Court Opinion

ID: 9554077
Source: CourtListenerOpinion
Date Created: 2023-08-07 19:41:08.494648+00
Date Added: 2024-06-11T15:32:57.712387
License: Public Domain

Brachtenbach, J.
(dissenting)—The trial court should be affirmed. The contract is unconscionable. American Nursery Products, Inc., should not be allowed to avoid liability for its breach of contract resulting from its conduct in violation of federal and state law regulating its use of Ridomil.
It is "extremely difficult to articulate an operational definition of unconscionability." Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 259, 544 P.2d 20 (1975). The term is not defined in the Uniform Commercial Code. The difficulty affirmatively built into the legal concept may, in part, account for the majority's limited analysis of this case. The difficulty is "affirmatively" built in because the doctrine is designed to enable a court, as a matter of law, to refuse to enforce those contracts, or parts of contracts, which, in "light of the general commercial background and the commercial needs of the particular trade or case," involve clauses "so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract." Official Comment 1, RCWA 62A.2-302.
The virtually unlimited possibilities as to circumstances surrounding the formation of a contract, the characteristics of the parties and the subject matter of the agreement, and the various permutations of contract terms, including promises made, disclaimers asserted, and remedies provided and excluded, all contribute to the principle that unconscionability is not a doctrine defined by mathematically precise formulas, nor should it be.
*239The majority's mistake is its seizing hold of a limited "test" which it uses in an absolute sense to decide whether the contract is unconscionable.
Although the majority has engaged in too limited an analysis here, and the unconscionability doctrine wriggles free of any attempt to impose a 3-factor "test" (or a 23-factor "test," for that matter), analytical principles have been developed which guide a court in deciding, in a particular case involving particular facts and a particular contract, whether the agreement is unconscionable in whole or in part. My examination of these principles and this contract leaves no doubt in my mind that this contract is unconscionable.
As a preliminary matter, the majority correctly notes that this court has held that RCW Title 62A.2 applies to bailments arising from a service transaction, such as this one. Mieske v. Bartell Drug Co., 92 Wn.2d 40, 593 P.2d 1308, 6 A.L.R.4th 923 (1979). In addition, paragraph 9.3 of the parties' agreement entitled the party declaring default to rights under the Washington Uniform Commercial Code. Further, as explained below, even if the code did not apply, the exclusionary clause would still be unconscionable and unenforceable.
I begin where the majority begins and ends, with considerations relevant to contract formation. As the court said in Schroeder, at 259-60, two classifications of unconscionability have generally been recognized: substantive unconscionability, which involves those cases where a contract clause or term is alleged to be one-sided or overly harsh, and procedural unconscionability, relating to impropriety during contract formation. See 1 J. White & R. Summers, Uniform Commercial Code § 4.3, at 204 (3d ed. 1988). The issues faced in Schroeder were whether a clause excluding consequential damages must be negotiated between the parties and set forth with particularity in a conspicuous manner, and whether these factors are relevant in a commercial transaction between businessmen. Schroeder, at 258-59. *240The court therefore confined its analysis to matters concerning contract formation, i.e., "procedural" unconscionability.
In so doing, the court stressed that unconscionability must be determined in light of all the surrounding circumstances. Schroeder, at 260. Moreover, the court stated that conspicuousness and negotiation, while "certainly relevant," are "not conclusive," and reasoned that, especially in a commercial transaction, prior course of dealing and usage of trade were also relevant in deciding whether the exclusion was unconscionable. Schroeder, at 260. The import is clear: All the surrounding circumstances must be examined when deciding whether unconscionability results from impropriety in contract formation.
The majority states the requirement that all of the circumstances be considered in deciding the unconscionability question, and acknowledges the course of dealing and usage of trade inquiries recognized in Schroeder. Then, after stating that the trial court found no prior course of dealing and no trade usage,1 the majority analyzes three remaining factors set forth in Schroeder and concludes there is no unconscionability here.
This analysis is flawed. First, it ignores aspects of the surrounding circumstances which suggest impropriety in the contract formation stage. Second, the majority narrows this court's holding and rationale of Schroeder.
In deciding whether requirements set forth in Berg v. Stromme, 79 Wn.2d 184, 484 P.2d 380 (1971) apply to commercial transactions, the court in Schroeder said that the same public policy applicable to consumer transactions applies in commercial transactions. That is, while the parties may agree to limit remedies for breach of contract, limitations on remedies are disfavored and the Uniform *241Commercial Code specifically provides for their deletion if their enforcement would deprive a contracting party of reasonable protection against breach. Schroeder, at 261 (citing Chemetron Corp. v. McLouth Steel Corp., 381 F. Supp. 245, 250 (N.D. Ill. 1974), aff'd, 522 F.2d 469 (7th Cir. 1975)).
The court in Schroeder further stated:
The code specifically provides for consequential damages and an individual should be able to rely on their existence in the absence of being informed to the contrary, either directly, or constructively through prior course of dealings or usage of trade.
Schroeder, at 262.
This language suggests that the majority incorrectly applies Schroeder. Indian Wells Orchards was not directly informed through discussion or negotiation about the exclusionary clause and its effect, nor was it constructively informed through prior course of dealing or usage of trade. Moreover, the majority requires a buyer at its peril to know or ascertain the legal definition and effect of RCW 62A.2-715, concerning incidental and consequential damages.
In any case, even if procedurally unfair aspects of this contract do not, alone, suffice to find the exclusionary clause unconscionable, the contract is still unconscionable. The inquiry does not end with allegedly unfair aspects of contract formation. As the court expressly acknowledged in Schroeder, the contract terms are also relevant to an unconscionability analysis, i.e., substantive unconscionability. RCW 62A.2-719(3) provides that, outside the consumer context, a limitation of "consequential damages is valid unless it is established that the limitation is unconscionable." This court has said that "by its use of the word 'unconscionable,' RCW 62A.2-719(3) conditions the validity of an exclusionary clause on . . . RCW 62A.2-302." Schroeder, at 259. RCW 62A.2-302(1) states that "[i]f 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 the *242unconscionable clause or it may limit application of the unconscionable clause to avoid any unconscionable result. The section expressly contemplates substantive unconscionability as shown by the reference to a court's finding that "the contract or any clause of the contract" is unconscionable.
As a leading commentator has put it:
It seems clear that the major focus of Section 2-302 is in fact on issues subsumable under the general heading of "substantive" unconscionability. Comment 1 goes to some lengths to establish a climate in which courts will feel emboldened to strike directly at contracts or contractual terms which appear too heavily weighted in favor of one of the parties . . ..
(Footnote omitted.) Ellinghaus, In Defense of Unconscionability, 78 Yale L.J. 757, 773 (1969).
As the court expressly said with respect to aspects of contract formation, Schroeder, at 260, it is apparent that the contract terms themselves also must be examined in light of all the surrounding circumstances and in relation to other terms. The majority has ignored the unconscionable nature of the contract terms. It may have done so on a theory that if procedural unconscionability is absent, substantive unconscionability is irrelevant. Any such theory does not justify enforcement of the exclusionary clause in this case.
Before turning to the particular facts and circumstances of this contract, and examination of its terms, a few comments are in order concerning the nature of this contract as involving a commercial transaction between businessmen. As this court has made clear, there is no prohibition in this state to finding unconscionability in a commercial transaction. In Schroeder, at 262, it is stated:
[T]he single most important concept intertwined throughout the entire code is that of good faith dealings. The mere fact that both parties are businessmen does not justify the utilization of "unfair surprise" to the detriment of one of the parties.
*243The same logic applies to overly harsh or one-sided contract terms.2
The business nature of a contract, as well as the status of a party as sophisticated businessman or neophyte, are among the factors a court must consider in deciding the unconscionability question. While there is generally greater reluctance to finding a commercial contract unconscionable, this reluctance should not stem, and does not in this state, from mere label-based analysis. The root of the matter is that where a commercial contract is concerned, the parties often fairly share bargaining strength, sophistication about contract terms relevant to the commercial enterprise involved, and the knowledge and skill required for a contract fairly allocating risks.
Turning to the facts and circumstances of this contract, unfairness in contract formation together with unfairness in contract terms renders the contract unconscionable.
American Nursery Products, Inc. (American Nursery), is a large, well-established commercial nursery which does business throughout the United States. The northwest division of American Nursery was created in 1978 when Mount Arbor Nursery, Inc. (Mount Arbor), was purchased; this division does business as Mount Arbor Nursery. The northwest division includes approximately 800 acres of nursery plantings in Oregon and 500 acres of nursery plantings near Zillah, Washington. In contrast, at the inception of this contract, Indian Wells Orchards (Indian Wells) was a newly created limited partnership. Its general managing partner had limited experience in the orchard business and no experience as a commercial nurseryman.
In the fall of 1983, the general managing partner had an obligation to the limited partners to develop several hundred acres of land into orchards no later than 1985 and *2441986. Preliminary negotiations with Mount Arbor ensued. Mount Arbor was aware of Indian Wells' nature as a limited partnership, and was aware of the general managing partner's fiduciary obligations to the limited partners.
Mount Arbor was also aware of the distinctive nature of the services required by Indian Wells. Although it had not previously entered a bailment contract of the precise sort involved here, as a large, established commercial nursery it contracted to perform specialized services tailored to Indian Wells' needs. The parties' contract involved particular rootstocks and scion wood to be provided by Indian Wells, with specialized services necessary on Mount Arbor's part. All of this was, of course, known to Mount Arbor. Thus, this situation is far removed from one where a buyer's unique or unusual needs are undisclosed to the seller. Nor is this a case in which a commercial transaction involves the purchase of fungible goods "off the shelf," or, closer to this case, the purchase of ordinary nursery stock simply grown by the nursery.
Following preliminary negotiations, American Nursery's attorney drafted a proposed contract, and later, American Nursery's attorneys drafted a second contract, which is the contract at issue here. At the bottom of page 4 of the contract, is the heading "Default; Remedies." On the next page are three paragraphs under this heading. In the middle of the third paragraph, which declares certain rights and remedies available to the contracting parties, is a clause stating "provided that in no event shall Grower [Mount Arbor] be subject to or liable for incidental or consequential damages. "
The trial court found, and substantial evidence supports the finding, that this exclusionary clause was never discussed or negotiated by the parties, that it was not set forth in greater size type than the remainder of the provisions, that it was not emphasized in the agreement, that it did not set forth with particularity those matters being excluded, and that the court did not believe that Indian Wells' general managing partner had the ability to know or *245understand fully the meaning of this provision. Finding of fact 5; Clerk's Papers, at 11-12.
The contract in its entirety is a mix of expressly stated glowing promises on Mount Arbor's part, and immediate negation of those promises through contractual limitations on and exclusions of remedies. The trial court quite correctly deduced that, in the end, there were no satisfactory remedies available to Indian Wells.
In paragraph 1.1 of the contract, Mount Arbor agreed to grow 700,000 apple trees for Indian Wells, specifically agreeing
to engage in all growing and cultural practices standard within the nursery industry in attending to and caring for the Trees and to take all appropriate and reasonable action which, in . . . [Mount Arbor's] judgment may be necessary to grow, feed, water, cultivate, spray, cut, harvest, and generally protect the Trees throughout their growing cycle through harvest and until delivery to . . . [Indian Wells].
(Italics mine.) Exhibit 1, at 1.
In paragraph 3.1 the parties expressly agreed on delivery dates, with the grafted trees to be ready to harvest in the fall of 1984 and the budded trees to be ready for harvest in the fall of 1985. The latest actual delivery dates provided for in the contract were March 15, 1985, for grafted trees, and March 15, 1986, for budded trees. These ready-for-harvest and delivery dates, of course, correspond to the general managing partner's obligation to the limited partners to develop land into orchards no later than 1985 and 1986.
Under paragraph 3.4, Indian Wells bore the risk of loss following delivery of the trees to Indian Wells after they were harvested.
In paragraph 3.5, Mount Arbor excluded liability for
any delay or failure to deliver any or all of the Trees in case such delay or failure is' caused by labor disputes, strikes, war, riots, insurrection, civil disorder, fire, flood, accident, storm, act of God, inability of . . . [Mount Arbor] to obtain materials or supplies from manufacturers or deliveries in a reasonable time after bona fide attempt and order, delays in transportation, *246accidents, or any other cause beyond the reasonable control of . . . [Mount Arbor],
(Italics mine.) Exhibit 1, at 2.
In paragraph 5.1, the contract provided that Indian Wells had 15 days from the date of delivery to reject nonconforming trees.
Paragraph 5.2 provided that as a result of Indian Wells' rejection of any trees, and Mount Arbor's acceptance of rejection, Mount Arbor had the option of replacing the nonconforming trees or reducing the purchase price.
In paragraph 9.3, the contract provided that a party declaring default
shall have all rights provided under the Washington Uniform Commercial Code and other applicable laws of the State of Washington and the terms and provisions of this Agreement
Exhibit 1, at 5. The clause excluding incidental and consequential damages followed this language.
There can be no doubt that the aim of the contract was provision to Indian Wells of healthy grafted or budded trees to be planted in an orchard and produce apples. Although paragraph 1.5 stated that no warranties, express or implied, were given which extended beyond the conditions and services set forth in the contract,3 this paragraph could in no way diminish Mount Arbor's specific promises: to grow the trees, to take all appropriate and reasonable action during their growth, to protect the trees throughout their growing cycle, and to properly care for them after harvest and before delivery, paragraph 3.4. This is so because these specific promises were made with no explicit, particularized disclaimer of liability except as to causes "beyond the reasonable control of [Mount Arbor]." Paragraph 3.5. The general disclaimer cannot serve to negate the express contractual promises made by Mount Arbor. See RCW 62A.2-316; Washington Comments, RCWA 62A.2-316.
*247Mount Arbor failed to keep its promise. Its negligence in dipping the rootstocks in Ridomil breached its fundamental promise to take reasonable care of the trees. Not only did Mount Arbor fail to keep its promise, it did so as a direct result of its own fault. As the trial court found, Mount Arbor's action in dipping the rootstocks in Ridomil caused injury and death to the rootstocks and grafted and budded trees. Finding of fact 20; Clerk's Papers, at 16. This finding is supported by substantial evidence.
Further, Mount Arbor's breach of contract resulted from conduct in violation of federal and state law. The clause excluding liability for incidental and consequential damages is invoked by Mount Arbor in order to avoid liability for large and foreseeable damages resulting from its unlawful conduct in violation of laws regulating pesticides.
This court should hold that the exclusionary clause is invalid as contrary to public policy. While the majority addresses the notion that exclusionary clauses may be invalidated as contrary to public policy, it never once addresses this principle in light of the violations of law which occurred in this case.
The Washington Pesticide Control Act, RCW 15.58, provides that it shall be unlawful
[f]or any person to use or cause to be used any pesticide contrary to label directions or to regulations of the director if those regulations differ from or further restrict the label directions: Provided, The compliance to the term "contrary to label directions" is enforced by the director consistent with the intent of this chapter . . ..
RCW 15.58.150(2)(c). Ridomil, a systemic fungicide, Mis within the statutory definition of a pesticide as including " [a]ny substance or mixture of substances intended to prevent, destroy, control, repel, or mitigate any . . . fungus . . .''. RCW 15.58.030(29)(a).4
WAC 16-228-180(1)(b) declares that "[use of] a pesticide inconsistent with [its] labeling" is a violation.
*248Under federal law, it is "unlawful for any person ... to use any registered pesticide in a manner inconsistent with its labeling. ..." 7 U.S.C. § 136j(a)(2)(G) (1988). 7 U.S.C. § 136(ee) provides that use of a pesticide in a manner inconsistent with its label "shall not include ... (3) employing .any method of application not prohibited by the labeling . . .." The Washington act does not contain a provision comparable to the latter federal provision.
The Ridomil label did not provide for dipping the roots (or rootstocks) of apple trees. Insofar as fruit trees are concerned, the label directed, with respect to citrus (nonbearing) trees in nurseries, use of Ridomil at the time of planting and at 3-month intervals as a soil drench or as a soil surface spray (with directions for the amount of Ridomil to mix with water specified). The label directed that citrus resets or new plantings should be treated with Ridomil 2E used in a water ring drench (around the base of the tree within the watering ring) or as a soil surface spray beneath the tree canopy. As to other deciduous fruits and nuts in nursery and field plantings (with separate directions for avocados), the label directed application of Ridomil 2E (again mixed with water) "to obtain thorough coverage of the soil under the canopy of the trees. Sufficient surface area should be treated in nurseries to cover the root zone of the plants." Exhibits 34, 35.
The label contained the statement: "It is a violation of federal law to use this product in a manner inconsistent with its labeling." The label also stated: "Failure to follow directions on this label may result in crop injury . . .." The label further directed, under a subheading of "Environmental Hazards": "Apply only as specified on this label." Exhibits 34, 35.
The trial court concluded that Mount Arbor's conduct in dipping the apple trees violated both state and federal pesticide laws. Although there may be a question about whether using a dipping method as opposed to a soil drench or spray method falls within 7 U.S.C. § 136(ee)(3), the label clearly directed the user to apply the product only as *249instructed on the label. Moreover, this section does not find a counterpart in the Washington act, which was clearly violated. Dipping the rootstocks was contrary to and inconsistent with the label directions. Several expert witnesses testified to this effect on Indian Wells' behalf.
Having determined that Mount Arbor's conduct was a violation of statutory and regulatory law relating to use of pesticides, the next inquiry is whether a clause excluding liability for such conduct is so against public policy as to call for invalidation of the clause.
In Wagenblast v. Odessa Sch. Dist. 105-157-166J, 110 Wn.2d 845, 851-52, 758 P.2d 968 (1988), the court concluded that factors set out in Tunkl v. Regents of Univ. of Cal., 60 Cal. 2d 92, 383 P.2d 441, 32 Cal. Rptr. 33, 6 A.L.R.3d 693 (1963) are helpful in determining whether an exculpatory agreement violates public policy. The majority considers these factors here, failing, as noted, to consider them in light of Mount Arbor's violation of law.
Initially, it is clear from the decision in Wagenblast that there is no magic equation involving the factors which will decide whether or not an exculpatory clause is against public policy. The court did say that "[o]bviously, the more of . . . [the factors] that appear in a given exculpatory agreement case, the more likely the agreement is to be declared invalid on public policy grounds." Wagenblast, at 852.
Several of the factors set forth in Wagenblast are pertinent in this case. A nursery business engaged in performance of a contract of the sort involved here will obviously find it necessary to use various pesticides, herbicides, fungicides, bactericides, and so on. Not only is this business activity suitable for public regulation, see Wagenblast, at 851, 852, it is specifically regulated under the Washington Pesticide Control Act and federal laws. Moreover, care of commercial fruit trees and use of pesticides involves service of great importance to the public. See Wagenblast, at 851, 853. Not only is the fruit industry of great economic importance to the state, but the use of pesticides significantly affects the health, safety, and welfare of this state's *250people and environment. The significance of the public interest in this matter is expressly set out in the Washington Pesticide Control Act:
The formulation, distribution, storage, transportation, and disposal of any pesticide and the dissemination of accurate scientific information as to the proper use, or nonuse, of any pesticide, is important and vital to the maintenance of a high level of public health and welfare both immediate and future, and is hereby declared to be a business affected with the public interest. The provisions of this chapter are enacted in the exercise of the police powers of the state for the purpose of protecting the immediate and future health and welfare of the people of the state.
RCW 15.58.020.
Also, while it may be that individual members of the public do not normally require nursery services as a matter of practical necessity, as the majority reasons at page 233, nurseries do hold themselves out "as willing to perform . . . [their] service[s] for any member of the public who seeks it, or at least for any member coming within certain established standards." Wagenblast, at 851 (quoting Tunkl). The contract here was not between purely private parties. Mount Arbor is part of a large commercial nursery whose services are available to a significant part of this state's public.
While other characteristics identified in Wagenblast may not weigh in favor of declaring the exclusionary clause as against public policy, these identified factors demand invalidation of the exclusionary clause under the facts of this case.
Many courts have found agreements exculpating liability to be against public policy where the relevant conduct was violative of statutes or regulations. See, e.g., Dessert Seed Co. v. Drew Farmers Supply, Inc., 248 Ark. 858, 454 S.W.2d 307 (1970); John's Pass Seafood Co. v. Weber, 369 So. 2d 616 (Fla. Dist. Ct. App. 1979); Bishop v. Act-O-Lane Gas Serv. Co., 91 Ga. App. 154, 85 S.E.2d 169 (1954); Hunter v. American Rentals, Inc., 189 Kan. 615, 371 P.2d 131 (1962); Warren City Lines, Inc. v. United Ref. Co., 220 *251Pa. Super. 308, 287 A.2d 149 (1971). The principle is often applied in cases where a safety statute or regulation is intended to protect the public. For example, in Warren City Lines, the court stated that " [a]ny attempt by a negligent party to exculpate himself for a violation of a statute intended for the protection of human life is invalid." Warren City Lines, at 313. Another court observed that although traditionally a plaintiff could assume a risk even where a defendant's negligence consisted of a violation of a statute, there was a trend "to the contrary where a safety statute enacted for the protection of the public is violated. The rationale is that the obligation and the right so created are public ones which it is not within the power of any private individual to waive." Winterstein v. Wilcom, 16 Md. App. 130, 137, 293 A.2d 821 (1972). The court in Winter-stein characterized this trend as a refinement on the principles set forth in Tunkl, the case upon which this court relied in Wagenblast.
In light of the express public interest in regulation of pesticide use, I conclude that insofar as the exclusionary clause in the parties' contract is invoked to avoid liability for damages resulting from Mount Arbor's violation of the pesticide laws, it is invalid as against public policy.
Moreover, the clause is unconscionable. Of course, the conclusion that the clause violates public policy supports the conclusion that the clause is unconscionable: "Remedy limitation provisions may be invalidated as substantively unconscionable if they are found to be violative of public policy. This is a common result in farming states in cases involving latent defects in seed or other agricultural products." 2 R. Anderson, Damages Under the Uniform Commercial Code § 12.11, at 12-33 (1988).5
*252The South Dakota Supreme Court concluded that a consequential damages exclusion was against public policy and unconscionable where damages resulted from conduct in violation of laws relating to pesticide labeling. Durham v. Ciba-Geigy Corp., 315 N.W.2d 696, 700-01 (S.D. 1982).
In addition to violation of public policy, principles of risk allocation support the conclusion that the exclusionary clause is unconscionable. RCW 62A.2-719 expressly allows for exclusion of consequential damages. Such an exclusion is a remedy limitation, which "is obviously an allocation of risk. It relieves the breaching party from some liability for which he would otherwise be responsible and places the risk thereof on the aggrieved party." (Footnote omitted.) 2 R. Anderson, Damages Under the Uniform Commercial Code § 12.03, at 12-6 (1988). However, while parties may allocate risks in exercising their freedom to contract, not every allocation of risk is enforceable. RCW 62A.2-719(1) and (3) allow for exclusion of consequential damages but also provide that unconscionable exclusions of consequential damages are invalid.
The severity of loss falling in the category of consequential damages does not alone make allocation of risk of such loss to the buyer unconscionable; an exclusion of consequential damages may lead to a harsh result, but this does not render such a clause unconscionable. Eddy, On the "Essential" Purposes of Limited Remedies: The Metaphysics of UCC Section 2-719(2), 65 Calif. L. Rev. 28, 44 (1977). More unfairness must be involved, therefore, than a harsh result. Other matters are relevant.
*253The nature of the risks allocated is relevant.
One can imagine a spectrum with risks avoidable only by the seller on one end and risks avoidable only by the buyer on the other. In between fall two other classes of risks: those avoidable by both parties and those avoidable by neither. It is difficult to see what is unfair about two contracting parties shifting a risk from either class of risks in this central portion of the spectrum to one or the other party. If there is a type of risk allocation that should be subjected to special scrutiny, it is probably the shifting to one party of a risk that only the other party can avoid.
Eddy, 65 Calif. L. Rev. at 47.
The concept of fault is also relevant. While "fault" materializes in various ways in contractual arrangements, one way to look at a situation where fault affects performance of a contract is to "focus upon [the] narrower question of the relative ability of the parties to engage in risk-avoidance or make provisions for risk-materialization." Eddy, 65 Calif. L. Rev. at 56.
This method of addressing fault and determining whether a risk-shifting term will be declared unconscionable has been described in relation to seed cases, where mislabeled, mispackaged, or otherwise defective seeds are purchased, and, following crop failure, the purchaser sues the seed distributor. Eddy, 65 Calif. L. Rev. at 57. A limiting clause is asserted in defense; the clause usually sets a time limit for inspection of the product or excludes consequential damages. Inequality in risk avoidance arises because detection of the defect may be difficult and the seller is generally more able to detect it, and, "more significantly, the seed company has the initial opportunity to avoid risk through careful handling." Eddy, 65 Calif. L. Rev. at 57. As to risk materialization, the purchaser is generally in a worse position for financing the loss because the seeds are usually used in an all-or-nothing investment in the crop. The farmer often wins these suits. Eddy, 65 Calif. L. Rev. at 57 (see cases cited therein).
*254In cases involving violation of statutes, such as occurred here, risk avoidance ability and fault have been generally described:
The widespread use of property and liability insurance does not invalidate the policy argument against contracts transferring responsibility for the violation of public safety measures enacted or authorized by the Legislature. If all that were involved was the shifting of ultimate loss from one insurer to another, we would not be concerned with the private transfer of risk by contractual agreement. It is an unescapable fact, however, that the party transferring the risk has no incentive to use reasonable care when it is held harmless for all losses resulting from its own negligence, and its insurer has no incentive to provide the transferor with loss prevention services or inspection. This creates a particularly dangerous situation for the public where (1) the party transferring the risk is better able to prevent loss or reduce the risk associated with loss, or (2) where the party to whom the risk has been transferred does not fully realize the responsibility which it has received.
(Footnote omitted.) Warren City Lines, Inc. v. United Ref. Co., 220 Pa. Super. 308, 313-14, 287 A.2d 149 (1971).
Applying principles of risk allocation in light of ability to avoid risks and fault: Mount Arbor unquestionably had the initial opportunity to avoid the risk of consequential loss by careful handling of the rootstocks and lawful use of pesticides, including Ridomil. Moreover, by providing its own rootstocks and scion wood, which were healthy when received by Mount Arbor, Indian Wells had an all-or-nothing investment in the trees, and sustained losses it could not afford and which it could not adequately cover. Considering Mount Arbor's unlawful and negligent use of Ridomil, which resulted in losses it alone could have avoided, the allocation to Indian Wells of the risk of such foreseeable consequential losses was unconscionable.
The clause excluding liability for incidental and consequential damages is against public policy, is unconscionable, and should not be enforced. The loss of production damages awarded by the trial court was proper. See RCW 62A.2-715.
*255Shifting focus, now, to other remedies available under the contract, the contract specifically allowed for replacement of nonconforming trees or reduction in the purchase price, at Mount Arbor's option. The contract also provided for all rights under the Uniform Commercial Code and applicable Washington law. Despite these apparently expansive provisions, the remedies in fact were quite narrow given the circumstances and terms of the contract.
It is fundamental, as the official comment to section 2-719 states, that
it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract.
Official Comment 1, RCWA 62A.2-719.6
It is clear that section 2-719(1) (a) and the official comment together contemplate that a replacement/refund remedy is usually a minimum adequate remedy and a fair quantum of remedy. Of course, a replacement/refund remedy might not allow a party the benefit of the bargain. If the two remedies are optional at the choice of the seller, the seller may opt to refund the purchase price. Instead of obtaining the benefit of the bargain, the buyer in such a case is usually simply returned to the status quo. This result is specifically permitted under section 2-719.
However, where refund is the sole remedy or the remedy selected by the seller at its option, a mere refund of the contract price may leave the buyer much worse off than before entering the contract; i.e., the buyer neither obtains the benefit of the bargain nor is returned to the status quo. In such circumstances one commentator concluded that the *256provision may be facially invalid for failure to provide a "fair quantum of remedy." Anderson, Contractual Limitations on Remedies, 67 Neb. L. Rev. 548, 556 (1988) (discussing Kusens v. Bodyguard Rustproofing Co., 23 Ohio Op. 3d 440, 33 U.C.C. Rep. Serv. 530 (Cuyahoga Cy. Ct. App. 1980), where plaintiff had his car rustproofed; the car rusted through; and a contract clause provided for a refund of price remedy which did not cover the amount of damage).
Here, of course, the replacement/refund remedy in the parties' agreement was not exclusive. The majority correctly reasons that cover and market price damages were also available. Paragraph 9.3 of the agreement granted rights under the Washington Uniform Commercial Code, and RCW 62A.2-711, .2-712, and .2-713 provide for these remedies. Nevertheless, there is a good argument to be made that the remedies provided do not constitute adequate remedies, as the trial court believed. Upon Mount Arbor's breach, it could not replace the dead or damaged trees, and Indian Wells could not fully cover for the shortage nor obtain cover in time to avoid loss of production of those trees it could cover. Despite availability of refund or market price damages remedies, Indian Wells was left much worse off than before it entered the contract. It did not have the trees for which it bargained, and it no longer had its own, special rootstocks to graft and bud in order to develop orchards by 1985 and 1986. It did not have producing apple trees by the time it could have had them had it not entered this contract with Mount Arbor.
Thus, aside from problems already discussed, there is further reason to hold that the contract unconscionably limited remedies.
As a matter of policy this contract demands close scrutiny because Indian Wells was effectively precluded from cover, having submitted a unique element of the final product which was irreplaceable and which was damaged and made useless by Mount Arbor's acts, acts in direct *257contravention of its express promise to protect and provide reasonable care for the trees.
Mount Arbor's breach went to its basic performance under the contract. The remedies provisions did not adequately protect in the event of breach. Instead, they frustrated the purpose of the parties' contract. See A&M Produce Co. v. FMC Corp., 135 Cal. App. 3d 473, 186 Cal. Rptr. 114, 38 A.L.R.4th 1 (1982).
To sum up to this point: Mount Arbor was a large, commercial, experienced nursery while Indian Wells was a new limited partnership having a general managing partner with no nursery experience; Mount Arbor knew of the specialized needs of Indian Wells, and knew of the general managing partner's fiduciary obligations and the time frame for performance of those obligations; Mount Arbor drafted the agreement; the limitations as to remedies were not discussed or negotiated; the exclusionary clause was in the middle of a paragraph providing a list of available remedies to the parties under a heading of "Default; Remedies"; the general managing partner lacked the ability to understand the exclusion; Mount Arbor expressly promised to use reasonable care in performing its obligations which were at the heart of the parties' bargain; Mount Arbor attempted to exclude liability for large foreseeable consequential damages, even when those damages resulted from its violation of federal and state law and common law negligence; Mount Arbor violated pesticide laws expressly impressed with the public interest and its unlawful conduct caused the damage to the trees; Mount Arbor was the only party able to avoid the loss which occurred; and Mount Arbor's breach foresee-ably left Indian Wells far worse off than it had been at the inception of the contract, given the remedies available under the contract and the clause excluding liability for incidental and consequential damages.
Two other contract provisions give rise to yet another reason to declare the contract unconscionable. Paragraph 3.4 provided that Indian Wells bore the risk of loss after delivery, and paragraph 5.1 gave Indian Wells 15 days in *258which to reject nonconforming trees. Together these clauses required Indian Wells to discover defects in the trees and reject them within 15 days or forgo all remedies for defective or damaged trees. Thousands of trees died as a result of Ridomil damage after they were accepted by Indian Wells and planted in Indian Wells' orchards.
This case thus involves the issue of defective or damaged goods with the defect or damage being undetectable by the buyer in time to meet a short time period set for rejection of the goods. Where such latent defects are involved, courts have had no difficulty in holding the resulting exclusion of remedies invalid. See, e.g., Kansas City Wholesale Grocery Co. v. Weber Packing Corp., 93 Utah 414, 73 P.2d 1272 (1937), cited in Official Comment 1, RCWA 62A.2-302 (as an example of the underlying basis for RCW 62A.2-302, concerning unconscionable contracts or clauses) (clause limiting time for complaints was held inapplicable to latent defects in a shipment of catsup which could only be discovered by microscopic analysis); Trinkle v. Schumacher Co., 100 Wis. 2d 13, 301 N.W.2d 255 (Ct. App. 1980) (clause provided that no claims would be allowed after buyer-cut fabric imposed risk on buyer of defects discoverable only on cutting; clause held unconscionable because it denied any remedy whatsoever and therefore provided neither minimum nor adequate remedy to buyer); Pittsfield Weaving Co. v. Grove Textiles, Inc., 121 N.H. 344, 430 A.2d 638 (1981); cf. Martin v. Joseph Harris Co., 767 F.2d 296 (6th Cir. 1985) (the court concluded that a warranty disclaimer and remedy limitation was unconscionable, noting that a latent defect in cabbage seed which was in the seller's control to prevent was not detectable or controllable by the buyers who could lose their livelihood).
Two early Washington cases are in accord. In National Grocery Co. v. Pratt-Low Preserving Co., 170 Wash. 575, 17 P.2d 51 (1932) and Los Angeles Olive Growers Ass'n v. Pacific Grocery Co., 119 Wash. 293, 205 P. 375 (1922), the court held that an unreasonable time period allowed for the discovery of latent defects in purchased goods would not be *259enforced to protect the seller. These cases are still sound under the Uniform Commercial Code. RCW 62A.1-204(1) provides that "[w]henever this Title requires any action to be taken within a reasonable time, any time which is not manifestly unreasonable may be fixed by agreement." Washington Comment 1, RCWA 62A.1-204 explains that the official comment contains clues to operation of section 204. Official Comment 1, RCWA 62A.1-204, states that in subsection (1) "provision is made for disregarding a clause which whether by inadvertence or overreaching fixes a time so unreasonable that it amounts to eliminating all remedy under the contract." Bringing time for rejection within the scope of RCW 62A.1-204, RCW 62A.2-602 requires that a rejection of goods must be made within a "reasonable time after their delivery or tender."
Courts have invoked section 1-204 in refusing to give effect to remedy limitations resulting from short rejection periods where latent defects in goods were not discoverable within the time allowed. See, e.g., Wilson Trading Corp. v. David Ferguson, Ltd., 23 N.Y.2d 398, 244 N.E.2d 685, 297 N.Y.S.2d 108 (1968); Neville Chem. Co. v. Union Carbide Corp., 422 F.2d 1205 (3d Cir.), cert. denied, 400 U.S. 826, 27 L. Ed. 2d 55, 91 S. Ct. 51 (1970).
The 15-day rejection period was manifestly unreasonable as to undetectable Ridomil damage which caused the death of trees after acceptance by Indian Wells. It is invalid and unconscionable under RCW 62A.1-204, .2-302, and .2-719. Further, it would be invalid even if the code did not apply. National Grocery Co. v. Pratt-Low Preserving Co., supra; Los Angeles Olive Growers Ass'n v. Pacific Grocery Co., supra. Damages are awardable for loss of these trees, including incidental and consequential damages, and the trial court correctly concluded that awardable damages included the cost of replanting and pulling trees damaged by Ridomil which later died.
Finally, it is necessary to address the concurrence by Justice Utter and the dissent by Justice Dore. Both adopt *260the simplistic view that substantive unconscionability cannot be evaluated by events occurring after formation of a contract. This is not only contrary to common sense it is contrary to an analytical consideration of the issue. The concurrence and the dissent paste on a label and find an answer in that label.
In the first place the procedural-substantive labels "do little but add more labels to the increasing number of substitutes for analysis." Murray, Unconscionability: Unconscionability, 31 U. Pitt. L. Rev. 1, 21 (1969).
Second, it seems patently obvious that a clause must be construed in light of what actually happened. It will not do to look only at a clause as of the time of making the contract. "Although conceptually a clause's scope of application is established at the time of formation, practically a clause is rarely construed until a given set of circumstances has raised a dispute." (Footnote omitted.) Eddy, On the "Essential" Purposes of Limited Remedies: The Metaphysics of UCC Section 2-719(2), 65 Calif. L. Rev. 28, 31 (1977).
Courts which have bothered to analyze the issue conclude that it is proper to look beyond the time of formation of the contract. "Thus, the agreement must be tested as to conscionability as it is applied to the particular breach which has occurred." Cayuga Harvester, Inc. v. Allis-Chalmers Corp., 95 A.D.2d 5, 20, 465 N.Y.S.2d 606 (1983). See also Resource Mgt. Co. v. Weston Ranch & Livestock Co., 706 P.2d 1028, 1045 (Utah 1985); Hershey v. Simpson, 111 Idaho 491, 725 P.2d 196 (Ct. App. 1986); Guthmann v. La Vida Llena, 103 N.M. 506, 709 P.2d 675 (1985).
I would affirm the trial court.
Smith, J., and Pearson, J. Pro Tern., concur with Brachtenbach, J.

Even if there were an industry trade practice of excluding incidental and consequential damages, its presence would not support a finding of conscionability. As explained herein, the exclusionary clause was clearly unreasonable as to Indian Wells. See Schroeder, at 261.

RCW 62A.1-203 expressly imposes an obligation of good faith.

The trial court concluded that this disclaimer was invalid.

Formerly RCW 15.58.030(1) (a). See Laws of 1989, ch. 380, § 1.

The trial court concluded that the exclusionary clause was both against public policy and unconscionable. Conclusion of law 5; Clerk's Papers, at 17. The trial court further concluded that Mount Arbor could not validly exclude liability for damages resulting from its negligence, under the principle that as a bailee for mutual benefit Mount Arbor was not permitted to disclaim or limit liability for its own negligence. The parties argue this issue in their briefs. The majority reasons *252that the rule does not apply where a bailment for mutual benefit, as opposed to a professional bailment, is concerned.
Because the exclusionary clause is otherwise against public policy, I do not find it necessary to reach this issue. Of course, the trial court may be sustained on any theory of law established by the pleadings and supported by the proof. LaMon v. Butler, 112 Wn.2d 193, 201, 770 P.2d 1027, cert. denied, 110 S. Ct. 61 (1989); Wendle v. Farrow, 102 Wn.2d 380, 383, 686 P.2d 480 (1984).

This court has previously relied on the official comments to section 2-719. In Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 259, 544 P.2d 20 (1975), the court noted that " [t]he functional purpose of RCW 62A.2-719(3) is to allow the parties to allocate their risks. Official Comment 1, RCWA 62A.2-719."