Author Question: Unconscionability. In 1983, Doughty contracted to sell a portion of his anticipated potato crop to ... (Read 74 times)

Redwolflake15 · **on:** Jun 24, 2018

Unconscionability. In 1983, Doughty contracted to sell a portion of his anticipated potato crop to Idaho Frozen Foods Corp (IFF) to secure financing for the growing of the crop. To express the terms of their agreement, the parties used a form contract that had been developed through negotiations between IFF and the Potato Growers of Idaho (PGI), of which Doughty was not a member. Under the contract, Doughty was to receive a base price if the potato crop contained a certain percentage of potatoes weighing ten ounces or more. If the crop contained a higher percentage, the price would be increased. Conversely, if the crop contained a lower percentage, the price would be reduced. These provisions in the contract reflected IFF's desire to have potatoes a certain size in order to meet its processing needs. The contract also provided IFF with the option of accepting or refusing delivery of the potatoes if less than 10 percent of them weighed ten ounces or more. Doughty contracted to sell only a portion of his crop to IFF; the rest of his crop he sold to another processor on the fresh pack marketin which potatoes are packaged in sacks and sold for whole use, such as for baking potatoesfor 4.69 per hundredweight. In the fresh pack market, no preharvest contract is used. The potatoes are sold after harvest. Because of poor weather conditions, only 8 percent of Doughty's potato crop consisted of ten-ounce potatoes. Because of the small percentage of ten-ounce potatoes, Doughty was entitled to only 2.57 per hundredweight for his potatoes under the terms of the IFF contract. After four days of delivery under the contract, Doughty refused to deliver any more potatoes to IFF. IFF brought suit for breach of contract. Doughty claimed that the contract was not enforceable because it was unconscionable and therefore void. Will the court agree? Discuss.

Question 2

In Cove Management v. AFLAC, Galgano, an independent contractor who solicited insurance business for AFLAC, rented office space from Cove under AFLAC's name. When Galgano defaulted on payments, Cove sued AFLAC contending that Galgano was its agent when he rented the office, so AFLAC was liable. The appeals court held that AFLAC:
a. was not obligated to the lease because real estate deals must be in writing with the principal of the company agreeing to the lease
b. was not obligated to the lease because Galgano did not have universal agent authority to sign a lease to bind AFLAC
c. was obligated on the lease as its employee had apparent authority
d. was not obligated on the lease, but its employee who told Galgano it was ok to enter into such a lease was obligated
e. all of the other choices are incorrect

aliotak · **Reply #1 on:** Jun 24, 2018

Answer to Question 1

Unconscionability
IFF won in court. In its decision, the court distinguished between procedural and substantive unconscionability. Procedural unconscionability may arise in the bargaining process and is characterized by great disparity in the bargaining positions of the parties, producing a result that does not reflect free market forces. Substantive unconscionability exists when, at the time a contract is made and in light of the general commercial background and needs of a particular case, a contract is so one-sided as to oppress or unfairly surprise one of the parties. As to the procedural aspects of Doughty's claim, the court concluded that PGI had substantial negotiating strength and expertise. The court ruled that Doughty entered into the contract freely and sought the benefits that PGI's bargaining power had obtained for its members. The court found no indication that Doughty tried or wanted to negotiate different terms or that extreme need forced him into the contract. The court also pointed out that Doughty could have simply contracted with a different processor if he were dissatisfied with the terms of the contract. As to the substantive aspects of Doughty's claim, the court found that the prices were based on the sizes of the potatoes and did not appear to be unreasonable. Each party took risks on entering the contract: Doughty stood to lose profits if he failed to grow a certain size of potato; IFF would lose profits if, after signing the contract, market prices declined. The court acknowledged that the contract did not give the parties identical rights but explained that this is part of the bargaining process and does not necessarily make a contract unconscionable.

Answer to Question 2

e