Opinion ID: 1357647
Heading Depth: 2
Heading Rank: 1

Heading: Unconscionability of Termination Clause.

Text: Smiths contend that the termination provision contained in the written agreement of the parties was unconscionable and void as a matter of law. The Smiths also assert surprise in ascertaining the specific language and far reaching consequences of the provisions of the termination clause, and that the contract between the parties unreasonably imposed a disproportionate allocation of risks upon them when balanced by the mere corresponding inconvenience which could be vested upon Price's in the event of any termination by the Smiths. Ordinarily, in the absence of ambiguity, the construction of a contract is a question of law for the court and is treated as a matter of law. Southwest Motel Brokers, Inc. v. Alamo Hotels, Inc., 72 N.M. 227, 382 P.2d 707 (1963). The determination whether a contract is ambiguous is also, necessarily a matter of law. Young v. Thomas, 93 N.M. 677, 604 P.2d 370 (1979). Since the contract was unambiguous, the trial court properly construed the contract of the parties upon the law. Failing a showing of ambiguity in a contract, or evidence of fraud, where the parties are otherwise competent and free to make a choice as to the provisions of their contract, it is fundamental that the terms of contract made by the parties must govern their rights and duties. Jim v. CIT Financial Services Corporation, 87 N.M. 362, 533 P.2d 751 (1975); Huey v. Lente, 85 N.M. 585, 514 P.2d 1081, reversed on other grounds 85 N.M. 597, 514 P.2d 1093 (1973). The evidence is undisputed that appellants were not rushed into signing the agreement, nor deprived of an opportunity to fully examine the terms of the contract prior to its execution, or to have an attorney selected by them to go over each of the contract's provisions. Appellant elected not to hire an attorney to advise them concerning the transaction, and there were no negotiations or attempts by appellants to change any of the provisions in the agreement prior to its execution. At the time of the formulation of the agreement between the parties, Mr. Smith was approximately 28 years of age, had a working knowledge of the duties of a route man for a dairy products distributor, and had previous experience working with a finance company, and additionally he had worked both as an insurance salesman and as a police officer. Mr. Smith also had three and one-half years of college education. Under the circumstances no material disputed factual issue has been shown to exist concerning lack of adequate opportunity to fairly review the contract, inability to understand the provisions of the document, or lack of opportunity to seek independent professional advice regarding the terms and provisions of the agreement. The Smiths although conceding that they were aware of both the existence and language of the termination clause, argue that they were assured prior to the execution of the agreement that the contract would continue to remain in effect as long as they performed satisfactorily under the distributorship. Even assuming the truth of this assertion, in the face of the clear wording of the rights of the parties under the termination clause, the oral statement of Price's made prior to execution of the agreement cannot be deemed to constitute fraud or misrepresentation. The termination clause specifically set forth the right of either party to terminate the agreement upon the giving of proper notice. Generally, a party who executes and enters into a written contract with another is presumed to know the terms of the agreement, and to have agreed to each of its provisions in the absence of fraud, misrepresentation or other wrongful act of the contracting party. Matter of Ferrara, S.p.A., 441 F. Supp. 778 (S.D.C.N.Y. 1977); Wyandotte Brewing Co. v. Hartford Fire Ins. Co., 144 Mich. 440, 108 N.W. 393 (1906). Each party to a contract has a duty to read and familiarize himself with its contents before he signs and delivers it, and if the contract is plain and unequivocal in its terms, each is ordinarily bound thereby. Borden v. Day, 197 Okl. 110, 168 P.2d 646 (1946). The plain language of the termination clause indicates that either party was free to terminate the contract for any reason. Although a contract may be declared void where it is unconscionable and oppressive in its terms, Drink, Inc. v. Martinez, 89 N.M. 662, 556 P.2d 348 (1976), nevertheless, the fact that some of the terms of the agreement resulted in a hard bargain or subjected a party to exposure of substantial risk, does not render a contract unconscionable where it was negotiated at arm's length, and absent an affirmative showing of mistake, fraud or illegality. Schow v. Guardtone, Inc., 18 Utah 2d 135, 417 P.2d 643 (1966); Hanks v. McNeil Coal Corporation, 114 Colo. 578, 168 P.2d 256 (1946); Zapatha v. Dairy Mart, Inc., 381 Mass. 284, 408 N.E.2d 1370 (1980). Section 55-2-302, N.M.S.A. 1978, is declarative of the duties of the court when a contract is determined to be unconscionable in whole or in part. This statute provides: (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination. Whether a contract or any of its terms are unconscionable is an issue of law to be determined by the court. § 55-2-302(1), supra. Viewing the agreement as a whole, in light of each of Smith's contentions, we agree with the trial court, that the contract is not contrary to substantive fairness nor unconscionable in its terms. The evidence is undisputed that the contract was freely entered into between the parties. Under these circumstances it is not the province of the courts to alter or amend a contract made by the parties for themselves. Owen v. Burn Const. Co., 90 N.M. 297, 563 P.2d 91 (1977). The courts cannot change or modify the language of a contract, otherwise legal, for the benefit of one party and to the detriment of another. Yankee Atomic Elec. Co. v. New Mexico and Ariz., 632 F.2d 855 (10th Cir.1980). The terms of the agreement arrived at between the parties were not unconscionable or oppressive and the trial court properly determined this issue as a matter of law.