Can this clause be struck down as unconscionable even though our contract does not involve a consumer?
Yes for a sale of goods: Idaho's unconscionability statute is not limited to consumer transactions, but it does sit inside the sales article, which "applies to transactions in goods" (Idaho Code § 28-2-102), so for a services or real-property contract § 28-2-302 is an analogy rather than the governing text. Idaho Code § 28-2-302(1): "If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result." § 28-2-302(2) requires the parties be given "a reasonable opportunity to present evidence as to its commercial setting, purpose and effect" once unconscionability is claimed or appears. Walker v. American Cyanamid Co. supplies Idaho's operative two-part test, applied to strike a limitation-of-liability clause on a herbicide product label: "Substantive unconscionability asks whether, at the time the contract was executed, and in light of the general background and commercial needs of a particular case, the clause is so one-sided as to oppress or unfairly surprise one of the parties," while procedural unconscionability looks to factors including "the commercial setting, purpose, and effect of the [provision]" together with disparity in bargaining power, ambiguity, and the drafter's superior knowledge.
The trap
Unconscionability in Idaho is assessed as of formation (§ 28-2-302(1) asks the court to find "the contract or any clause of the contract to have been unconscionable at the time it was made," and Walker, which quotes the section's own comment 1 in support, asks whether "at the time the contract was executed, and in light of the general background and commercial needs of a particular case, the clause is so one-sided as to oppress or unfairly surprise one of the parties"), so evidence of how the clause played out later, or how unfair its result feels in hindsight, is not by itself the statutory test; the focus is the bargain as struck. Walker also shows unconscionability is NOT a purely consumer-protective doctrine. The buyer there was a commercial farming operation, not an individual consumer, and the Idaho Supreme Court still found the clause both procedurally and substantively unconscionable based on superior seller knowledge, lack of a real alternative, and the clause's ambiguity. The commercial character of the deal cut the other way in the same opinion: the Court treated the buyer's claims as satisfying the "commercial transaction" requirement for a mandatory fee award and gave the buyer its fees on appeal. Do not conflate the general § 28-2-302 UCC-sales standard with the DIFFERENT, express unconscionability carve-out for consequential-damages limitations in consumer-goods personal-injury cases under § 28-2-719(3): § 28-2-302 is the general doctrine; § 28-2-719(3) is a narrower, damages-specific rule with its own asymmetric consumer/commercial presumption.
10 authorities
- statuteIdaho Code § 28-2-102enactment date not established
The words that state the rule
Unless the context otherwise requires, this chapter applies to transactions in goods; it does not apply to any transaction which although in the form of an unconditional contract to sell or present sale is intended to operate only as a security transaction nor does this chapter impair or repeal any statute regulating sales to consumers, farmers or other specified classes of buyers.
- statuteIdaho Code § 28-2-302enactment date not established
The words that state the rule
If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.
- statuteIdaho Code § 28-2-302enactment date not established
The words that state the rule
When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
The words that state the rule
Substantive unconscionability asks whether, at the time the contract was executed, and in light of the general background and commercial needs of a particular case, the clause is so one-sided as to oppress or unfairly surprise one of the parties. I.C. § 28-2-302(2); Smith, 114 Idaho at 684 , 760 P.2d at 23 . The commercial setting, purpose, and effect of the clause are relevant in determining whether a contract is unconscionable. I.C. § 28-2-302(2).
The words that state the rule
The element of unfair surprise exists because of the ambiguity of the limitation of liability provision. A reasonable purchaser could interpret the provision not to limit the recovery of damages like those to Walker’s potato crops. Therefore, we conclude that the limitation of liability provision is substantively unconscionable because it constitutes unfair surprise.
The words that state the rule
Comment 1 to the official text of I.C. § 28-2-302 states, in part: This section is intended to allow the court to pass directly on the unconscionability of the contract or particular clause therein and to make a conclusion of law as to its unconscionability.
The words that state the rule
The fact that Cyanamid had superior knowledge concerning ASSERT and made representations concerning its safety coupled with the fact that the label is ambiguous and with the lack of Walker’s bargaining power to negotiate concerning the limitation of liability lead us to conclude that the limitation of liability provision is procedurally unconscionable.
The words that state the rule
In 1988, 1989, and 1990, Walker Farms (Walker) purchased an herbicide, ASSERT, manufactured by American Cyanamid Company (Cyanamid) to use on fields where Walker grew grain and potatoes in rotation.
- statuteIdaho Code § 28-2-719enactment date not established
The words that state the rule
Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.
The words that state the rule
Therefore, Walker’s claims for breach of the express warranty satisfy the “commercial transaction” requirement. Because Walker has prevailed in this appeal, we also award Walker attorney fees on appeal pursuant to I.C. § 12-120(3).
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.