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Regarding substantive unconscionability, only in special circumstances may a court of equity set aside contracts fairly and freely negotiated. Such "special circumstances" turn on whether, at the time of making of the contract, and in light of the general commercial background and commercial needs of a particular case, the contract is so one-sided as to oppress or unfairly surprise one of the parties.
Gerald Doughty, a farmer, contracted to sell a portion of his anticipated potato crop to Idaho Frozen Foods (IFF), a processor of potato products. However, Doughty's crop later produced smaller than expected potatoes, resulting in a lower price under the terms of the contract. Doughty then sought a declaratory judgment that the contract was unenforceable. The district court ruled for IFF, holding the contract was enforceable. Doughty appeals, asserting that the contract was unenforceable because of a lack of mutual obligation and because the contract was unconscionable.
Did the district court err in holding that the contract was enforceable?
The court held that, through use of the form contract, Doughty had significant bargaining power. Doughty entered into the contract freely and sought the benefits that the collective bargaining power of the independent organization had obtained; thus, the contract was not procedurally unconscionable. Given that each party accepted risks under the preharvest contract, the contract was not substantively unconscionable. Further, because the corporation gave genuine, rather than illusory, consideration, the contract was not void for lack of mutuality of obligation.