Case Study: Campbell Soup Co. v. Wentz
Facts: Per a written contract between Campbell Soup Company (a New Jersey company) and the Wentzes (carrot farmers in Pennsylvania), the Wentzes would deliver to Campbell all the Chantenay red cored carrots to be grown on the Wentz farm during the 1947 season. The contract price for the carrots was $30 per ton. The contract between Campbell Soup and all sellers of carrots was drafted by Campbell and it had a provision that prohibited farmers/sellers from selling their carrots to anyone else, except those carrots that were rejected by Campbell. The contract also had a liquidated damages provision of $50 per ton if the seller breached, but it had no similar provision in the event Campbell breached. The contract not only allowed Campbell to reject nonconforming carrots, but gave Campbell the right to determine who could buy the carrots it had rejected. The Wentzes harvested 100 tons of carrots, but because the market price at the time of harvesting was $90 per ton for these rare carrots, the Wentzes refused to deliver them to Campbell and sold 62 tons of their carrots to a farmer who sold some of those carrots to Campbell. Campbell sued the Wentzes, asking for the court’s order to stop further sale of the contracted carrots to others and to compel specific performance of the contract. The trial court ruled for the Wentzes and Campbell appealed.
Issues: Is specific performance an appropriate legal remedy in this case or is the contract unconscionable?
Discussion: In January 1948, it was virtually impossible to obtain Chantenay carrots in the open market. Campbell used Chantenay carrots (which are easier to process for soup making than other carrots) in large quantities and furnishes the seeds to farmers with whom it contracts. Campbell contracted for carrots long ahead, and farmers entered into the contract willingly. If the facts of this case were this simple, specific performance should have been granted.
However, the problem is with the contract itself, which was one-sided. According to the appellate court, the most direct example of unconscionability was the provision that, under certain circumstances, Campbell may reject carrots, but farmers cannot sell them anywhere without Campbell’s permission. Though the contract was legal, it was wrong for Campbell to ask for the court’s help in enforcing this unconscionable bargain (one that “shocks the conscience of the court”). The court said that the sum of the contract’s provisions “drives too hard a bargain for a court of conscience to assist.”
Holding: The judgment of the trial court in favor of the farmers is affirmed.
Questions for Discussion
- What were the terms of the contract between Campbell and the Wentzes?
- Did the Wentzes perform under the contract?
- Did the court find specific performance to be an adequate legal remedy in this case?
- Why did the court refuse to help Campbell in enforcing its legal contract?
- How could Campbell change its contract in the future so as to avoid the unconscionability problem?
Focus on Ethics
Ace Heating and Cooling sells air conditioners. One unit, the Freezy, has a fair market value of $300. During a heat wave, Ace sells a Freezy air conditioner for $500 to each of the following:
- Breanna, single mom with poor credit, who canâ€™t afford to pay cash for an AC unit. Breanna signs a contract to pay $500 on a credit plan, with an additional $300 in interest and financing fees.
- Barry Bigshot, investment banker, who knows the price is way too high but who is far too important to waste his time driving around town trying to get a better deal.
- Glamour CafÃ©, a fancy restaurant with an upscale clientele, whose AC went out in the middle of the lunch rush. The manager is desperate to get the place cooled down before people like Barry Bigshot come in for the evening happy hour.
- Shady Rest Nursing Home, a business that barely makes a profit. The manager isnâ€™t happy about the price, but old people are very vulnerable to heat, and sheâ€™s afraid that her patientsâ€™ health could be compromised by any delay in getting AC.
Questions for Discussion
- 1.Under UCC 2-302, who has the best chance of getting out of the contract due to unconscionability?
- 2.The symbol for justice features a woman wearing a blindfold, to illustrate that the law should be applied the same way regardless of who the parties are. Does the UCC rule seem to contradict this? Which approach do you think is more ethical?
- 3.Note that both Glamour and Shady Rest are businesses, and courts rarely find that contracts between two businesses are unconscionable. The rationale is that a business is a sophisticated entity, familiar with transactions and able to protect itself. Do you think Glamour and Shady Rest are in a comparable position regarding whether this contract is unconscionable?
- 4.Section 2-302 leaves a goodly amount of discretion to the courts in deciding whether a contract term is grossly unfair and whether the parties had such disproportionate ability to bargain that the contract should be found unconscionable. Do you think this is a good approach? Would it be better if the law were more specific?