Standardized form contracts, while generally beneficial to the business community, have led courts to develop various theories under which they can refuse to enforce the terms of such contracts when enforcement would lead to harsh results. The broadest of these theories is unconscionability. Relying on this theory, the California Court of Appeal in A & M Produce Co. v. FMC Corporation refused to enforce a disclaimer of warranties and an exclusion of consequential damages contained in an agricultural equipment sales contract. This holding is controversial because it invalidated exculpatory clauses contained in a contract between two commercial entities, clauses that are expressly permitted by the Uniform Commercial Code. Moreover, the court used broad language that suggests the imposition of new duties on commercial parties submitting a form contract to another. This Note first sets out the background of the unconscionability doctrine. The Note then discusses the facts and the holding of the A & M Produce case, critically examining the A & M, Produce court's analysis. The Note concludes that the court misapplied the unconscionability doctrine in order to protect a commercial party from its unprofitable bargain, and suggests some drafting techniques to protect a contract from a finding of unconscionability under this court's analysis.
Trudy Nobles Sargent,
Unconscionability Redefined: California Imposes New Duties on Commercial Parties Using Form Contracts,
35 Hastings L.J. 161
Available at: https://repository.uchastings.edu/hastings_law_journal/vol35/iss1/5