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Law School Case Brief

A & M Produce Co. v. FMC Corp. - 135 Cal. App. 3d 473, 186 Cal. Rptr. 114 (1982)

Rule:

The procedural element of unconscionability focuses on two factors: oppression and surprise. Cal. Com. Code § 2302. "Oppression" arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice. "Surprise" involves the extent to which the supposedly agreed-upon terms of the bargain are hidden in a prolix printed form drafted by the party seeking to enforce the disputed terms. Characteristically, the form contract is drafted by the party with the superior bargaining position.

Facts:

Plaintiff A & M Produce Co. ("A & M") bought farm equipment from defendant FMC Corporation (FMC). A & M completed an order form and sent it, along with a $ 5,000 check as a deposit, to FMC. Later, after FMC determined that the equipment would cost $ 32,041.80, A & M executed a pre-printed form contract prepared by FMC and paid FMC an additional $ 5,680.60 as a down payment. A & M never paid the balance owed when the equipment was delivered. When the equipment failed to work properly, A & M tried to return it for a refund. However, FMC refused the refund and insisted on payment of the full purchase price. A & M then filed a lawsuit against FMC in California state court alleging causes of action for breach of express warranties, breach of implied warranty for a particular purpose, and misrepresentation. FMC filed a cross-complaint for the balance due on the purchase price. At trial, the court ruled that clauses in FMC's form contract disclaiming all warranties and excluding consequential damages were unconscionable and evidence of such provisions was not presented to the jury. The jury rendered a general verdict in A & M 's favor for $ 281,326, which the parties agreed to reduce by the amount already paid to FMC. The court found for FMC on its cross-complaint, but it awarded A & M $ 45,000 in attorney's fees and prejudgment interest. FMC appealed.

Issue:

Did the trial court err by refusing to allow into evidence the disclaimer of warranty and limitation of damages clauses contained in FMC's contract?

Answer:

No.

Conclusion:

The court of appeal affirmed the trial court's judgment. The court ruled that the trial court properly excluded from evidence the disclaimer of warranty and limitation of damages clauses because the clauses were unconscionable under the facts of the case. The manner in which the provisions were presented in the agreement was sufficient evidence to find that A & M was surprised by the provisions. Although A & M had the opportunity to read the back of the contract or consult a lawyer, the length, complexity, and obtuseness of the form contract rendered A & M's surprise unfair. In addition, the court ruled that A & M was properly awarded attorney fees, since its action was one to enforce a written agreement within the meaning of the reciprocal attorney fee statute, Civ. Code, § 1717. Finally, the court held A & M was properly awarded attorney fees, since its action was one to enforce a written agreement within the meaning of the reciprocal attorney fee statute, Civ. Code, § 1717. Finally, the court held that the trial court properly exercised its discretion in awarding plaintiff prejudgment interest in light of the facts that the litigation had spanned over seven years and that FMC's refusal of an offer to settle could be viewed as placing prejudgment interest at risk.

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