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(A
version of this article will appear in the California
Construction Law Reporter, published by the West Group.)
By James E. Acret
Freeway
contractor Benco ordered a crane, operated and maintained,
from Reliable. At the end of the work day, the operator
marked down the hours on a form that was entitled "Work
Authorization and Contract" and presented it to Benco's
foreman, who signed it. The parties had followed this same
practice, using the same form, dozens of times over a period
of several years. Benco treated the forms as invoices and
paid from them. Above the signature line appeared the statement,
"This is a contract which includes all terms and conditions
stated on the reverse side." The reverse side displayed
10 paragraphs, one of which required Benco to indemnify
Reliable against claims and expenses. A jobsite worker who
suffered a broken leg that day sued Benco and Reliable for
negligence, and Benco sued Reliable to recover attorney
fees (more than $45,000) expended to defend the suit.
The
trial court held that the document was an invoice and that
the indemnity clause was unenforceable. The Court of Appeal
reversed. Marin Storage & Trucking, Inc. v. Benco
Contracting and Engineering, Inc., 89 Cal.App.4th 1042,
107 Cal.Rptr.2d 645, 2001 DJDAR 5816 (2001)
A
party who signs a contract is deemed to assent to all of
its terms. Benco cannot avoid the contract on the ground
that the foreman failed to read it. An oral contract was
formed when Benco ordered out the crane, and the course
of dealing establishes that the oral contract included the
terms on the back even though the president of Benco had
never read them. (Evidence indicated that the terms would
be negotiable, but no customer of Reliable had ever asked
for such a negotiation.)
The
fact that the form was signed after the accident does not
make it unenforceable. The form probably is a contract of
adhesion (a standardized contract imposed on the subscribing
party without an opportunity to negotiate the terms), but
the finding of adhesion merely begins another inquiry: Whether
the provision is unconscionable. Granted that the contract
was one of adhesion and, therefore, procedurally unconscionable,
the trial court overlooked the principle that to be unenforceable
the contract must also be substantively unconscionable.
The concept of "unconscionability" is so nebulous
that the Court of Appeal will not find a contract term to
be unconscionable unless the term shocks the conscience.
Here, the indemnification clause does not shock the conscience.
Nor does it defeat the reasonable expectations of Benco.
Benco's agents had signed the form dozens of times. There
was evidence that other crane companies had similar indemnity
provisions on similar forms and that Benco also did business
with other such companies.
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To learn more about Thelen Reid's Construction and Government Contracts Department, click here. For more information about books and other legal materials written by James Acret, click here and enter "Acret" in the Search Products Field. To learn more about topics covered in this article, contact Paul Berning at (415) 369-7229 or at pwberning@thelen.com.
©2002 Thelen Reid Brown Raysman & Steiner LLP
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