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Unconscionability is evaluated by looking at the circumstances at the time a contract was originally made, and determining whether, in light of the commercial needs of the particular trade involved, the agreement is one which no sane man not acting under a delusion would make and no honest man would take advantage of.
Defendant Smoke Rise Corporation leased a BMW automobile from plaintiff, and the corporation's president, defendant William Probst, personally guaranteed the lease. The lease, as modified in an extension agreement, provided that at the end of the lease term defendants could purchase the vehicle for $16,863.75, the estimated end-of-term wholesale value of the vehicle. It also provided that if defendants returned the vehicle rather than exercising their option to purchase it, they would have to pay a charge of "up to 15 cents" for each mile the vehicle had been driven in excess of 85,011 miles. Defendants chose not to purchase the vehicle and returned it with an odometer reading of 180,409 miles, but they refused to pay for the excess mileage. Plaintiff seeks $14,309.70, which is 15 cents times 95,398 (the difference between 180,409 and 85,011 miles), plus attorney fees. In their defense, Smoke Rise and Probst contend the excess mileage provision is unconscionable because the $14,309.70 charge is almost as much as the projected end-of-term value of the car, and is considerably more than their experts say the actual value of the car is with 180,409 miles. The trial court denied BMW’s motion for summary judgment. BMW appealed.
Was the excess mileage provision unconscionable?
The court held that the trial court erred in denying BMW’s motion for summary judgment. First, in the context of a corporation leasing a luxury auto, an excess mileage charge of 15 cents per mile was not unreasonable and did not shock the conscience. Such a charge served the necessary commercial function of compensating for out-of-the-ordinary usage that affected the auto's residual value. If at the end of the term the lessees discovered the excess mileage charge was too high relative to the value of the auto, they could have exercised their option to purchase it. When they did not do so, they could not then complain about a charge that they had agreed to pay. Second, BMW was entitled to anything up to 15 cents per mile, and that included 15 cents per mile. The fact that bmw was willing to take less earlier in the dispute did not undermine its right to 15 cents per mile.