Wille v. Southwestern Bell Tel. Co.

• Citation: 19 UCC Rep.Serv. 447,549 P.2d 903,219 Kan. 755
• Decision Date: 08 May 1976
• Docket Number: No. 47986,47986
• Parties: , 19 UCC Rep.Serv. 447 Frank WILLE d/b/a Frank Wille Company and Frank Wille's Coleman Comfort Center, Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Appellee.
• Court: United States State Supreme Court of Kansas

Page 903

549 P.2d 903

219 Kan. 755, 19 UCC Rep.Serv. 447

Frank WILLE d/b/a Frank Wille Company and Frank Wille's Coleman Comfort Center, Appellant, v. SOUTHWESTERN BELL TELEPHONE COMPANY, Appellee.

No. 47986.

Supreme Court of Kansas.

May 8, 1976.

Syllabus by the Court

In an action by an advertiser against a telephone company for damages by reason of an omission of advertising contracted for in the yellow pages directory, it is held that under the particular circumstances the contract which limited the company's liability for errors and omissions to an amount equal to the cost of the advertising was not unconscionable and contrary to public policy.

Charles E. Cole, Jr., of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and Robert C. Foulston, Wichita, was with him on the brief for the appellant.

Durward D. Dupre, Topeka, argued the cause, and T. Larry Barnes and Robert A. Lewis, Topeka, were with him on the brief for the appellee.

HARMAN, Commissioner:

This appeal presents the question whether an advertiser can recover damages for negligence or breach of contract from a telephone company for an omission in the yellow pages of a telephone directory when the contract entered into by the parties limits the company's liability for errors and omissions to an amount equal to the cost of the advertisement. The trial court granted summary judgment for the telephone company and the advertiser has appealed.

The facts, as revealed by the pleadings and appellant's deposition, are undisputed. Appellant Frank Wille operates a heating and air conditioning sales and service business in Wichita under the trade names, Frank Wille Company and Frank Wille's Coleman Comfort Center, and for the thirteen years prior to 1974 had purchased some form of yellow page listing for his business in the telephone directory published by appellee Southwestern Bell Telephone Company for the Wichita district.

In February, 1974, a sales representative for Bell contacted appellant to discuss his yellow page listings in the directory to be published in July, 1974. As a result appellant agreed to purchase certain listings for both of his business trade names. Appellant received a copy of the written contract which was executed. At this time appellant's business was located at 1633 East Second street and his business phone numbers were 265-2609 and 265-7231.

In April, 1974, appellant contacted Bell regarding changing his telephone service to a new business location at 1909 East Central street and expanding his service through additional rotary or sequential telephone numbers. Appellant was advised numbers were not available to him to expand his present numbers sequentially. Hence he decided to subscribe to a new number, 265-4685, in order to have additional telephone lines available for his business in sequential numbers. As part of this decision appellant cancelled the phone service to him under the number 265-7231. However, because his other telephone number, 265-2609, was displayed on some equipment previously sold, appellant decided to retain that service in the yellow pages but not in the white.

In July, 1974, Bell distributed the new directory. Certain of appellant's yellow page listings under various headings for the business name Frank Wille's Coleman Comfort Center and telephone number 265-2609 were omitted. The yellow page advertising sold in February, 1974, applicable to the Frank Wille Company, phone number 265-7231, appeared in the directory. That advertising listed appellant's new address, 1909 East Central, and the new telephone number, 265-4685. Upon learning of the omission appellant began advertising his business on local television stations and in alternate forms of advertising, with total expenditures being between four and five thousand dollars.

Appellant was never billed nor has he paid for the omitted listings. The written contract between the parties was subject to thirteen terms and conditions which were set out on the back of the contract. The fourth paragraph of those conditions provided:

'The appellant agrees that the Telephone Company shall not be liable for errors in or omissions of the directory advertising beyond the amount paid for the directory advertising omitted, or in which errors occur, for the issue life of the directory involved.'

Appellant filed this action October 24, 1974, alleging breach of contract and negligence by Bell in the omission. Damages were sought in the amount of $9,990 for lost profits and expense for alternative advertising.

The trial court entered summary judgment for Bell because of the contractual limitation of liability for errors and omissions and the matter is now here for review.

Appellant contends the exculpatory clause upon which appellee relies is contrary to public policy and should not be enforced. He asserts unconscionability of contract in two respects: The parties' unequal bargaining position and the form of the contract and the circumstances of its execution.

American courts have traditionally taken the view that competent adults may make contracts on their own terms, provided they are neither illegal nor contrary to public policy, and that in the absence of fraud, mistake or duress a party who has fairly and voluntarily entered into such a contract is bound thereby, notwithstanding it was unwise or disadvantageous to him (Anno.: Sales-'Unconscionability', 18 ALR 3d 1305, § 2, p. 1307). Gradually, however, this principle of freedom of contract has been qualified by the courts as they were confronted by contracts so onesided that no fair minded person would view them as just or tolerable. An early definition of unconscionability was provided by Lord Chancellor Hardwicke, in the case of Chesterfield (Earl of) v. Janssen, 2 Ves.Sen. 125, 28 Eng.Rep. 82 (1750):

'. . . (a contract) such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other; which are unequitable and unconscientious bargains; and of such even the common law has taken notice. . . .' (p. 100.) (Discussed in Hume v. United States, 132 U.S. 406, 411-413, 10 S.Ct. 134, 33 L.Ed. 393 (1889).)

The doctrine was first applied by early equity and some common law courts in cases which approached clear fraud. (See a discussion of these cases in the Anno.: 18 ALR 3d, § 3, p. 1309.)

The doctrine, however, received its greatest impetus when it was enacted as a part of the Uniform Commercial Code. K.S.A. 84-2-302 provides in part that:

'(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. . . .'

(The doctrine of unconscionability in the area of private contract has come into our Kansas law by three other recent enactments: K.S.A. 16a-5-108, Uniform Consumer Credit Code; K.S.A.1975 Supp. 50-627, Consumer Protection Act; and K.S.A.1975 Supp. 58-2544, Residential Landlord and Tenant Act.)

Although the UCC's application is primarily limited to contracts for the present or future sale of goods (K.S.A. 84-2-102; 84-2-105), many courts have extended the statute by analogy into other areas of the law or have used the doctrine as an alternative basis for their holdings (Leff, 'Unconscionability and the Code-The Emperor's New Clause', 115 U.Pa.L.Rev. 485). The UCC neither defines the concept of unconscionability nor provides the elements or perimeters of the doctrine. Perhaps this was the real intent of the drafters of the code. To define the doctrine is to limit its application, and to limit its application is to defeat its purpose. (Note, 'The Doctrine of Unconscionability', 19 Maine L.Rev. 81, 85.)

The comment to K.S.A. 84-2-302 sheds some light on the drafters' intent. It provides in part:

'. . . The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. . . . The principle is one of the prevention of oppression and unfair surprise . . . and not of disturbance of allocation of risks because of superior bargaining power. . . .'

One commentator has elaborated on the two types of situations which UCC is designed to deal with:

'. . . One type of situation is that involving unfair surprise: where there has actually been no assent to the terms of the contract. Contracts involving unfair surprise are similar to contracts of adhesion. Most often these contracts involve a party whose circumstances, perhaps his inexperience or ignorance, when compared with the circumstances of the other party, make his knowing assent to the fine print terms fictional. Courts have often found in these circumstances and absence of a meaningful bargain. (See Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960).)

'The other situation is that involving oppression: where, although there has been actual assent, the agreement, surrounding facts, and relative bargaining positions of the parties indicate the possibility of gross over-reaching on the part of either party. Oppression and economic duress in a contract seem to be inseparably linked to an inequality of bargaining power. The economic position of the parties is such that one becomes vulnerable to a grossly unequal bargain.' (19 Maine L.Rev., supra, pp. 82-83.)

(Accord: Spanogle, 'Analyzing Unconscionability Problems', 117 U.Pa.L.Rev. 931.)

Although the doctrine of unconscionability is difficult to define precisely courts have identified a number of factors or elements as aids for determining its applicability to a given set of facts. These factors...