One-sided contracts are a bad deal for ALL parties
The Court of Appeals just released a decision that shows that getting greedy will get ya’ in the end. Despite precedents that show that contracts substantially favoring the party with the greater power often are deemed unconscionable (so unfair as to not be enforceable), lawyers stiff draft them and companies still like them. That is what occurred in Speedway SuperAmerica, LLC v. Erwin, 2007-CA-000451-MR (March 21, 2008)
The contract involved in the Erwin case was drafted by Speedway and designed to have Sebert Erwin be an independent contractor for Speedway. It also provided that Sebert (love that name!) would indemnify (pay for) and hold harmless (not sue) Speedway for any damages arising out of any breach of the contract. Further, Speedway expected Sebert to get $300,000 in insurance that also insured Speedway plus his own workers’ compensation insurance. The contract was for five (5) years, but Speedway could cancel it any time they wanted for any reason whatsoever, but Sebert could not do the same. He could not even assign the contract to someone else. Basically, the contract only benefited Speedway and provided no protection for Sebert. First year law students learn that such contracts are problematic at best and yet Speedway paid some lawyer big money to come up with the rag.
The Court decided that it did not matter which case law was applied to this particular contract because the guiding principal fit both pre-injury releases and indemnification clauses. The holding of the Court is that when a contract that is used to defend against the indemnifee’s own negligence is “agreed to by a party in a clearly inferior bargaining position” (Id. at 9) then it is against public policy and not enforceable. In other words, by taking advantage the less sophisticated Sebert and trying to have all the protection and none of the risk, Speedway made their fancy contract worth no more than the paper it was written on.