Title: Southland Farms, Inc. v. Ciba-Geigy Corp.
Citation: 575 So. 2d 1077
Docket Number: 1900112
State: Alabama
Issuer: Alabama Supreme Court
Date: February 15, 1991

575 So. 2d 1077 (1991)
SOUTHLAND FARMS, INC.
v.
CIBA-GEIGY CORPORATION.
1900112.

Supreme Court of Alabama.
February 15, 1991.
*1078 Bayless E. Biles of Wilkins, Bankester, Biles &amp; Wynne, Bay Minette, for appellant.
W. Dewitt Reams, Victor T. Hudson and William W. Watts III of Reams, Vollmer, Philips, Killion, Brooks &amp; Schell, Mobile, for appellee.
PER CURIAM.
The United States Court of Appeals for the Eleventh Circuit has presented this certified question pursuant to Rule 18, A.R. App.P. 914 F.2d 220.
The Court of Appeals submitted the following statement of the facts, the procedural history, and the question:
The question of law certified to us is whether the disclaimer on the CIBA-GEIGY label is unconscionable or is reasonable under the Uniform Commercial Code (Ala. Code 1975, § 7-1-101 et seq.) and thus precludes the recovery of consequential damages.
We summarized the law in Alabama with respect to the unconscionability of a contract in Wilson v. World Omni Leasing, Inc., 540 So. 2d 713, 716 (Ala.1989). There, we cited comment 1 of the official comments to § 7-2-302, Code 1975, which sets forth the basic test to determine unconscionability:
540 So. 2d  at 716. (Citation omitted.) As we noted in Wilson, an unconscionable bargain or contract is "one that no man in his senses, not under delusion, would make on the one hand, and that no fair and honest man would accept on the other." Id., Central Mining, Inc. v. Simmon Machinery Co., 547 So. 2d 529, 531 (Ala.1989). Unconscionability includes "an absence of meaningful choice on the part of one of the parties, together with contract terms that are unreasonably favorable to the other party." 540 So. 2d  at 713, citing West Point-Pepperell, Inc. v. Bradshaw, 377 F. Supp. 154 (M.D.Ala.1974), and Williams v. Walker-Thomas Furniture Co., 350 F.2d 445 (D.C.Cir.1985).
The Uniform Commercial Code recognizes the validity of a limitation or exclusion of consequential damages where the loss is commercial. Ala.Code 1975, § 7-2-719(3), reads as follows:
This Court has confirmed the validity of risk-shifting provisions in the commercial context in Kennedy Electric Co. v. Moore-Handley, Inc., 437 So. 2d 76 (Ala.1983), and in Puckett, Taul &amp; Underwood v. Schreiber Corp., 551 So. 2d 979 (Ala.1989).
We stated in Puckett, Taul &amp; Underwood:
551 So. 2d  at 983.
Where a provision excluding consequential damages is so widely used and accepted in a particular trade that it can be characterized as a "usage of trade," it has been found to be reasonable. Comment 6 to § 7-1-205 makes it clear that a contract clause resting on "usage of trade," while not immune from a charge of unconscionability, is prima facie "reasonable" due to its broad-based commercial acceptance:
Agricultural chemicals are sold, on an industry-wide basis, subject to an exclusion of liability for consequential damages. The affidavit of Dr. Everett Cowett, director of technical services for the Agricultural Division of Ciba-Geigy, has attached to it sample labels from 18 different pesticide manufacturers, all containing clauses excluding consequential damages. Clauses excluding consequential damages are permitted under the U.C.C. because they are an allocation of unknown or undeterminable risks. Comment 3, § 7-2-719.
The Minnesota Supreme Court found an identical section of a Ciba-Geigy exclusionary clause to be reasonable in Kleven v. Geigy Agricultural Chemicals, 303 Minn. 320, 227 N.W.2d 566 (1975). That court concluded that the facts of nature and the nature of the product made the stated exclusion of consequential damages reasonable. The court reasoned as follows:
303 Minn. at 326, 227 N.W.2d  at 572. In accord, Earl Brace &amp; Sons v. Ciba-Geigy Corp., 708 F. Supp. 708 (W.D.Pa.1989); Slemmons v. Ciba-Geigy Corp., 57 Ohio App.2d 43, 385 N.E.2d 298 (1978).
In upholding the exclusion clause in Lindemann v. Eli Lilly &amp; Co., 816 F.2d 199 (5th Cir.1987), the Fifth Circuit Court of Appeals noted the commercial context of transactions of this nature. The court noted that the purchaser was an experienced and sophisticated farmer who operated a large holding and had been using the product for years. The court saw these facts as establishing a course of dealing between the parties. These factors, the court felt, indicated that no procedural unconscionability existed. The court further found no *1081 substantive unconscionability, stating that "the principle of unconscionability is one of preventing oppression and unfair surprise, not the disturbance of allocation of risks because of superior bargaining power." 816 F.2d  at 204. The court discussed the fulfilling of the risk-allocation function by such exclusion clauses as that in Lindemann, as follows:
816 F.2d  at 204.
As these cases demonstrate, a consequential damages exclusion in the commercial context of the sale of agricultural chemicals is an accepted method of riskshifting in the industry.[1] Indeed, Southland Farms admits in its brief (p. 16) that the disclaimers on the labels of the Dual and Ridomil products involved here have been upheld in other jurisdictions and that those jurisdictions have held that consequential and incidental damages were not recoverable.[2] There are several reasons that make these clauses an accepted usage of trade: (1) the vagaries of nature and the nature of such products; (2) the fact that the numerous factors affecting crop yield are beyond the manufacturer's control; (3) the fact that if the potential for consequential losses were shifted to the seller, the cost of the product would be prohibitive; and (4) the fact that crop insurance is available to the farmer to mitigate any burdensome effect that such an exclusion would have.
We hold that the disclaimer on Ciba-Geigy's product is reasonable, and, therefore, that the exclusion acts to preclude the recovery of consequential damages.
QUESTION ANSWERED.
HORNSBY, C.J., and MADDOX, SHORES, ADAMS, HOUSTON, STEAGALL, KENNEDY and INGRAM, JJ., concur.
[1]  The Supreme Court of South Dakota found a disclaimer identical to the one in this case to be unconscionable. Durham v. Ciba-Geigy Corp., 315 N.W.2d 696 (S.D.1982). However, after Durham was decided, the South Dakota legislature enacted a statute that negated its holding.
[2]  Citing: Kleven v. Geigy Agricultural Chemicals, 303 Minn. 320, 227 N.W.2d 566, at 572 (1975); Earl Brace &amp; Sons v. Ciba-Geigy Corp., 708 F. Supp. 708 (W.D.Pa.1989); Slemmons v. Ciba-Geigy Corp., 57 Ohio App.2d 43, 385 N.E.2d 298 (1978).