law-choice-of-law-provisions | application of foreign or other state's law based on contractual choice-of-law
clause in contract | contractual specification of choice of law and forum selection |
CONTRACTUAL CHOICE OF LAW PROVISIONS
“Texas courts generally apply Texas procedural law even while applying the parties’ contractual
choice of law for substantive matters.” Nexen, Inc. v. Gulf Interstate Eng’g Co., 224 S.W.3d 412, 417 (Tex.
App.—Houston [1st Dist.] 2006, no pet.). “When the only evidence before the court is the uncontroverted
opinions of a foreign law expert, a court generally will accept those opinions as true as long as they are
reasonable and consistent with the text of the law.” Ahumada v. Dow Chemical Co., 992 S.W.2d 555, 559
(Tex. App.—Houston [14th Dist.] 1999, pet. denied).
Unrebutted expert testimony accepted into evidence by the trial court suggested that the “Authority” had to
be a court of Saudi Arabia. In the face of such evidence and the plain provisions of the Contract, the
Rules, and the Regulations, the trial court erred when it concluded that it could act as the “Authority.”
In re Aramco Services Co (Tex.App.- Houston [1st Dist.] Mar. 19, 2010)(Sharp)
(arbitration mandamus) (choice of law and forum and language for arbitration and notices)
GRANT PETITION FOR WRIT OF MANDAMUS: Opinion by Justice Sharp
Before Justices Keyes, Sharp and Massengale
01-09-00624-CV In re Aramco Services Company
Appeal from 334th District Court of Harris County
Trial Court Judge: Hon Sharon McCally
In light of our conclusion that the trial court could not be the “Authority”
empowered to appoint arbitrators pursuant to the parties’ agreement, we do not reach
the question concerning the empanelment of non-Muslim arbitrators.
Anaheim Industries, Inc. v. GM Corp (Tex.App.- Houston [1st Dist.] Dec. 20, 2007)(Bland)(commercial law,
UCC, BoC, extra-contractual claims, estoppel, misrepresentation, Michigan law applied, choice of law clause)
(Both converter agreements contain choice of law clauses specifying that Michigan law applies to any dispute
arising under them)
AFFIRM TC JUDGMENT: Opinion by Justice Bland
Before Chief Justice Radack, Justices Alcala and Bland
01-06-00440-CV Anaheim Industries, Inc., Frank Gilchrist, Inc., d/b/a Texas Stagecoach of Houston v.
General Motors Corporation
Appeal from 55th District Court of Harris County (Judge Jeff Brown)
Breach of contract
The upfitters contend that the trial court erred in granting summary judgment on their breach of contract
claims, asserting that the evidence raises a fact issue concerning whether GM breached the converter
agreements. The upfitters’ request that we consider the parties’ course of performance in determining
whether GM limited or modified its rights in a way that is not reflected in the agreements. Course of
performance may be relevant to show waiver or modification of a written term. Mich. Comp. Laws Ann. §
440.2208(3) (West 1994); accord Tex. Bus. & Com. Code Ann. § 1.303(f) (Vernon Supp. 2007).
Both the UCC and the converter agreements prohibit consideration of the parties’ course of performance to
the extent that it is not consistent with the language of the agreements. When an alleged course of
performance conflicts with the express terms governing a contractual relationship, the express terms prevail.
Mich. Comp. Laws Ann. § 440.1205(4) (West 1994); accord Tex. Bus. & Com. Code § 1.303; see Blalock
Mach. & Equip. Co. v. Iowa Mfg. Co., 576 F. Supp. 774, 777-78 (N.D. Ga. 1983). Further, “[a] signed
agreement which excludes modification or rescission except by a signed writing cannot otherwise be
modified.” Mich. Comp. Laws Ann. § 440.2209(2) (West 1994); accord Tex. Bus. & Com. Code Ann. § 2.209
(b) (Vernon 1994). The converter agreements specifically provide that “no waiver or modification of any term
of this agreement or creation of additional terms shall be valid or binding upon [GM] unless made in writing,
executed on its behalf.”
Our conclusion that converter agreements alone do not constitute enforceable contracts under Michigan law
until GM accepts an order for vehicles is dispositive of this claim. The upfitters do not allege that GM failed
to satisfy any term of the converter agreement after committing to fulfill a purchase order. Absent an
accepted purchase order, the upfitters cannot demonstrate that GM breached the only obligation that would
bind it under the converter agreements. The trial court, therefore, correctly granted summary judgment on
the upfitters’ breach of contract claims.
Unconscionability
The upfitters next contend that GM’s actions in either actually or effectively terminating the converter
agreements and in modifying the contract language expanding GM’s discretion in accepting vehicle orders
are unconscionable. The party seeking to prove unconscionability must show that the challenged contract or
term is both procedurally and substantively unconscionable. Clark v. DaimlerChrysler Corp., 268 Mich. App.
138, 143, 706 N.W.2d 471, 474 (2005).
“Procedural unconscionability exists where the weaker party had no realistic alternative to acceptance of the
term.” Id.; see also In re Halliburton Co., 80 S.W.3d 566, 571 (Tex. 2002) (explaining that procedural
unconscionability relates to actual making or inducement of contract provision). Whether the contract is one
of adhesion has no bearing on whether it is procedurally unconscionable. Clark, 268 Mich. App. at 143, 706
N.W.2d at 474; accord In re Halliburton Co., 80 S.W.3d at 572 (observing that contract provision is not
procedurally unconscionable simply because party with superior bargaining power makes “take it or leave it”
offer, leaving weaker party with no opportunity to negotiate). If the circumstances surrounding the contract
formation show that the weaker party could have freely accepted or rejected the contract, it is not
procedurally unconscionable. Clark, 268 Mich. App. at 144, 706 N.W.2d at 475.
In defining substantive unconscionability, the Clark court explained that it
exists where the challenged term is not substantively reasonable. However, a contract or contract provision is
not invariably substantively unconscionable simply because it is foolish for one party and very advantageous
to the other. Instead, a term is substantively unreasonable where the inequity of the term is so extreme as to
shock the conscience.
Id. (citing Allen v. Mich. Bell Tel. Co., 18 Mich. App. 632, 637–38, 171 N.W.2d 689, 692 (1969), and Gillam v.
Mich. Mtg.-Inv. Corp., 224 Mich. 405, 409, 194 N.W. 981, 982 (1923)); accord In re FirstMerit Bank, N.A., 52
S.W.3d 749, 757 (Tex. 2001) (“The principle [of allowing relief for unconscionability] is one of preventing
oppression and unfair surprise and not of disturbing allocation of risks because of superior bargaining
power.”).
The court decides as a matter of law whether a contract term is unconscionable. See Mich. Comp. Laws
Ann. § 440.2302(1) (West 1994). The high threshold a party must meet in proving unconscionability stems
from the strong policy favoring freedom of contract. As the Michigan Supreme Court declared:
The general rule of contracts is that competent persons shall have the utmost liberty of contracting and that
their agreements voluntarily and fairly made shall be held valid and enforced in the courts. Under this legal
principle, the parties are generally free to agree to whatever they like, and, in most circumstances, it is
beyond the authority of the courts to interfere with the parties’ agreement.
Wilkie, 469 Mich. at 62–63, 664 N.W.2d at 787–88 (quotations, citations, and footnotes omitted); see also
WXON-TV, Inc. v. A.C. Nielsen Co., 740 F. Supp. 1261, 1264 (E.D. Mich. 1990) (“The law presumes that
business people are fully competent to enter into contracts and obligate themselves to perform in any
manner they wish. The courts have no authority to rewrite the terms of a contract because they might feel
that it was an unwise agreement for a party to have entered into.”). Neither of the upfitters’ challenges
approaches this threshold.
The upfitters’ first claim of unconscionability, which concerns GM’s conduct leading to the termination of the
parties’ relationships, does not raise a fact issue for the same reason it does not support a claim for breach
of the duty of good faith and fair dealing. In their second claim, the upfitters assert that GM’s alteration of the
converter agreement language addressing the scope of GM’s discretion was unconscionable. The upfitters
point out that the converter agreements originally provided that “[GM] shall have no obligation to deliver to
[the upfitter] any model or number of vehicles, but may deliver to [the upfitter] such number and type of
vehicles as requested by [the upfitter] as it deems appropriate,” but that GM later changed that provision to
state that “[t]here are numerous factors which affect the availability of vehicles to [GM] and [GM] reserves to
itself discretion in accepting orders and distributing vehicles and its judgment in such matters shall be final.”
We do not construe the former language as limiting GM’s discretion as to the quantity of vehicles ordered
and consequently, do not view the alteration, which expressly confers absolute discretion to GM, as material.
Even if it were, the change in language is not unconscionable. Procedurally, we note that the upfitters
agreed at the outset that GM would have unrestricted power to modify the terms of the converter agreement.
The upfitters could either accept the modification by continuing to perform under the agreements or notify
GM that they were terminating the relationship. See Mich. Comp. Laws Ann. § 440.2208(1) (West 1994)
(providing that, where “contract for sale involves repeated occasions for performance by either party with
knowledge of the nature of the performance and opportunity for objection to it by the other, any course of
performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the
agreement”); see also Hathaway v. Gen. Mills, Inc., 711 S.W.2d 227, 229 (Tex. 1986) (explaining that
employer may enforce changes to at-will employment contract if it unequivocally provides notice of definite
change and employee accepts change by continuing employment). Accordingly, the trial court properly
granted summary judgment on this claim.
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