Court Opinion

ID: 9554076
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:41:08.488718+00
Date Added: 2024-06-11T15:32:57.670878
License: Public Domain

Utter, J.
(concurring)—The issue of substantive unconscionability has not been adequately addressed by the parties in their briefs. The appellant dismisses substantive unconscionability as inapplicable to commercial contracts and then directs its unconscionability argument to the process of formation of the contract. The respondent also focuses on the negotiation process in its discussion of unconscionability. Thus, as to the issue of the unconscionability of the clause excluding consequential damages, the issue raised by the case at bar is one of procedural unconscionability. The majority correctly concludes that the exclusionary clause contained in the contract between Mount Arbor and Indian Wells is not procedurally unconscionable. Accordingly, I concur in the majority's decision.
Justice Brachtenbach's dissent analyzes substantive unconscionability in terms of the possible violation of state and federal laws regarding pesticides. I have reservations whether substantive unconscionability applies to an act occurring after the contract is made. RCW 62A.2-302(1) provides that unconscionability is determined as of the time the contract was made. The parties present evidence as to the contract's commercial setting, purpose and effect. *236RCW 62A.2-302(2). In determining unconscionability, the court examines the circumstances surrounding the making of the contract. Mieske v. Bartell Drug Co., 92 Wn.2d 40, 50, 593 P.2d 1308, 6 A.L.R.4th 923 (1979).
There are cases supporting the position that the time of contract formation governs substantive unconscionability analysis as well as cases analyzing contracts in terms of substantive unconscionability in light of subsequent events. Resource Mgt. Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028 (Utah 1985), which the dissent cites presumably in support of its position, holds that substantive unconscionability is determined as of the time of the making of the contract. The court stated, "Unconscionability cannot be demonstrated by hindsight." Resource Management, at 1043. The court then held, "When viewed in light of the circumstances as they existed on September 21, 1974, when the instant contract was executed, we cannot say that the contract was so unfair or oppressive in its mutual obligations as to shock the conscience." Resource Management, at 1043-44. The court noted an exception to the general rule that substantive unconscionability is determined as of the time the contract was made. A contract that was not unconscionable at the time of formation may become unconscionable with the passage of time and thus unenforceable. Resource Management, at 1045. This exception is limited, however, to instances where the subsequent events were not within the reasonable contemplation of the parties at the time of execution of the contract. Resource Management, at 1046. The relevant inquiry is whether the alleged disparity in contractual obligations between the parties could have been foreseen during the time the contract was in force. The fact that the clause would operate to exclude consequential damages arising from a breach was surely within the contemplation of Indian Wells and Mount Arbor when they executed the contract.
In Hershey v. Simpson, 111 Idaho 491, 725 P.2d 196 (Ct. App. 1986), cited by the dissent, the court found that the contract was not substantively unconscionable. The court *237evaluated substantive unconscionability as of the time of the making of the contract. The court held, "In the present case, the settlement agreement does not exhibit [the elements of one-sidedness, oppression and unfair surprise] when viewed ex ante—that is, in light of circumstances when the agreement was made." Hershey, at 494.
Guthmann v. La Vida Llena, 103 N.M. 506, 709 P.2d 675 (1985), which the dissent also cites, held that the agreement was not unconscionable. The court found that a contract is not substantively unconscionable unless the terms are grossly unfair under the circumstances as they existed at the time the contract was formed. Guthmann, at 511. The court then examined the circumstances existing at the time the contract was entered into and found no unconscionability. The court stated, "The doctrine of unconscionability is designed to prevent oppression and unfair surprise, and not to disturb allocation of risks because of superior bargaining power." Guthmann, at 513.
Thus, if a contract or clause is unconscionable, it must be so at the time the contract was made. There is no evidence that the clause excluding incidental and consequential damages was unconscionable when the parties entered into the contract.
Furthermore, substantive unconscionability of clauses excluding consequential damages is more applicable to consumer contracts than commercial contracts. In Tacoma Boatbuilding Co. v. Delta Fishing Co., 28 U.C.C. Rep. Serv. 26, 35 (W.D. Wash. 1980), the court observed:
[U.C.C.] § 2-719(3) declares that exclusions of consequential damages are prima facie unconscionable when applied to personal injuries resulting from sales of consumer goods. The Code does not specify what other types of limitations might be substantively unconscionable, but I am persuaded that, at least where only economic injury is involved, consequential damage exclusions in major commercial contracts are not among them.
(Footnote omitted.) There exists no policy against limitations of consequential damages. RCW 62A.2-719(3) (limitation of consequential damages valid unless established to be unconscionable); Schroeder v. Fageol Motors, Inc., 86 *238Wn.2d 256, 262, 544 P.2d 20 (1975) (exclusionary clauses in commercial contracts are prima facie conscionable).
Thus, the dissent's discussion of the substantive unconscionability of the exclusionary clause may be irrelevant in the context of a commercial contract.
This discussion, while of interest in future cases, is not determinative here because the questions of whether substantive unconscionability applies to commercial contracts or to acts occurring after the inception of the contract were not squarely raised by the parties.