July 31, 2013

Missouri Supreme Court upholds freedom of contract

By Deborah J. La Fetra Senior Attorney

Janet Chochorowski rented a garden tiller from Home Depot for $25, plus an optional charge of $2.50 for a damage waiver.  She signed a contract accepting these charges, including the optional $2.50.  Later, though, she sued Home Depot, purportedly as a class action under Missouri’s consumer protection act, arguing that the optional fee was “automatically” included and that the damage waiver was worthless.  Yesterday, a unanimous Missouri Supreme Court upheld the contract.

The Court specifically addressed two key points in PLF’s amicus brief.  First, the Court agreed that parties to a contract have a fundamental obligation to actually read the contract.  Mrs. Chochorowski had asked to be excused from this responsibility on a variety of grounds, but the Court correctly noted that she was competent to read the contract and therefore would be bound by its terms.

Second, the Court flatly rejected her claim that a damage waiver is worthless.  This optional provision allows a consumer to pay a small fee, $2.50 in this case, in exchange for Home Depot’s waiver of any claims for damages against her if she accidentally damages the rented equipment.  PLF’s brief argued that this standard method of risk allocation does have value.  Specifically, Home Depot provided Mrs. Chochorowski (and other Missouri do-it-yourselfers) with an overall lower cost of service because it could bargain for reduced litigation expenses.  If someone rents a rototiller, the general expectation is that she will return it intact, without damage and in regular working order.  Typical  rental contracts would require her to pay for repair or replacement.  A damage waiver provides a measure of certainty in the transaction that negligent damage of the rental property will not result in potentially major costs.  The Court agreed, finding nothing inherently “unfair” about a damage waiver in exchange for consideration of a fee.

PLF greatly appreciates the assistance of Jason R. Scheiderer, in Kansas City, Missouri, who acted as local counsel for us.

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