Gianni Sport Ltd. v. Gantos, Inc.
151 Mich.App. 598, 391 N.W.2d 760 (Mich.App. 1986)
submitted a purchase order to
Gianni for holiday clothing.
order contained a clause saying, "the buyer reserves the right to
terminate by notice to seller all of any part of this purchase order with
respect to goods that have not been shipped for any reason
contract represented over 20% of Gianni's business that year, but less
than 1% of Gantos'.
cancelled the order three months later.Gianni then agreed to a 50% reduction in price if
Gantos would accept the goods anyway.Gantos agreed to take the goods at 50% off, but then Gianni had a change of heart and sued on the basis that the
second agreement was unconscionable.
Trial Court held that the second agreement was invalid because the
cancellation clause was unconscionable.
Trial Court found that the parties did not have equal bargaining power.
Appellate Court affirmed.
Appellate Court looked at UCC §2-302 which gives a basic test for unconscionability.
contract that allows one party to cancel at any time is clearly unfair,
and the Court was unsure if it was even a legal contract.
Court found that the last minute cancellation placed the Gianni
in the untenable position of absorbing the loss or negotiating a reduced
price.This is unconscionable.
order for a contract to be held unconscionable, it must both be procedurallyunconscionable and substantively unconscionable.
case of Cardinal Stone Co. Inc., v. Rival Mfg. Co. had a similar clause, but the Court in that
case found that since the two companies had approximately equal bargaining
power, the clause was not unconscionable.In this case, Gianni did not have
the ability to negotiate with the much larger Gantos.
also Martin v. Joseph Harris Co.,
which also argued that unequal bargaining power can result in unconscionable