Graham v. Scissor-Tail, Inc.

28 Cal. 3d 807, 171 Cal. Rptr. 604, 623 P.2d 165 (1981)

 

RULE:

Generally speaking, there are two judicially imposed limitations on the enforcement of adhesion contracts or provisions thereof. The first is that such a contract or provision that does not fall within the reasonable expectations of the weaker or "adhering" party will not be enforced against him. The second -- a principle of equity applicable to all contracts generally -- is that a contract or provision, even if consistent with the reasonable expectations of the parties, will be denied enforcement if, considered in its context, it is unduly oppressive or "unconscionable."

FACTS:

A promoter of musical concerts contracted to promote concerts by members of a musical group and a corporation through which the group's services were marketed under a contract of adhesion that required arbitration through a labor union to which appellee musicians belonged. The promoter and musical group got into a dispute on whether the loss in a concert could be offset against the profits of another. The promoter asserted that industry practice and custom required such offset, sued the musical group for breach of contract, declaratory relief, and rescission. The musical group's petition to compel arbitration was granted, and the arbitrator ruled in their favor. The Superior Court confirmed an arbitration award in favor of the musical group and denied the promoter's petition to vacate. 

ISSUE:

Is the contract considered unenforceable as a contract of adhesion?

ANSWER:

Yes

CONCLUSION:

The court reversed the judgment confirming the award and directed the lower court to vacate its order compelling arbitration because, especially in contracts of adhesion, minimum levels of integrity were required of arbitration procedures if the arrangement was to pass judicial muster. The court held the arbitration agreement at issue failed to achieve that level of integrity because it designated appellees' labor union as sole arbitrator.

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