfunctioned against King present suit perform failed to the menced the very beginning and damages in- for the lease installments praying the station as purpose automating interest, attorneys responded promptly unpaid, together tended. IGM however costs. fees, expenses incidental and King Louie and sent certain complaints counter- filed answer and also a City King who worked dili- Louie engineers to Kansas misrepresentations alleged on correct the claim based gently attempting at warranties, rescission praying breach of point and Difficulty ment. continued 15,1970, in the sum of damages and July letter dated contract that Rich wrote a in the $71,958.20. Intermedia intervened Funding Systems, jointly addressed against filed a counterclaim stating litigation that Manhattan and IGM Chase same alleging the Funding Systems some recently leased King Louie “has King relief as asking the same grounds Music from International Good third-party King Louie also filed Leas- Louie. Funding Systems Company through Intermedia of itself and on behalf again petition advise that ing This letter is to Corp. against alleging misrepresentations, stipulation recognized given IGM is effect warranties, breach of claiming rescission 1-105.1 Uniform Commercial Code Sec. $71,958.20 praying damages in the sum of has no interest in the Funding Systems any judgment might and for which be enter- being solely that issue point appeal, third against Funding Systems. ed it in favor of In Although King Louie and IGM. it, response against to the claims Funding represented in appeared the latter and was against filed a crossclaim court, nor it has filed no brief trial praying indemnity any judgment in this court.2 appearance made other might be entered against it favor of Intermedia, Louie or seeking and further I. damages against IGM breach of warran- ty. APPLICATION OF U.C.C. ARTICLE court judgment
The trial entered in favor TO FUNDING SYSTEMS of Funding Systems against King Louie in that “a war- provides U.C.C. 2-314 Sec. $63,485.50; the sum of favor of ranty goods shall be merchantable Systems on the counterclaims of implied in a contract for sale if the seller Intermedia; against Funding Systems respect goods is a of that merchant IGM; against on its claims in favor of provides kind.” 2-102 further Sec. * * * against $22,862.86; IGM the sum of apply “this Article does not * * * against against Intermedia on its claim is intended transaction Funding Systems. judgment, From that operate only security as a transaction >> * * * the sole appeal has been taken by Louie. application foregoing provi- King Louie upon following relies following sions is affected definitions (1) points: the trial court erred in (1) contained in 2-104. Sec. Subsection finding was a mere meaning defines the “a term “Merchant” financing agency responsible and not as a person of the kind or who deals merchant under the Uniform Commercial occupation himself otherwise his holds *6 Code; (2) failing that the court erred in having knowledge peculiar out as or skill unconscionable; (3) find the lease and goods the in practices or involved the trans- * * the court limiting King erred in Louie’s (2) action defines Subsection recovery those amounts theretofore “Financing agency” meaning the term as “a paid by King Louie. bank, company person finance or other who ordinary in the course of business makes prevail against For Louie to against goods or documents of advances Funding Systems, it must establish both of arrangement by title or who with either the points stated, its 1 and 2. Otherwise the buyer ordinary seller or the intervenes in judgment must be affirmed if the trial course to make or collect due or court’s ruling Funding Systems in favor of * the for sale *. claimed under contract point can be as 1 or sustained to either ‘Financing agency’ includes also a bank or point questions respect 2. All to these person similarly other intervenes be- who points two must be determined under New position in the of persons tween who are York law because in the lease it buyer respect goods.” seller interpret is stated that “said lease shall be rights ed and the the par argues Funding Systems liabilities of ties here determined in accordance with the a the meaning “merchant” within the of laws the state of New York.” a above sections and therefore is Such deemed simply 1. The Uniform has Commercial Code been ion hereafter will be to or else “U.C.C.” adopted McKinney’s in New York Uniform to section number. Commercial Code Sections 1-101 to 10-105. transcript statutory time pertinent opin- 2. The at the indicates that IGM The references in this process being liquidated. of trial was in the 630
have
implied
made an
warranty
Funding Systems
position
under
did not
a
occupy
Sec.
2-314.
Funding Systems argues
governing
and the
deci-
covered
Sec. 2-314.
trial court held that
Processing
merely
it was
a “fi-
is Leasco Data
point
sion on this
nancing agency” and therefore does not fall
Corp.
Corp.,
Equipment
v. Starline Overseas
within
scope
the
of Sec. 2-314.
supra.
case,
plaintiff
In that
the
was a
bought
company
equip-
office
finance
particular
Whether
party
designated by the defendant and then
ment
given
scope
transaction falls within the
defendant.
leased
implied warranty
provisions of
2-
Sec.
for
paid
The defendant
under
the lease
314
must be determined
at
looking
defaulted,
claiming
years
three
then
facts and circumstances of each case sepa
the equipment
plain-
to be defective. The
Processing
Leasco Data
Equipment
rately.
tiff
for rent
for the balance of the
sued
due
Corp. v.
Corp.,
Starline Overseas
Misc.2d
Court,
Supreme
York
lease term. The New
(1973).
similarly
N.Y.S.2d
See
Term,
Department,
First
held
Appellate
Services,
In Re
Sherwood Diversified
plaintiff was
recover
entitled to
382 F.Supp.
Atlas In
(D.C.N.Y.1974);
upon alleged breach
dustries,
despite defenses based
Register Co.,
Inc. v. National Cash
warranty.
In this connection and direct-
(1975).
216 Kan.
631 the Uniform complete upon shall be deemed arrival at “Article Commercial * * *’ 2-102, (Sales), expressly at section premises (Emphasis Lessee’s Code— application provi of its excludes from the supplied). Defendant’s selection of (sec. including 2-101 to and sec. sions specified prompted by machine was U.C.C.) ‘any which al 2-725 transaction friend, way recommendation of a in no of an though in the form unconditional plaintiff connected with or the manufac- is present contract to sell or sale intended A representative turer. of the manufac- transaction* * *'." operate only security as a dealing turer or merchant in these ma- chines, was consulted defendant’s been fol The above decision Leasco has
president
entering
leasing
before
into the
jurisdictions.
lowed in a number of other
agreement
plaintiff.
in In Re
directly
Leasco was
cited
Sherwood
“A
written
proper construction of the
Services,
supra, and Atlas
Diversified
leasing
must find it to be a
Industries,
Register
Inc. v. National Cash
* *
‘title retention contract and lease
Co.,
supra. Atlas in turn was cited
security’
meaning
intended as
within the
v. Allied
Citicorp Leasing,
followed in
Inc.
9-102(2),
designed
U.C.C.
to afford
Distributors, Inc.,
F.Supp.
Institutional
advantage
having
defendant
re
(D.C.Okl.1977).
Other authorities
possession and use of
own
choice
its
free
third-party
fusing to hold a financier
particular
throughout
machine
its
subject
2-314 are
Sec.
expectancy, by
long-term
usable
means of
Bass,
Leasing Co. v.
96 Idaho
All-States
installment
payments
per
of $274.20
(1975);
Although encompassed not forth does not set by Rule The code itself any point upon required relied as 2-302.9 “unconscionability.” A any will be taken of definition of 84.04(d), note nonetheless concept has however measuring this Sys that even if test suggestion Leff, “Unconscionability implied suggested by been exempt liability tems is under 2-302(1) provides: here, court as a “If the 9.Sec. 7. Under the facts any opposed clearly “security or clause of law finds the contract interest” as matter 1-201(37); at Hawk- unconscionable a “true lease.” U.C.C. Sec. to have been of the contract the time it was made the land, may Impact refuse to “The of the Uniform Commercial court Equipment Leasing,” supra. contract, may Code on enforce or it enforce uncon- without the of the contract remainder 2-316(2) provides: clause, applica- or modi- may 8. Sec. “to exclude limit the or it scionable merchantability fy any part implied warranty any to avoid unconscionable clause tion of language mer- of it the mention must result.” unconscionable chantability writing and in of a must be case conspicuous, modify and to im- exclude or warranty plied must of fitness the exclusion * * * by writing conspicuous .” *10 634 effective deprives it of its most New disclaimer Emperor’s
and The Code—The fact the leased remedy despite the Clause,” (1967) which 115 485 U.Pa.L.Rev. to be useless. proved has commen widely accepted by legal has been 10 argument from United Louie derives this New York case law. Indus tators Plaza Corp. v. Franklin Leasing States Eq. Corp. tralease Automated & Scientific Inc., 319 N.Y.S.2d 65 Misc.2d Apts., Inc., supra, 396 Enterprises, v. R. M. E. by a civil (1971).12 opinion That 431. N.Y.S.2d at York, court of a City of the New court test, distinction is Leff Under the and the jurisdiction, inferior and limited “proce made between “substantive” of uncon- problem approach toward the substantive unconscionability. By dural” has not opinion in that scionability adopted is meant undue harsh unconscionability by any court followed approved been or themselves. ness in terms On the contract York. More in New superior jurisdiction hand, unconscionabil procedural the other problem by to this over, taken approach involved with the contract ity general Leasing is inconsistent United States high pres process, formation and focuses on higher in the by courts subsequent opinions print fine parties, sure on the exerted being heirarchy, those judicial New York contract, unequal bar misrepresentation, Court, Appel Supreme the decisions of Generally there must be gaining position. in Leasco Term, Department, First late substantive uncon- procedural both and also Corp. v. Star Processing Equipment Data a contract or clause scionability before by the supra, and Su Corp., line Overseas Deutch, 2-302. can be voided under Sec. S. Division, Court, Appellate Second preme 10; Summers, supra supra note White Automated & in Industralease Department, 10; note 10. In the Spanogle, supra note Enterprises, R. M. E. Eq. Corp. v. Scientific concepts, it has been application of these Leasing there States supra. United that there suggested by leading one writer as declarative be considered fore cannot balancing the substantive be a New York law. if there exists aspects, and that procedural great have argument Louie’s would unconscionability then not gross procedural un- here had if appeal the lease un- by way much be needed of substantive warranty rights deprive it of all dertaken to “sliding same conscionability, and that the financing party, against either the substan great if there be applied scale” be Very little IGM. supplier, or the Systems, unconscionability procedural little tive but such a total added to would have to be 10. Spanogle, supra note unconscionability. require relief to right destruction indeed That unconscionable. it be declared Unconscionability. A. Substantive Industralease, supra, the situation upon basis concepts important general these is another Applying distinguished from case, ap little case must present the facts Here, contrast, King situation. present substantive unconscionabili pears by way of breach of rights for its full there is un- Louie retains argues that ty.11 impor- As to against IGM. sense, warranty in this because conscionability Leasing war- does not involve States g., Spanogle, “Analyzing 12.United Unconscionabil- E. disclaimer, requirement (1969); ranty Problems,” but rather ity 117 U.Pa.L.Rev. Summers, special provision Article 10 under “Uniform Commercial notice White Deutch, Code,” Series, 1972); Property (Hornbook Law which S. the New York Personal Contracts,” Note, (1977); in our 27 Buffalo “Unfair into contention has never been drawn Leasing (1978). Therefore, consti- L.Rev. United States case. applicability authority respecting no tutes warranty implied could 11. A disclaimer Funding Systems, issue for U.C.C. art. itself, hardly with- in and of be unconscionable Neverthe- cites that case. more, specifi- of Sec. 2-316 which out in view Leasing less, opinion does States United cally if in an such disclaimer done authorizes un- issue of comments on the relevant contain surrounding way, appropriate at least when conscionability. improper. not make that circumstances do factor, ed, considerations. The Citicorp but also on further especially tance of this see *11 case, peculiar Industralease Leasing, Inc. v. Allied Institutional Distrib facts of the been referred utors, Inc., Industries, already which have supra; Atlas Inc. v. some of page summarized at Co., opinion, to in this are supra; All- Register National Cash opinion to show the 432 of the Industralease Bass, supra. Leasing Co. v. States involved: unconscionability there Unconscionability. B. Procedural shortly be- “Here the evidence is that delivered, were to be fore the incinerators it is at best to find While difficult con- the defendants were told declaring any sound basis for substan themselves tract in existence case, unconscionability tive in this it be performed not be and Clean Air could flatly impossible comes to do so with re reasons, clearly not communicated spect aspect procedural uncon- had to be executed to that a new contract scionability. There can be no claim of sur equipment. delivery insure prise part light on the Louie in eliminated the warranties new contract very prominent conspicuous nature pre- Air contract had which the Clean of the written disclaimer on the face of the served, Clean Air was the manufac- since Furthermore, agreement. as admit equipment. atmosphere turer of the ted counsel for Louie in the course pressure of haste and on the defendants court, argument of oral this there is before addition, In at this clearly pervasive. is no claim it of any economic coercion. begin- point bargaining, with the any showing Nor is there of any whatsoever ning of the season for the defendants’ high pressure against King tactics exercised hand, the were operations at defendants Louie. further very great Still and of im disadvantage bargain fur- clearly at a portance, there is and could be no claim as and, indeed, to under- profess ther did not inequality position. stand the size and mechanism of Leasco Processing Equipment Corp., Data their satisfy would which supra, is squarely point. That case under needs.” parallel facts refused to find a disclaimer of case, summarized, bear The facts of that liability by the financing party under an facts here. no resemblance to the equipment lease to be unconscionable. In reaching empha- Sliding that conclusion the court Evaluation. C. Scale litigation sized that the was between two said that Even if it could be corporations business dealing at arms present presents some element of sub case length through representatives who were unconscionability (although we are stantive advised, alert, “presumably knowledge- well opinion), King Louie has contrary able Exactly business men.” the same is any procedural .failed to show completely present true in the was case. a unconscionability. Applying sliding scale corporation, multi-million dollar whose factors, an balancing of there has been all held, stock had ac- publicly who been proof insufficient of such unfairness quiring property by lease-purchase agree- express declaring invalid an justify would years, ments for more than fifteen and who contract between provision of the written represented very in this trans- actively connection, it must be parties. these In this experienced, sophisticated action at- carries leasing remarked torney. buyer-lessee for the great advantages Industralease, great popularit burgeon it to upon Louie have caused reliance, from tax places plainly distinguish- y.13 popularity This fresh results heavy able, accounting procedures which allow already not for the reasons stat- laws and Fortune, November, 1976, p. reports $150 billion was forecast increase to 13. Comparable reports leases of 1980. are found accounted for a full end 15% volume, Forbes, 15, 1975, outlays January p. Age, capital and Iron all between for 1975. The dollar 12, 1976, industry, July p. $50 $80 for that billion concerning design, manufac evidence acquire new a business man to preliminary enjoy the advan- ture That through a lease and also performance.” A its own terms depreciation.14 finding shows tage of an accelerated and order adju lessee is conserva- final advantage to the to be a further that it was not intended preservation of capital outlay of unconsciona- question tion upon dication seek King Louie cannot capacity.15 Moreover, preliminary credit or any such bility. time the same advantages these and at interlocutory and merely is in its nature der protection contract claim that concomitant or re later modification subject remains financing party is unconscionable. Co.,Inc. v. Monsan Feed Rozansky versal. *12 financ- warranty by the The disclaimer of 1979, and Company, to 579 S.W.2d in the commercial ing party is universal reading A fair cases therein cited. busi- A valuable world and is reasonable. yields conclusions findings and trial court’s im- unnecessarily not be should ness device court did reach that the trial the conclusion unsym- by an perhaps destroyed paired agree lease that the final decision as his pathetic understanding by lack of In any was not unconscionable. ment underlying economic consider- courts of the event, unconscionability finding here of reasons, uncon- ations. For these claims of weight of the contrary to the would be transaction have scionability type in this reversible be and would therefore evidence New York Leas- only been denied not in the Carron, Murphy the standard of under decision, following in the cases co but also 1976). (Mo. 30 banc 536 S.W.2d Motors, Inc. in other states: Bill Stremmel supra; Walter E. Leasing Corp., v. IDS III. Home, Co., Inc. v. Convalescent Heller & 213, 8 Ill.Dec. 365 N.E.2d Ill.App.3d DAMAGES (1977). principally argues King Louie mention for brief There remains it is unfair to damages that respect to prelimi court held a the fact that the trial Fund it in favor of judgment against enter question of unconscion- nary hearing on the $63,485.50, in the amount of ing Systems it found of which ability, at the conclusion against recovery King limit Louie’s but to “is unconscionable that the $22,862.86. complaint has That to IGM that the Defendants deny in that it would merit. at the existing can show the circumstances entered judgment The amount of the mer time, warranties of destroy would third-party King Louie’s trial court on perform rep as chantability and fitness of the fol- consisted against IGM petition destroy the deny resented and would was the $3,214.44, which lowing items: among the understanding and King Louie made payment down belong to equipment would parties that the the total IGM; $18,743.77 which were Defendant, the end of King at King by either made monthly payments Dollar period One upon Manhattan; to Chase or Intermedia Louie finds that Defendants ($1.00). The court personal was an item and $904.65 terms because of the deprived, shall not be advanced on the property tax contract, right produce evi made when default at the time dence of circumstances agreement. the lease made, under respect in that contract, including representations follows: Leases, reason as II, Accounting stated Intermedia’s Wyatt, He 1972 U.II1. $50,000 pay 297; Equipment another Coogan, didn’t want Leases of “[We] L.Forum therefore, outright Security De- this cash for and Some Other Unconventional vices, presented made lease-purchase to us Duke n. 5. as L.J. pay King their would more sense because proportionate it, they it long used 15. A testified witness Intermedia share as give required Louie’s he its consent to would acquisition or four months would be three only King if of this to use.” for us the remainder would have [sic] agreement. so means of a did proof no alloca- good perceived why spects can be those and has made No reason distinguished legal items should be from two branches of tion as between those $63,- given different treatment from of such an alloca- services. In the absence required 485.50 which Louie will be tion, proper upon no basis which to there is pay Funding Systems by reason of the attorneys’ fees. make allowance judgment, directly all of which is tied to the the extent judgment is modified to acquisition equipment. of this Both the judgment Louie’s increasing paid amounts before suit and the additional $22,862.86 $86,348.36. against IGM paid amount which will have to be under modified, judgment is affirmed. As so judgment resulting from the suit are are assessed one-half Costs equally part price paid” of “the as has been request by Louie. The one-half to buyer upon which the is entitled to recover against Funding costs King Louie to tax rejection or revocation of ac un- ground that the latter Systems, on ceptance, provisions under of U.C.C. cost of the tran- necessarily increased the Ford, Beasley Sec. 2-711. See Carl Inc. v. ground alleged script, is because the denied Burroughs Corporation, F.Supp. l. proved. has not been (D.C.Pa.1973). c. 334 Even were that not *13 so, King Louie should be entitled to that J., DIXON, SWOFFORD, and C. consequential damages. additional sum as PRITCHARD, CLARK, and SOMERVILLE buyer upon rejection A or revocation of JJ., concur. acceptance consequential is entitled to dam
ages
2-715(2). Lloyd
under U.C.C. Sec.
v.
J.,
SHANGLER,
separate
dissents
Coaches,
Classic
F.Supp.
Motor
opinion filed.
(D.C.Ohio 1974); Davis v. Colonial
785[4]
Homes,
N.C.App.
Mobile
220 S.E.2d
SHANGLER, Judge, dissenting.
(1975);
Carpet
La Villa Fair v. Lewis
802[4]
opinion is valid as a didactic
majority
The
Mills,
Inc., 219 Kan.
The decade has seen a the various tellingly timing burgeon [by] use for an old commercial device: integration steps” popularity lease.1 The fresh into final Leases, II, 1.Fortune, Accounting November, 1976, Wyatt, reports 1972 U.Ill. p. 2. that 497; Equipment Coogan, L.F. Leases of leases accounted for a full 15% Devises, volume, Security capita] outlays Some Unconventional 1975. dollar Other all The 912, 909, industry, 1973 Duke L.J. $50 n. 5. $80 between billion for that $150 billion was forecast to increase Comparable reports Hawkland, are found in Impact end of 1980. the Uniform Com 3. The 1975, Forbes, p. Age, January Equipment Leasing, Iron mercial on 1972 U.Ill. Code 12, 1976, July p. 27. L.F. financing ment between King Louie and terms. Those discussions Funding Systems. premise, correspon- That once were written memorialized adopted, inexorably majority leads dence between case, 24,1970. result —for in April such the transaction The early Rich as lease money, would be in not 400.2- May followed on itself soon [§ 104(1) (2)], no warranty & would attend 1970 . . 400.2-314], King Louie would be without [§ negotiations The between Louie at-
status to unconscionability claim 400.2- Funding Systems. [§ torney Rich 302(2)] remedy open or other buyer to a deposition “Rich in his which was intro- goods. however, It is a premise, the evi- duced into evidence [testified]: dence, under scrutiny, does not allow. originally thinking ‘We started out that ground evidential carry for decision rests it- going paper IGM was self, recall, the ultimate conclusion—in the terms of Ias there was some conver- the opinion sation, sibling company with a or sub- —that sidiary company purported to be in parties here from the outset con- “[t]he leasing financing We business.
templated the very . . kind . didn’t care how to finance IGM chose party third lease-financing which has be- arrangements their long as it didn’t come a familiar and much used device in arrange- make difference in our American business . . . ments with [Emphasis knew them.’ beginning from the added].” the financ- ing would be by party.” a third evidence, On are the full these inferences premise, turn, This derives from other frangible, prove three-party and do not inferences of fact interpolations proves, transaction. The full rath- evidence opinion postulates: er, straightforward, consummated two- party equipment lease-purchase
The lack of facility by IGM to finance the King Louie Funding Sys- and IGM which transaction. adopted tems then and assumed from IGM. “IGM did not have facilities for carrying the financing of the agree- ground majority opinion general ment itself. Its practice with the parties contemplated, respect to such arrange- first, knew from the ments was to utilize the services of a party, would be financed a third is not finance broker.” compatible history with the of the transac- *15 Louie, The transaction among King IGM 30, 1970, April tion: On March and Funding Systems was concurrent. King agreed Louie to two orders for the “At the very same time that IGM sent its lease-purchase equipment from electronic Equipment Louie, Proposal King IGM, to it the The term manufacturer. was for concurrently wrote to Fi- International years specified monthly five at a sum with nancing get to the third-party financing option pur- the at the end of the term for under way. Financing King International then system by chase of the Louie on the very promptly got in King touch with payment of One Dollar. The order form Louie to request necessary the forms paid for a balance to be the called cash signed which would have to be submitted thirty days ship- manufacturer within after to the financing company, and monthly payments, Interna- ment and three advance Financing tional very promptly pro- did King duly which Louie remitted to IGM ceed to submit the proposed transaction equipment within the week. Each order approval IGM, for Funding Systems. to Fund- provided payment form for to that ing Systems any delay without then in possession goods its title to right to of the turn submitted its King documents to purchase remained in IGM until full was Louie, and negotiations immediately en- paid, goods and that the carried full war- sued between and ranty year. days, for one Within some of [King attorney respect IGM, Louie the was delivered but to Rich] majority opinion subpremise The of the preceded by
a site. The sale was mistaken references, request for fiscal which to the facility IGM the lack of finance that IGM sugges- King supplied. There was no Louie general costly equipment and its sale its other than any purpose tion in the letters of lease sales tend to finance use a broker King fiscally that Louie was satisfy IGM the prove “King that Louie knew obligation responsible for the between financing would outset that was any suggestion them. Nor there logically. The not follow party” third does order for a contem- forms exchanges between IGM preliminary obligation to plated assignment of the IGM third intimation of a King give Louie no payee. These or other variance of the are ex- contract. letters party to the significant two-party indicia of a contract them, the IGM change between opinion gives no majority which were proposal forms account. ordered, acceptance proposals— sale, posture It was in this of a concluded of sale suggests any terms none of them term, every as to as well as deliv essential them adopted those between additional ery that the knowl part, IGM —without them- other than party nor interest edge King or concurrence of Louie [unless reiterate, Funding Systems, selves. infer, majority, we as fore must does complet- agreed and already came to a sale knowledge design of such a from the bare privy. On elementa- ed to which it was not request for that credit information] law, King Louie ry principles of contract Financing, solicited International knowledge of terms cannot be bound so, Funding Systems. It is broker Pink American assent. contract without King thereafter Louie executed forms York, Surety of New N.Y. Co. in the culminated (1940); on Con- Williston N.E.2d 845[7] Funding Systems, but as tracts, (3d ed.). § evident, although becomes transaction King Louie sequential to the IGM — ma- subpremise Nor does another equipment purchase, integral it was not fully “King Louie was jority opinion —that completed commercial event. The methods of lease- the usual familiar with presented forms were major all its made purchasing had [and] Louie, by King appears, subscribed as it [except by lease- acquisitions real estate] for IGM nothing more than a convenience past arrangement for at least the purchase since the terms for deferred logic conclu- years” add more already been concluded equipment had account, on that sion that IGM, manufacturer, practice to fi- general on account Funding Sys purchaser. IGM, expected purchases nance lease independent of tems transaction evidence, de- This third-party transaction. contract, original benefit without Rich, attorney estab- King Louie rived from for IGM Louie and with benefit used the merely lishes Funding Systems only. represented It plant costly for its lease-purchase device the obli purchase by Funding Systems *16 doubt, of accel- as a mode acquisitions —no King owed IGM Louie a gation advantage. tax depreciation and erated assumption obligation owed concomitant say, suggest, or even does not That evidence effect, legal Fund King Louie IGM. In other were purchases these habitual that ing assignee an and to to IGM transaction, two-party than a seller —with all at surrogate Louie a as lends itself device warranty, good faith obligations tendant as, readily third-party to a as a im transaction — conscionability such transaction has instance, manufacturer for where the 400.2-302; 400.1-201(19); ports. [Sections transac- 400.2-314; capacity for deferred v. Umber Corp. Lease Fairfield sufficient has to, (1970)].4 lessee-purchaser tions or the U.C.C.Rep.Serv. parties. of the rights terms, and liabilities lease, by adopts York law New to define its 4. The capital outlay. resources for The distinc one who subsequently purchased this tion is two-party lease-pur critical: for sale to Louie In- chase is a transaction in analogous to ternational, Inc.? sale, protections and so within the Yes, A. sir.
Article 2 of the Code v. Patent [Owens Q. And with you whom did have subse- Co., Scaffolding 11 Misc.2d 354 N.Y. contact, quent Rich? Mr. 778,780[3, (1974)] S.2d while a true third- 4] A. I recall presently cannot his name. party arrangement merely pur finances the Funding Systems. It was a fellow at chase debt and so is a transaction in money ****** by obligation unattended warranty conscionability of contract. Data [Leasco Q. Now, right. you All mentioned a Processing Equipment Corp. v. Starline ago your counseling moment that in Corp., Overseas 74 Misc.2d 346 N.Y. purchase and in the of this (1973); Note, S.2d 288 Warranties in the purchase ment it was ar- on a lease Goods, Leasing L.J., Ohio State Vol. rangement, is that correct ? p. 1. c. 144 et seq. (1970)]. The insis Yes, A. sir. tence by attorney Rich that there be no Q. Is there some significance to that so surrender of warranty to Funding Systems far as concerning warranties the ma- in fuller shortly] context implies a [related terial is concerned? practice by King Louie to two-party lease- Well, warranties, sure, A. we had war- purchases whereby the merchantability and ranties of fitness under the code and fitness for use costly of the equipment were contract, referring ensured now to the by warranty. proof In further proposals accepted which were not, fact, debt finance was object for always acknowledged which IGM as subscription to the Funding Systems pro deal, posals, completed warran- forms contained were modified to conform purchase with the ties option provision by their terms as well as the for One Dollar at the end of the warranties that are contained in lease term and—so attorney Rich commercial preserve assumed—to transactions under the warranty. U.C.C. Q. Was it your opinion, as the counsel The subpremise remainder majori- International,
ty opinion attempts prove, by fragment the matter as arrived at and testimony attorney Rich, consummated with International he negotia- understood tions Good Music contained usual war- Systems that the lease ranties of merchantability was a and fit- three-party transaction. ness the purpose evidence takes it was manufac- on a completely differ- aspect, however, ent tured? in the full context of
testimony. subject of the inquiry was Absolutely. A. the terms of the lease-purchase documents Now, Q. you I would ask your this: In used to order from IGM. conversations you had with Mr. ON DIRECT EXAMINATION: Larson of Funding Systems, was
Q. Was this arrangement and the there ever any discussion that
understanding you counseled transaction with them would your client at the time the different so far as these warranties purchased? were concerned? A. Absolutely. Not only my client but A. Absolutely not. *17 plaintiffs
with the [Funding Sys- Q. any Was there conversation with him in this lawsuit . tems] concerning understanding that Q. Now, right. All subsequent at some purchase with arrangement you any
time did have contact with Funding Systems was to be the same Internationa] it as was with was equipment Good this sold or pur- lease Music? any chased to Louie was under A. Q. And what was that conversation? A. There Systems were understanding was, yeah. going was that to understand— Funding [******] tionalf?] different which had been arrangement made with Interna- than that were adopting the deal with IGM advised prior A. Not time that we point original- from our of view. We company, Systems that the Funding ly thinking started out that IGM was pay for going to was not itself, going carry paper this as I Prior that time equipment. recall, conversation, there was some deal was they us that assured subsidiary with a or sibling company same, just they were that exactly purported company that to be in the the shoes IGM. stepping into leasing or We financing business. Q. right. All didn’t care how IGM chose finance A. Thereafter— long their it arrangements differ- there was Q. that You learned any didn’t make difference in our made? contention ent arrangements with them. Absolutely. A. Q. Was there ever or any understanding A. conversation with surrendered? shows that. be identified on Of course not. this simply equipment Leasing leased Exhibits 1 and 2 as enumerated and and anyone Corporation that Correspondence all warranties was Q. [******] feit all All ever or ties of would right. any arrangement warranties of merchantability, and intent or leased I’ll that ask or lease any which you, fitness, warran- this understanding equipment would was there purchased forfeit- for- [******] ing at the end forfeiting payments? all term Q. you Did ever review forward Mr. Lerner officer of [Executive was never There Absolutely not. A. any for execution docu- Louie] prior time any at anybody with ment which this was any lawsuit of this institution purchased leased rather than lease or oth- conversation, correspondence, all warranties were of, that aware erwise, I am surrendered? leasing any reference had—made No, plan, A. sir. wasn’t a Q. [******] All reached was there ever would be leased right, any agreement sir. To which this or purchased your understanding would be knowledge surren- ****** because was way, consideration [Emphasis never never they don’t supplied.] have any remission of our do certainly there business warranties. without dering forfeiting all warranties Rich, attorney testimony of The insistent merchantability? of fitness restated, the transaction stated no, Certainly, A. sir. manufacturer intended
[******] purchaser full transac- a sales contemplated warranty Q. Funding Systems, your Did reaffirm- merely Code under tion them, communications ever indi- ment. arrangement by which cate that the *18 I Systems that know nothing ON about CROSS-EXAMINATION: pay Funding had direction to
Q. you When was the first time that I other doc- Systems, but know of no Louie Inter- King became aware that ument. national, Inc., had leased assignment from Q. you any Do know of Funding Systems Leasing from Cor- Leasing? Funding Systems IGM poration? A. [******] rangement we had made with My understanding arrangement was a lease ar- was that IGM, that A. Q. tween IGM Do Leasing? No, you sir. know of connection be- Well, I had to be lease, A. know that there away which was a walk relationship lease, dollar, some kind of commercial abandon for one at the was con- time, as far as this transaction period termination of a cerned, that I have no but other than payments certain number of knowledge. full warranties as set out in the— ****** Q. upon you And what do base that assumption? Q. Is it your testimony that James Lar- IGM, okay, A. We made a deal son you indicated to Funding that thing hearing next I know I’m from Systems Leasing Corporation was ex- Funding Systems, so I would assume tending warranties to Louie In- there, privity that there was some ternational, Inc., with reference to although perhaps I should not make this equipment? assumption. that A. my It is understanding, Larson, from [Emphasis supplied.] they were standing in the shoes evidence, unnoticed This extended of IGM. Whatever arrange- majority opinion, quite plainly means ments we made with they IGM were King Louie understood the transaction as a just purchasing two-party lease-purchase direct making IGM and arrange- the same equipment attended with warranties of us; ment with yes, my that is under- that by sale. This evidence means also standing. signature Funding Systems forms Q. And arrangement was what? accept another Louie meant A. arrangement And that was a lease and, seller whatever “in the shoes of IGM” purchase of this automated else, express giv- warranties preserve ment, was, whatever it to be fi- IGM, en the documents of sale with as through nanced the lease device and implied by well law under as warranties purchased at particular the end of a implies clearly, evidence the Code. This term equipment, and that also, lease-purchase practice that the usual course, would have the normal war- two-party by King used Louie was ranties and fitness for service. fully excepted kind and that ****** kindred, transaction with IGM of Q. warranty and unaffected protected by Other than that you document do Funding Systems as sell-
know of the substitution of any other agree- written by assignment. ment under er Louie Inter- national, Inc., paid would have Fund- soli- testimony, In the full context of ing Systems Leasing Corporation testimony of Rich cited tary fragment moneys totalling approximately majority opinion twenty thousand dollars? didn’t care how IGM chose to fi- [w]e Well, A. I may think there was—there it arrangements long nance their agreement,
have been some some as- in our ar- didn’t make difference signment rangements with them.
644 King un- of contract that accrued to Louie majority
does not allow the inference the
unless,
original
of
of
terms
King
draws —that
Louie understood
der
sale—
course,
relinquished
by King
entail a
thereafter
first
transaction would
rather,
Contracts,
King
167
third-party financer —but
Louie. Restatement of
§
Contracts,
(1951);
(1934);
892
Louie was indifferent
to whatever the over-
Corbin on
§
Reisman,
Leasing—
Funding Systems brought
Equipment
ture
IGM to
Fritch &
by
King
Leasing, p.
617.
Leveraged
sales
Louie
transaction
except
and
the sales warranties
IGM
thus,
successor to
Funding Systems,
was
be unaffected.
goods King
of
the status as lessor-seller
attorney
of
Rich
Finally,
testimony
Louie,
such,
New
by
as
established
and
fairly
what
evidence
asserts
the other
law,
by
on
governed
York
Article 2
expressly
shows —and
found5
the trial court
applies
by
Sales
definition —
which —
King
—that
the sale between
Louie and
goods.
policy
transactions
in
what-
IGM was concluded before IGM [for
by
as concluded
equipment
treats a lease of
ever
the intercession of
solicited
reason]
thus a
King Louie as
simulated sale —and
a
into
Funding Systems
the transaction.
on
the rationale
goods
transaction
—rests
Leasing Corp.
Commercial
[Hertz
post-sale
The evidence
letter
entirely,
House,
Clearing
59
Transportation Credit
exchanges among King
Funding Sys-
226,
(1969),
rev’d
Misc.2d
298 N.Y.S.2d
tems and
Chase Manhattan Bank
assignee
910, 316
N.Y.
grounds,
on other
Misc.2d
included,
lease-purchase
a
con-
fully
shows
(1970), l. c. 298 N.Y.S.2d at
S.2d 585
395]
King
cluded between
Louie and IGM as
commer-
great
into
solicited
of
volume of
true transaction
which IGM
view the
[in]
are entered into
Funding Systems
by purchase
cial
intervene
transactions
lease,
a
than
payment obligation
by
of the deferred
owed
the device of
rather
sale,
large
this
Accordingly,
if
IGM
Louie.
IGM
it would
anomalous
and,
were
body
basic
of commercial
transactions
princi-
lessor-seller of
on
law than
assignments, Funding
subject
rules of
ples of the law of
different
which tend
obligations
for
other
Systems succeeded to
commercial transactions
conscionability
result.6
warranty,
dealing
fair
to the identical economic
Fact,
nine,
provided
Findings
through
tured as
the Uniform Commercial
one
also
5.The
of
proposals.
majority opinion
in the
Code were not excluded
recite:
unnoticed
Relying
representations and the
6.
on the
April
sev-
1. In March and
of
IGM,King
judgment
forward-
skill and
thereto,
prior
Party
years
eral
fendant,
the Third
De-
$3,214.44to IGM
ed its check in the amount of
Music,
(herein-
Inc.
International Good
required
payments as
as the first and last two
IGM) engaged in
busi-
after referred to as
by proposals
7420.
sys-
manufacturing
ness of
radio automation
accepted
payment of
check as
7. IGM
tems.
payments
two
as evidenced
the first and last
April
2. In
for a
March and
10, 1970,
May
Rogan
signed
a letter dated
thereto,
period
prior
Inter-
time
Jones, President of IGM.
national,
(hereinafter
Inc.
referred to as
April,
IGM
8. Sometime March
Louie)
Radio
KBEA and was
owned
Station
‘lease-brokerage’firm named Inter-
contacted a
sys-
purchasing
desirous of
a radio automation
Financing Incorporated which in turn
national
tem.
Funding Systems
plaintiff,
Leas-
contacted
April
into
3. In
Louie entered
Sys-
ing Corporation regarding
sale to
an
IGM
automation
herein
tems of the same
system.
IGM 630
This
was embod-
involved.
proposals
ied in written
numbered 7408 and
thereafter,
or about
9.
signed by representatives
parties.
1st, 1970,
April
bought
automation
represented
that the 630 automation
0403083,with the
ment as set out in
No.
Lease
operation
would automate the
buy-
guaranties
warranties and
extended
timing
pro-
including
Station KBEA
accurate
er under the Uniform
Code.
Commercial
commercials, features,
grammed events such as
music,
unfairly
semi-hourly join-
majority
disparages
hourly
the authori-
6.The
news and
guised
ty
precedent
sale
ing
as
to treat a
of Hertz
of affiliate network stations.
merchantability
nonetheless—
as a sale
and fitness
5. Warranties of
goods within the
particular purpose
therefore a transaction
for the
which manufac-
free-
Unconscionability
displace
does not
that an
augury
principle
It is the
of this
transactions.
dom contract in commercial
advantage of a
entrepreneur who seeks the
Rather,
prin-
is made a
freedom of contract
the transaction—
seller—whatever
form
400.1-102(3) that
ciple
Code
§
of a seller. It
obligations
must bear the
*20
may
this
provisions
effect of
[Act]
“[t]he
since the
Louie that
the contention
Com-
by agreement.”
be varied
[U.C.C.
Funding Systems was ac-
transaction with
however,
subject
principle,
ment
That
2].
sale,
the
plaintiff warranted
tually a
that
of that section
specific exceptions
to the
merchantability and fitness for use
not disclaim the obli-
parties may
that the
is answerable for
their
equipment and
and reasonableness
good faith
gations of
this transac-
The circumstances of
breach.
Although not
the Code.
prescribed by
by
Sys-
the contention
dispel
tion
terms,
agree
the authorities
dubbed in those
lessor and
merely
tems
it was
a finance
that
obligation under
Code
that another
Sales, but
so not amenable to Article 2 on
by
varied or avoided
may
not be
contends, notwithstand-
Funding Systems
400.2-302
provision of
§
is the
the transaction
ing, if warranties attended
White and
conscionability of contract.
for
conspicuous
they
by
were disclaimed
Code,
Summers,
3-9
Commercial
§
Uniform
400.2-
writing
required
of exclusion
§
Deutch,
The
(1972);
Unfair Contracts:
King Lou-
agreement.
316 contained in the
(Lexington
Unconscionability
Doctrine
notwithstanding,
responds,
ie
all else
Thus,
these
Books,
imposes
1976).
Code
the lease
was unconscionable
for the sale
obligations
every
contract
within the terms of 400.2-302.
§
goods.
It
whether the
only
remains
to decide
unconscionability derives
doctrine of
The
warranty
terms of surrender of
and defens-
equity
law and the
from both the common
es of
contract between
the form
in-
were reluctant
practice. The courts
conscionable
ground
par-
that a
express
validate on
assent.
unfair. Out
ticular clause or contract
by Systems
they
The form
contract”
contract submitted
for “freedom of
regard
of a
and oth-
Leasing
by King
and subscribed
Louie was
devices of construction
used formal
accomplish
pur-
methods to
unconscionable and should not be enforced.
er covert
Eq. Corp.
operation
Scientific
Industralease Automated &
of Article 2 of the
The com
Code.
482,
majority opinion
Enterprises,
396
ment at note 4 of the
not
58 A.D.2d
v. R.M.E.
427,
(1977)
prominently
appellate disposition
misconstrues the
of Hertz
430
[cited
N.Y.S.2d
authority
majority opinion].
pervasive
purposes
but
overlooks the
other
subsequent
original
lower
deci
Hertz decision contin
Civil Court rationale in
influence of the
ues
courts,
only by
Mays
beyond
sions—not
but in
New York
forum:
v. Citi
the immediate
jurisdictions.
Bank,
perception
Ga.App.
Trusnik,
other
of the ma
132
National
zens & Southern
602,
jority
prece
May
(1974);
that Hertz can be of no value as a
v.Co.
Paragraph twenty-one
is a waiver
to the
(2)
appears
is claimed
When it
jury
interposition
lessee of trial
any clause
court
the contract or
against
counterclaim
lessor in
or setoff
par-
be unconscionable
any litigation
may
the lease.
thereof
directly against
again
the Lessor on
agreements
have recourse
7. The RECEIPT iterated
defense,
counter
paragraphs
such
set-off or
account of
claim”—in clear contradiction of
paragraph
of
lessor to
three and eleven
intention
assign
promise
the terms of
and the
lessee to
twenty-one
pay
assignee
obligation
which recites the waiver
under the
defense,
against
notwithstanding any
the lessor
of all remedies
contract
setoff or1
lessee
against
under
lease.
counterclaim available
proviso
lessor with
reserv(es)
right
Lessee
its
“the
400.2-302,
draftsman of
the tradi-
oppor-
ties shall be afforded a reasonable
§
evidence as to its com-
tunity
present
signature
manifests
tional doctrine that a
setting, purpose
mercial
and effect to aid
nature of a
special
assent overlooks the
making
the determination.
court in
Llewellyn
every
saw in
form contract.
separate agree-
two
standard form contract
unconscionability comes with
The term
the terms ac-
ments: one
meaning.
not without
out definition but
given as-
specifically
tually bargained
prevention
one of the
principle
“The
agree-
and the other
sent
the nondrafter
oppression
surprise
unfair
rote, nonnegoti-
boilerplate,
not of
of allocation of risks ment from the
disturbance
bargaining power.”
and,
terms of
superior
certainly,
because of
unread
ated
almost
400.2-302,
The ele
U.C.C. Comment
The Com-
Llewellyn,
printed
1].
form.
[§
[K.
have
surprise
oppression
ments unfair
Tradition,
(I960)]:
mon Law
370-371
commentators,8
been translated
and ac
“assent” to
thinking about
Instead of
majority opin
cepted by the courts [and
clauses,
recognize
we can
boiler-plate
ion],
procedural
as a distinction between
there is no
specific,
far as concerns
unconscionability.
and substantive
Proce
has in fact been
assent at all. What
unconscionability
dural
refers to abuse
few dick-
specifically
are the
assented
process
the contract formation
and substan
terms,
type of the
and the broad
ered
to resultant
unconscionability
tive
refers
more;
transaction,
thing
and but one
of contract.9
harsh and unreasonable terms
more is a blanket assent
thing
[not
terms,
not
unconscionability
In these
does
not unreasonable
specific
assent]
contract,
interfere with freedom of
but re
may have on
the seller
or indecent terms
the lack of free
dresses unfair results from
form,
or eviscerate
his
which do not alter
agreement.
Indus
assent to the terms of
the dickered
meaning of
the reasonable
Eq. Corp.
tralease Automated & Scientific
has not been
print
The fine
terms.
Enterprises,
supra,
v. R.M.E.
l. c.
to cut under
read has no business
Co.,
Furniture
Williams v. Walker-Thomas
meaning of those dickered
reasonable
*23
445,
(U.S.App.D.C.1965).
350 F.2d
449
dominant and
which constitute the
Although unconscionability
400.2-302
§
expression
agreement.
real
contracts,
applies to all
the statute is
printed
Thus,
given to the
the assent
to the ina-
particular response
the Code
by consumers
terms of a form
law to deal with the
contract—
bility of the traditional
by
limited
alike—is
businessmen
perti-
unfairness of form contracts—most
parties
that:
understanding
common
rules,
nent
conventional
a con-
here. On
first,
not alter the
may
the form terms
a
signs
prepared by
sumer
a form
who
second,
and,
the rote
negotiated terms
manifests intent to
thereby
seller or lender
singly
unreasonable
may
clauses
not be
by
though
bound
all its terms —even
he
Analyzing Un-
Spanogle,
in
effect.
total
neither under-
had not read them and could
Problems,
conscionability
117 U.Pa.L.Rev.
change
nor
them if he had.
It was
stand
931,
contradicts
(1969). When a form
chief architect and
940
insight Llewellyn,
choice,
Corp.,
Leff,
59 Misc.2d
Unconscionability
Jones v. Star Credit
and The Code—The
485,
189,
Clause,
(1969).
nu
Emperor’s
There are
There were
four terms
Louie: not be enforced.
Industralease Automated
description of
goods,
payment,
terms of
Eq. Corp.
Enterpris
v. R.M.E.
& Scientific
option
and extension of
432;
time
es,
Zabriskie
supra, l. c.
Chevro
The
acceptance.11
balance of the lease
Smith,
let,
N.J.Super.
Inc. v.
terms, twenty-six separate paragraph terms
Contracts,
(1968);
A.2d 195
6 Corbin
except
por-
for a
conditions of
1256-1257;
Summers,
lease—
&
Uniform
White
§§
paragraph
conspicu-
tion of
three which in
Code, 9-2.
Commercial
§
print
any warranty
ous
disclaims
a mass
—is
parties
The
free
are left
under the Code
print
protects,
fine
trivia. The form
to their own re-
shape their remedies
terms sometimes contradictory to the DE-
quirements
pow-
but even this
400.2-719]
[§
RECEIPT,
LIVERY ACCEPTANCE
Fund-
subject
er to limit remedies is
to the uncon-
ing Systems
assignee
any
and its
scionability principle of
400.2-320.
§
“[I]t
claim, counterclaim, setoff, remedy
jury
contract
very
is of the
essence of a sales
to which
may
the lessee
be entitled.
.trial
adequate
that at least minimum
remedies
The
many
protections
form recites
of these
be available .
.
.
be at
[T]here [must]
against
transaction,
the lessee from
quantum remedy
least a fair
for breach
short,
whether or not under the
In
lease.
obligations
of the
or duties outlined
Funding Systems undertakes
to assert
pur-
contract
.
.
. Thus
clause
against King
rights
and to
all
porting
modify
or limit the remedial
exculpated
liability
might
from all
a lessor
provisions of this Article in an unconsciona-
conceivably
against
have
a lessee or be sub-
subject
ble manner is
to deletion .
. .”
ject to under all circumstances however un-
400.2-719,
exculpatory
Comment
related to the actual transaction. These
[§
1].
provisions
throughout
printed
terms are
grossly
out of balance as to be
iterated
beyond
expectations
deny remedy
the reasonable
of the
lease form which
to the lessee
Trading Corp.
transaction. Wilson
v. David altogether
are
not codetermined
terms
Ltd.,
Ferguson,
supra;
Corp.
Electronic
of King
merely
Louie but
inserted
the les-
Corp., supra.
America v. Lear Jet
meaning
sor.
alter the fair
They
dickered terms and so subvert
the basic
bargain
The basis of the
between IGM
party
bargain without assent
other
and King
Louie and thereafter assumed
“Unconscionability
contract.
arises
Funding Systems, was the lease-sale for an
compelling
inequity
payment
from the
agreed price
that can’t be used without
operate
that would
as an automated broad
right
interpose a defense or set-off.
system.12
negotiated
cast
These were the
point
From the
of view of the user it makes
terms
very
and the
root of the contract.
buyer
that he is labeled a
printed
a lessee
little difference
deny
forms which
[in
*25
case,
this
to assert a defense or lessee. In either case the
is
Louie]
equipment
place
negotiated agreement
was not in
until
11.
the
to extend
the
June
about
Even
1,
acceptance
days
provid-
time for
from three
[as
by paragraph
printed
ed
four
form]
another, simpler,
12. The evidence establishes
days
ten
is at variance with the actual transac-
remedy:
608;
acceptance.
of
400.2-
revocation
[§
tion because the form DELIVERY ACCEPT-
Eq.
Industralease Automated & Scientific
equipment
ANCE
RECEIPTshows that the
Corp.
Enterprises,
supra,
v. R.M.E.
l. c.
1970,
accepted by King
May
Louie on
[the
present
n.
That issue was
5].
not made or
fact,
when,
signed]
date the lease was also
in
ed.
however,
justification
judicial
for
inter-
pay
unconscionable if the user must
for
the
right to
something he can’t use without the
indisputable fact
rests on the
ference
[es-
assert a
defense or set-off.”
meritorious
Funding
the
of
by
very
tablished
evidence
Leasing Corp.
United States
v. Franklin
no
had
choice but
Systems]
the lessee
Apts., supra.
Plaza
required
which
terms
accept the form
equipment yet excul-
payment
full
for the
Funding
contends
the ma-
Systems
[and
stresses], however,
there
jority opinion
liability.
lessor
all
The lease-
pated the
for
no
the
formation
unfairness in
contract
between Fund-
purchase which eventuated
there was
process
disparity
because
no
placed
Louie was
ing Systems and
bargaining
lessor and
power
In-
Funding
by lease-broker
lessee,
corporations.
both million-dollar
request
Inc. at the
of
Financing,
ternational
contention, however,
Contrary to
uncon-
of
finance
debt
IGM to
scionability
operate
relieve
does not
original
Louie.
transaction
disadvantaged by
a consumer
a one-sided Larson,
International Financ-
President of
contract induced
imbalance of the
concurrently Regional
Mana-
ing, Inc.
purpose
The
of the un-
power
bargain.
that the
ger
Systems,
of
testified
section is
conscionability
prevention
“the
used
the transaction was
lease form
oppression
surprise
and unfair
every
used
lessor-financer of
the terms
not of
disturbance of allocation of risks
equipment
industry.
layout
in the
“The
bargaining power.”
because of superior
different,
they
but
are
may
the lease
400.2-302,
1, emphasis
U.C.C. Comment
[§
all the
He testified cer-
virtually
same.”
supplied.]
primary
which
concern
company
is in
tainly
leasing
that “no
prompted adoption
unconscionability
leasing
business .
general
section was recognition that
was little
there
warranties, maintenance, mer-
extends
reliance
businessmen
the force of
such
chantability
any product.” Every
printed terms in the form contract transac-
throughout
industry
war-
lease
contains
tions between them. This section under-
disclaimers,
exculpatory clauses
ranty
takes
relieve the artificial rule which
those
limit remedies and
other terms
which
accords the
principles
form terms effect on
assignee
insulate
lessor and
of freedom
although
of contract
no assent
legal
termi-
actions and counterclaims.
given
hidden terms was
or intended.
is
nology
document
Deutch, Unfair Contracts: The Doctrine of
requirements
made to conform to the
thus
Unconscionability, p.
(Lexington
Books
houses,
large
particularly
financial
1977). As the citations of
on the
decisions
Bank and New York
Manhattan
Chase
signify,
U.C.C.
to that
Comments
section
Bank,
major
which are the
Chemical
unconscionability relates to merchant-to-
fact,
In
sources
such credit.
merchant transactions as well as to consum-
ment lease form between
er contracts.
con-
King Louie is a virtual adhesion
An
bargaining power,
imbalance in
nondrafter no choice
tract which allows the
itself, does
render a contract uncon
not
prepared
It
as to terms.
is a contract form
substantively
if
scionable
the result is not
every
required
industry and
Michigan
unreasonable. Allen v.
Bell Tele
printed
equipment lease transaction. The
632, 171
phone Company, Mich.App.
advantage of the lack
form takes
(1969).
consumer
N.W.2d
In
692[5]
terms
impose
real alternative to a lessee
contracts, the
of the indi
particular status
no
but allows
which demand full
instance,
knowledge
his
vidual—for
limited
worth-
goods
prove
to be
recourse
disparity
English may
contribute to the
—
no
but
has
choice
less. An
lessee
the court.
induce intervention
accept
on the terms offered
a contract
Marcano, 60
Corp.
Jefferson
Credit
altogether.
Such
do without
(1969). In
Misc.2d
actual transaction. each describes reasons, these I dissent. For contemplated a true finance lease and as- pur- sented to as such. In each case the designated
chaser-lessee purchased by
which was then finance-
lessor of the lessee request at the actual
—as Systems-King does not do. simulates but SHURTZ, Don Shurtz Don d/b/a opinion shows concern that majority Plaintiff, Realty, to hold the form contract unconscionable v. would undermine finance-lease transactions JOST, Construction Robert B. d/b/a Jost and unsettle a useful commercial device. Company, Defendant. also that the dis- majority expresses claimer of as a reasonable device warranty BESCH and Heide U. Walter J. proved by for a debt financer is its univer- Besch, Plaintiffs, A currency sal in the commercial world. v. true has no cause for unease finance-lessor definition, activity, by because such JOST, B. Jost Construction Robert d/b/a beyond money transaction in Company, Defendant. scope warranty provisions of Article 38984. No. 2 on Had the event described Sales. Appeals, Missouri form between Court District, actuality, King Louie reflected an Eastern Louie would have no basis for the claims for Division Four. and defenses it now asserts. I warranty Nov. Funding Sys- no
have cause to doubt that tems was in business to finance and com-
ment leases and not to sell as a transactor
ported in all other instances arrangement. warranty under the sales Where the 13. The disclaimers of and defense money sale, assignment arrangement as these circumstances sales security show, are vulnerable under 400.9-206 on Se- transaction are evidenced § disclaim, writing may species writing, cured of commercial limit Transaction one [a agrees permitted majority opinion modify de- transaction the to the extent warranties IGM, undertaking [Emphasis scribes the Louie and Article 2.” added.] Funding Systems]. also, Leasing Leveraged Comment Equipment U.C.C. Leas See — (Second 3 to that section states: ing, Print Edited Fritch & Reisman seq.; ing), pp. N. Ameri Bank of 45 et National (2) makes clear . Subsection Co., (N.Y. ca v. DeLuxe Poster 18 U.C.C. purchase money security transactions are Corp. App.Div.1976); sales, Elec. Credit warranty appli- General rules for sales are Rooms, Inc., Laundry U.C.C. 1119 prevents buyer Glamorous cable. It also from inad- vertently abandoning (N.Y.Sup.Ct.1971). of the waiv The avoidance his warranties a “no however, ground, security agreement was not asserted ers on that warranties” term in the by King already Louie. when warranties have been created