Sales and Leases | 13
the parties’ relative bargaining power and ability to negotiate; and whether the party asserting unconscionability had other options.
b. Substantive Unconscionability Substantive unconscionability means that the contractual terms themselves are unfairly or unreasonably one-sided or oppressive. These terms allocate contractual risk so unevenly that one reasonably wonders why any reasonable person would knowingly agree to them under the circumstances. Examples include inequitable termination or arbitration clauses, unreasonable or unfair limits on remedies, and improper warranty disclaimers. Price matters, but price alone will seldom establish unconscionability. Identifying Goods to the Contract Identification occurs when particular goods, whether conforming or not, are associated with a specific contract for their sale. If the goods exist and have been identified at the time of contracting, then the goods are identified to the contract when the contract is made. If the goods are future goods, or if the goods exist but have not been identified at contracting, then identification typically occurs when the seller designates the goods as the contract’s subject matter ( e.g. , by marking or shipping the goods). Risk of Loss without a Breach of Contract under § 2-509 Section 2-509 sets forth the rules (absent contrary agreement) to determine risk of loss, assuming neither party has breached the contract. Normally, risk of loss passes from the seller to the buyer when the seller has performed its contractual obligations. If the goods are in a bailee’s possession for delivery without being moved, risk of loss passes when the bailee acknowledges the buyer’s right to possess the goods (though special rules apply if documents of title are involved). 1. Risk of Loss in a Shipment Contract In a shipment contract, the seller must or may ship the goods by carrier, but need not deliver the goods at a particular destination. Here, risk of loss passes to the buyer when the goods are properly delivered to the carrier. If the goods are identified in transit ( e.g. , the seller buys goods that are aboard a ship and diverts them to the buyer), risk of loss passes upon identification, regardless of when the goods were shipped. 2. Risk of Loss in a Destination Contract In a destination contract, the seller is authorized or required to ship the goods by carrier, and the seller must deliver the goods at a particular destination. Courts normally presume a
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