unconscionable contract or conduct | 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 | unconscionable arbitration clause |
Section 17.50 provides that a consumer may recover under the DTPA for a laundry list violation or an
unconscionable action or course of action. TEX. BUS. & COMM. CODE ANN. § 17.50(a).
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.
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)
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