Opinion ID: 2076945
Heading Depth: 5
Heading Rank: 2

Heading: Application of New Hampshire Contract Law

Text: [¶ 51] A contract is given its plain meaning if the terms are clear. See In re Liquidation of Home Ins. Co., 157 N.H. 543, 953 A.2d 443, 447 (2008). If a contract's language is ambiguous, however, it is interpreted to have the meaning that reasonable persons would attach to it. See Gamble v. Univ. Sys. of N.H., 136 N.H. 9, 610 A.2d 357, 361 (1992). Where possible, the interpretation of the contract will avoid results that are harsh and unreasonable or that place one party at the other's mercy. Id. [¶ 52] Koshy and Scandent argue that the existence of the two indemnification provisions creates an ambiguity in the contract and that the ambiguity should be construed to meet their reasonable expectations. Koshy and Scandent are correct that the contract contains two indemnification provisions as well as a provision by which the renter assumes responsibility for the conduct of a driver operating the vehicle on behalf of the renter with permission from the renter and the owner. These provisions are all consistent, however, and are not ambiguous in any way. Because there is no ambiguity in the indemnification provisions, we must interpret the contract pursuant to its plain language. See In re Liquidation of Home Ins. Co., 953 A.2d at 447. That language provides for Koshy and Scandent to completely indemnify Enterprise. [¶ 53] Koshy and Scandent next contend that the indemnification provisions must be clear and conspicuous to be enforceable. This particular requirement arises, however, from Maine law providing for the strict construction of a contract that provides for a party to be indemnified for losses resulting from that party's own negligence. See Emery Waterhouse Co. v. Lea, 467 A.2d 986, 993 (Me. 1983). As it applies in the present case, the indemnification provision at issue allocates the risk between the owner and renter for the negligence of a third person driving with the renter's permission. Even if New Hampshire were to follow the rule of Emery Waterhouse, the facts set forth in the parties' statements of material facts do not justify the application of that law because Enterprise was not seeking indemnification for its own negligence. [¶ 54] We therefore turn to the remaining question: whether, on the summary judgment record, Scandent and Koshy have raised genuine issues of material fact such that a fact-finder must determine whether the rental agreement is an unenforceable contract of adhesion. [¶ 55] A contract of adhesion is a contract that is prepared by one party and submitted to the other on a take-it-or-leave-it basis. Magulas v. Travelers Ins. Co., 114 N.H. 704, 327 A.2d 608, 609 (1974). Although the disparity in bargaining power between the parties requires that, in the event of ambiguity, such contracts will be construed against the drafter to meet the other party's reasonable expectations, id., contracts of adhesion are not inherently unenforceable, see Mills v. Nashua Fed. Sav. & Loan Ass'n, 121 N.H. 722, 433 A.2d 1312, 1315 (1981); see also Pittsfield Weaving Co. v. Grove Textiles, Inc., 121 N.H. 344, 430 A.2d 638, 640 (1981). A party may avoid the enforcement of an unambiguous contract of adhesion, however, by establishing that the contract is unconscionable. PK's Landscaping, Inc. v. New Eng. Tel. & Tel. Co., 128 N.H. 753, 519 A.2d 285, 286 (1986); see also Mills, 433 A.2d at 1315. [¶ 56] Unconscionability may be established pursuant to common law principles or pursuant to the Uniform Commercial Code, N.H.Rev.Stat. Ann. § 382-A:2A-108 (1994); see N.H.Rev.Stat. Ann. § 382-A:2A-102 (1994) (This Article applies to any transaction, regardless of form, that creates a lease.); N.H.Rev.Stat. Ann. § 382-A:2A-103(1)(j) (Supp. 2009) (defining lease to mean a transfer of the right to possession and use of goods for a term in return for consideration). [¶ 57] When a term in a statute is not legislatively defined, New Hampshire courts look to common law concepts in understanding the undefined term. See, e.g., State v. McMillan, 158 N.H. 753, 973 A.2d 287, 290-91 (2009); Dovaro 12 Atl., LLC v. Town of Hampton, 158 N.H. 222, 965 A.2d 1096, 1102 (2009). Because the term unconscionability is not defined in the Uniform Commercial Code, common law concepts of unconscionability will define that term. Cf. McMillan, 973 A.2d at 290-91; Dovaro 12 Atl., LLC, 965 A.2d at 1102. Accordingly, pursuant to either the Code or the common law, Koshy and Scandent will survive Enterprise's motion for summary judgment only by raising genuine issues of material fact on the elements of common law unconscionability. [¶ 58] A contract is unconscionable pursuant to the common law of New Hampshire if (1) the contract contains terms that unreasonably favor one party, and (2) the other party lacked a meaningful choice. See Pittsfield Weaving Co., 430 A.2d at 639. A party lacks a meaningful choice if there is overreaching by the other party or a gross inequality in bargaining power. See id.; Hydraform Prods. Corp. v. Am. Steel & Aluminum Corp., 127 N.H. 187, 498 A.2d 339, 343 (1985). [¶ 59] New Hampshire law is not entirely clear about who bears the burden of establishing unconscionability, though certain cases suggest that the party asserting unconscionability bears the burden of proof. See In re Estate of Hollett, 150 N.H. 39, 834 A.2d 348, 351 (2003) (stating that the party seeking to invalidate a prenuptial agreement must prove that it is unenforceable); see also Polonsky v. McIlwaine, 114 N.H. 467, 324 A.2d 729, 731-32 (1974) (stating that a trial court will decide factual disputes regarding whether unconscionable conduct prevents ordering specific performance of a contract). Regardless of who bears the burden, however, the determination of whether a particular provision of a contract is unconscionable is a fact-laden question. See generally 7 Joseph M. Perillo, Corbin on Contracts § 29.4, at 387-93 (2002); cf. N.H.Rev. Stat. Ann. § 382-A:2-302(2) (1994) (providing that evidence of the commercial setting, purpose and effect of a contract is of aid when determining the unconscionability of a contract for the sale of goods as a matter of law). Indeed, the Uniform Commercial Code requires that a court, on its own motion or that of a party, shall afford the parties a reasonable opportunity to present evidence as to the setting, purpose, and effect of the lease contract or clause thereof, or of the conduct. N.H.Rev.Stat. Ann. § 382-A:2A-108(3) (1994) (emphasis added). [¶ 60] Here, the summary judgment record reveals that Koshy, acting for Scandent, entered into a pre-drafted agreement with Enterprise that, if enforced, will transfer extensive statutory liability to Koshy and Scandent by means of two clauses written in small print on the back of the agreement. We cannot, in these circumstances, say that Enterprise is entitled to judgment as a matter of law on the question of unconscionability. See M.R. Civ. P. 56(c). The summary judgment record, when viewed in the light most favorable to Koshy and Scandent, Reliance Nat'l Indem. v. Knowles Indus. Servs., Corp., 2005 ME 29, ¶ 7, 868 A.2d 220, 224, raises a genuine issue regarding whether the indemnification provisions of the rental agreement are unconscionable and unenforceable. In these circumstances, we must vacate the summary judgment for Enterprise and remand for further development of the facts, particularly those facts concerning the circumstances of execution.