Court Opinion

ID: 9584692
Source: CourtListenerOpinion
Date Created: 2023-08-21 22:51:44.178443+00
Date Added: 2024-06-11T15:13:30.948334
License: Public Domain

DE MUNIZ, P. J.,
dissenting.
It may be that my quarrel here is less with the majority itself than with Southern Pac. Co. v. Layman, 173 Or 275, 145 P2d 295 (1944), Cook v. Southern Pac. Transp. Co., 50 Or App 547, 623 P2d 1125, rev den 291 Or 1 (1981), and the related authority on which the majority relies. The notion that contractual hold harmless and indemnity provisions are not inherently enforceable according to their terms may be an attractive one in a case like Layman, where the protagonists were a railroad and a farmer who got proportionately little benefit from the contract binding him to indemnify the railroad for its own negligence. However, in a case such as this, where parties with equal bargaining power *544use such a provision to allocate the risk of liability in a mutually desired commercial arrangement, that notion may reflect a wholly unjustifiable expansion of the appropriate judicial role in an action to enforce a contract.
Moreover, the apparent premise of the Layman-Cook approach is that hold harmless and indemnity provisions tend to be worded broadly and to encompass after-the-fact, hability-producing events that the parties did not anticipate at the time, of contracting. Although that premise is correct, it does not support a general rule of nonenforcement. Such provisions are worded broadly because breadth is their intended purpose. The sine qua non of a general risk-allocation provision is to cover future contingencies generally and to encompass events that cannot be foreseen in all of their specifics at the time the contracts are negotiated.
Even given the Layman-Cook rationale, however, I do not agree with the majority’s conclusion here. The majority states:
“Better Builds and CGF were both small and relatively unsophisticated companies. * * * The parties did not discuss apportionment of risk, much less specifically negotiate the indemnity provision. Rather, that provision was merely included in a preprinted form that Better Builds provided.” 160 Or App at 541.
Although I agree with the majority’s factual recitations in that statement and elsewhere, I disagree with the implication that the majority appears to find in the facts. In contrast, what I find significant is that Better Builds and CGF had equal bargaining power; that they used a pre-printed lease agreement form that was prepared by StevensNess and not by either party; and, as the majority notes earlier in its opinion, the parties did not discuss the terms of the form lease agreement at all. They did not single out the hold harmless provision for inattention. See 160 Or App at 530. The situation here differs from the one in Cook, 50 Or App at 556, where we construed the “form contract prepared by” the railroad against it. In Cook, there was a radical disparity in *545bargaining power, and the form contract was actually prepared by the party with the greater power. In this case, neither of those factors is present. Further, the fact that the parties did not specifically discuss the hold harmless provision here lends no greater support to the inference that they did not intend what it says than that the lease agreement, as a whole, was unintended. The parties did not talk about any of its terms. I find nothing in Layman or Cook that requires us to presume, as the majority effectively does, that parties with equal bargaining power did not intend to include a term that appears in their written contract simply because they did not single it out for oral negotiation.
My more significant disagreement, however, is with the majority’s statement that
“the benefit to CGF under the contract — the entitlement to use Better Builds’ equipment, including the rowing machine — is uncertain. Although CGF was going to pay $28,000 for the 3-year lease followed by a $100 buy-out, CGF’s benefit under that arrangement was not susceptible to some sort of ‘maximum potential profit’ quantification. Compare, e.g., Cook, 50 Or App at 556 (noting that contractor’s ‘maximum expected salvage value over demolition costs’ was $1,500). There was, for example, no evidence that use of Better Builds’ equipment, as opposed to some other supplier’s, would increase CGF’s membership or revenues. Conversely, given the severity of injuries that can result from defective exercise equipment, CGF’s potential indemnity liability was considerable.” 160 Or App at 542-43.
Contrary to the majority’s understanding, the benefit that CGF obtained is not uncertain; the benefit was the procurement of the essential equipment that CGF uses to conduct its business. Unlike Layman and Cook, where, respectively, the farmer received a small ancillary supplement to his farming income and the contractor was hired for a small incidental job, the contract in this case related to the central business operations of both parties. Consequently, this case is doomed from the outset to fail the tests that the majority administers, based on the analysis and the terminology in Cook, because that analysis and terminology are meaningless as applied to the facts of a case such as this.
*546Eveiy step in the majority’s risk-benefit analysis, as to both parties, serves to illustrate my point. For example, the majority’s observation that there was no evidence that CGF’s membership and revenues were increased by the use of “Better Builds’ equipment, as opposed to some other supplier’s,” 160 Or App at 543, is much like saying that, because CGF might have attracted more customers in Portland than Cottage Grove, it gained no ascertainable benefit by the contract through which it owns or leases its business location in the latter city. Both the majority’s actual statement and the one to which I liken it are wrong because the benefit to CGF in both instances is the procurement of a fundamental component of the operation of its business: a place to conduct the business and the stock-in-trade with which to conduct it. The fact that a different business location or different equipment might have been more advantageous in no way alters the benefit that CGF has obtained through the contracts reflecting its basic management decisions as to where and how to carry out its essential business operations.
Also misplaced are the majority’s observations that the likelihood of injury and resulting liability from defective equipment are potentially great to CGF, although Better Builds’ liability risk is no greater with CGF than some other party as the lessee and operator of the equipment. It is of course true that a severe injury to a patron could expose CGF to more liability than the equipment as machinery is worth; however, it is also true that, without exercise equipment, CGF cannot operate a business in which to have patrons. The risk is inherent in the business that requires the equipment as much as it is in the equipment itself. Similarly, the fact that Better Builds would have no greater exposure to liability if it leased the equipment to others instead of to CGF is an incident of its business. The equipment carries an intrinsic risk with it wherever it goes. That is not a compelling reason for foreclosing Better Builds from seeking to spread that fundamental risk of its business to its lessees, whether CGF is or is not among them.
In sum, I think that the majority attempts to transport both the general rationale and the analytical particulars of Layman and Cook beyond the point where they have any logical application. The contract here is between two parties *547that have equal bargaining strength, and it provides the benefits and fosters the risks that are essential to and inherent in the businesses in which both parties are engaged. In my view, there is no reason why the courts should not give effect to the risk allocation provision to which they have agreed. I therefore respectfully dissent.1

 One other matter should be emphasized. Although the underlying action in this case arises out of a personal injury, the issue before us does not involve a waiver of liability by, or the ability of, a person who has suffered injury to recover damages. Rather, the contractual provision that is in question here relates only to which of the contracting parties is responsible for the damages. The risk that the contract allocates is a purely commercial one in the context of a consensual commercial arrangement between the parties.