Opinion ID: 2041498
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Heading Rank: 1

Heading: Revolution in formation of contractual relationships.

Text: Many of our principles for resolving conflicts relating to written contracts were formulated at an early time when parties of equal strength negotiated in the historical sequence of offer, acceptance, and reduction to writing. The concept that both parties assented to the resulting document had solid footing in fact. Only recently has the sweeping change in the inception of the document received widespread recognition: Standard form contracts probably account for more than ninety-nine percent of all contracts now made. Most persons have difficulty remembering the last time they contracted other than by standard form; except for casual oral agreements, they probably never have. But if they are active, they contract by standard form several times a day. Parking lot and theater tickets, package receipts, department store charge slips, and gas station credit card purchase slips are all standard form contracts.       The contracting still imagined by courts and law teachers as typical, in which both parties participate in choosing the language of their entire agreement, is no longer of much more than historical importance. W. Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529 (1971). With respect to those interested in buying insurance, it has been observed that: His chances of successfully negotiating with the company for any substantial change in the proposed contract are just about zero. The insurance company tenders the insurance upon a `take it or leave it' basis.    `   Few persons solicited to take policies understand the subject of insurance or the rules of law governing the negotiations, and they have no voice in dictating the terms of what is called the contract. They are clear upon two or three points which the agent promises to protect, and for everything else they must sign ready-made applications and accept ready-made policies carefully concocted to conserve the interests of the company.    The subject, therefore, is sui generis, and the rules of a legal system devised to govern the formation of ordinary contracts between man and man cannot be mechanically applied to it.' 7 Williston on Contracts § 900, pp. 29-30 (3d Ed. 1963). See also 3 Corbin on Contracts § 559, p. 266 (1960); 6A Corbin on Contracts § 1376, p. 21; Grismore on Contracts § 294, pp. 505-507 (Rev.Ed. J. E. Murray, Jr. 1965); R. Keeton, Insurance Law Rights At Variance With Policy Provisions, 83 Harv.L.Rev. 961, 966-67 (1970); F. Kessler, Contracts of AdhesionSome Thoughts About Freedom of Contract, 43 Colum.L.Rev. 629 (1943); C. Oldfather, Toward a Usable Method of Judicial Review of the Adhesion Contractor's Lawmaking, 16 Kansas L.Rev. 303 (1968). It is generally recognized the insured will not read the detailed, cross-referenced, standardized, mass-produced insurance form, nor understand it if he does. 7 Williston on Contracts § 906B, p. 300 (But where the document thus delivered to him is a contract of insurance the majority rule is that the insured is not bound to know its contents); 3 Corbin on Contracts § 559, pp. 265-66 (One who applies for an insurance policy    may not even read the policy, the number of its terms and the fineness of its print being such as to discourage him); Note, Unconscionable Contracts: The Uniform Commercial Code, 45 Iowa L.Rev. 843, 844 (1960) (It is probably a safe assertion that most involved standardized form contracts are never read by the party who `adheres' to them. In such situations, the proponent of the form is free to dictate terms most advantageous to himself); see Hully v. Aluminum Company of America, 143 F.Supp. 508, 513 (S.D.Iowa 1956), aff'd sub nom. Columbia Casualty Company v. Eichleay Corporation, 245 F.2d 1 (8 Cir. 1957); Collegiate Mfg. Co. v. McDowell's Agency, Inc., 200 N.W.2d 854, 859 (Iowa 1972); Quinn v. Mutual Benefit Health & Acc. Ass'n of Omaha, 244 Iowa 6, 14, 55 N.W.2d 546, 550 (1952); Lankhorst v. Union Fire Ins. Co., 236 Iowa 838, 844, 20 N.W.2d 14, 17 (1945). The concept that persons must obey public laws enacted by their own representatives does not offend a fundamental sense of justice: an inherent element of assent pervades the process. But the inevitable result of enforcing all provisions of the adhesion contract, frequently, as here, delivered subsequent to the transaction and containing provisions never assented to, would be an abdication of judicial responsibility in face of basic unfairness and a recognition that persons' rights shall be controlled by private lawmakers without the consent, express or implied, of those affected. See Grismore, supra § 294 at p. 506; K. Llewellyn, What Price Contract?An Essay in Perspective, 40 Yale L.J. 704, 731 (1931); Meyer, Contracts of Adhesion and The Doctrine of Fundamental Breach, 50 Va.L.Rev. 1178, 1179 (1964); C. Oldfather, supra at 303-04. A question is also raised whether a court may constitutionally allow that power to exist in private hands except where appropriate safeguards are present, including a right to meaningful judicial review. See W. Slawson, supra at 553. The statutory requirement that the form of policies be approved by the commissioner of insurance, § 515.109, The Code, neither resolves the issue whether the fineprint provisions nullify the insurance bargained for in a given case nor ousts the court from necessary jurisdiction. See, e. g., Benzer v. Iowa Mutual Tornado Insurance Ass'n, 216 N.W.2d 385 (Iowa 1974); Union Ins. Co. (Mutual) v. Iowa Hardware Mut. Ins. Co., 175 N.W.2d 413 (1970). In this connection it has been pertinently stated: Insurance contracts continue to be contracts of adhesion, under which the insured is left little choice beyond electing among standardized provisions offered to him, even when the standard forms are prescribed by public officials rather than insurers. Moreover, although statutory and administrative regulations have made increasing inroads on the insurer's autonomy by prescribing some kinds of provisions and proscribing others, most insurance policy provisions are still drafted by insurers. Regulation is relatively weak in most instances, and even the provisions prescribed or approved by legislative or administrative action ordinarily are in essence adoptions, outright or slightly modified, of proposals made by insurers' draftsmen. Under such circumstances as these, judicial regulation of contracts of adhesion, whether concerning insurance or some other kind of transaction, remains appropriate. R. Keeton, supra at 966-67. See also 3 Corbin on Contracts § 559, p. 267. The mass-produced boiler-plate contracts, necessitated and spawned by the explosive growth of complex business transactions in a burgeoning population left courts frequently frustrated in attempting to arrive at just results by applying many of the traditional contract-construing stratagems. As long as fifteen years ago Professor Llewellyn, reflecting on this situation in his book The Common Law Tradition Deciding Appeals, pp. 362-71 wrote, What the story shows thus far is first, scholars persistently off-base while judges grope over well-nigh a century in irregular but dogged fashion for escape from a recurring discomfort of imbalance that rests on what is in fact substantial nonagreement despite perfect semblance of agreement. (pp. 367-368).    The answer, I suggest, is this: Instead of thinking about `assent' to boiler-plate clauses, we can recognize that so far as concerns the specific, there is no assent at all. What has in fact been assented to, specifically, are the few dickered terms, and the broad type of transaction, and but one thing more. That one thing more is a blanket assent (not a specific assent) to any not unreasonable or indecent terms the seller may have on his form, which do not alter or eviscerate the reasonable meaning of the dickered terms. The fine print which has not been read has no business to cut under the reasonable meaning of those dickered terms which constitute the dominant and only real expression of agreement, but much of it commonly belongs in. (p. 370) In fairness to the often-discerned ability of the common law to develop solutions for changing demands, it should be noted appellate courts take cases as they come, constrained by issues the litigants formulated in trial courta point not infrequently overlooked by academicians. Nor can a lawyer in the ordinary case be faulted for not risking a client's cause on an uncharted course when there is a reasonable prospect of reaching a fair result through familiar channels of long-accepted legal principles, for example, those grounded on ambiguity in language, the duty to define limitations or exclusions in clear and explicit terms, and interpretation of language from the viewpoint of an ordinary person, not a specialist or expert. See Benzer v. Iowa Mutual Tornado Insurance Ass'n, supra at 388. Plaintiff's claim it should be granted relief under the legal doctrines of reasonable expectations, implied warranty and unconscionability should be viewed against the above backdrop.