Court Opinion

ID: 9473723
Source: CourtListenerOpinion
Date Created: 2023-08-05 04:38:00.957352+00
Date Added: 2024-06-11T17:43:42.296961
License: Public Domain

MERRITT, Circuit Judge,
concurring.
I write to explain my view of the unconscionability issue because I am normally loath to interfere with the contract the parties have made. Judge Hillman has handled this case with great care and intelligence. He found that the limitation of remedy and warranty disclaimer clauses were both procedurally and substantively unconscionable. The procedural unconscionability ruling was based on findings that the plaintiff farmers did not understand the meaning of an “implied warranty of merchantability,” did not have its meaning explained to them, and could not have “bargained” concerning the disclaimer of implied warranty even if they had understood its import because the clause is contained in a standard seed order form which Harris Company seed salesmen must use and cannot modify. The District Court found that Harris Company used this gross disparity in knowledge, and hence bargaining power, to shift the risk of loss from diseased seeds to the party least able to discover and take precautions against disease. The District Court’s factual findings on these matters are not clearly erroneous, and its ruling, narrow in scope, is that a legally sophisticated seller may not take advantage of a buyer’s lack of legal expertise about warranties to shift, by cryptic language, the risk of loss due to latent, undiscoverable defects in the product sold.
Our decision, therefore, is based on the unequal position of the parties. If the parties had been roughly equal in their legal sophistication and had actually bargained over the limitation clauses, or if Harris Company’s salesman had informed the legally unsophisticated farmers of the meaning of these clauses, we would have ground for upholding the limitation clauses as a bargained-for term in an informed, mutually understood exchange. But here, where the technical, legalistic disclaimer failed to inform the farmers as to the risk they were bearing, and where the seed company for the first time failed to take precautions against the risk by hot water treating the seeds, the key element of accurate and roughly equal knowledge regarding the meaning of the contract was absent. The principle of freedom of contract “is enhanced by a requirement that both parties be aware of the burdens they are assuming.” Johnson v. Mobil Oil, 415 F.Supp. 264, 269 (E.D.Mich.1976). Our holding on unconscionability is thus an application of the fundamental principle of freedom of contract, and that principle would dictate a different result were both of the parties informed as to the meaning of the limitation clauses.