Lauvetz v. Alaska Sales and Service D/B/A National Car Rental

828 P.2d162 (Alaska Supreme Ct. 1991).

 

Purpose: 

To review of the superior court’s grant of partial summary judgment against the driver of a rental vehicle, in respect to the enforceability of a collision damage waiver (CDW). 

 

Procedural History:

Ø      Superior court held that the “terms and provisions of the CDW in the car rental agreement were valid, binding and enforceable.” 

 

Ø      Supreme court reversed.  

 

Rule of Law: 

Parties “are not bound to unknown terms which are beyond the range of reasonable expectation.” 

 

Issue:

Whether the purchaser of a collision damage waiver should reasonably expect the waiver to be subject to any exclusions? 

 

Holding:

No, the purchaser could have reasonably expected the contract to be complete, thus, not subject to any exclusions.

 

 

Rationale:

Rest. 2nd  § 211 establishes the general enforceability of the terms of standardized forms, w/out regard for whether the customer reads or understands those terms.  The enforceability is subject to limitations of reasonableness:  Customers “are not bound to unknown terms which are beyond the range of reasonable expectation.”

 

A purchaser of damage waive would not have any reasonable expectations that the waiver would be subject to any exclusions for the following reasons:

1.  Lauvetz was paying the premium rate of $8.95 per day.  

2.  There was no summary of the alternative choices. Lauvetz merely had the choice between a damage waiver and no waiver, protection against damaging the car or no protection.

 

 

Legal Theory: 

Rest 2nd § 211 “Interpreting standardized form agreements”

(1)  where a party to an agreement assents to a writing and has reason to believe that like writing are regularly used to embody terms of agreements of the same type, she adopts the writing as an integrated agreement.

 

except,

 

(3)  where the other party has reason to believe that the party manifesting assent would not do so if she knew that the writing contained a particular terms, the term is not part of the agreement.  (Here, the court held that National knew or should of known that Lauvetz would not give his assent because the terms of the contract were unreasonable.)

 

 

 

Facts:

Part I

Osborne and Lauvetz, arrived at Anchorage International Airport, where they rented a van from National Car Rental.  Although Osborne rented the vehicle, he listed Lauvetz as an authorized drive.  During the rental transaction, Osborne was offered an optional collision damage waiver (CDW), which he accepted and paid $8.95 per day.

 

Directly above the CDW acceptance box, in bold face were the words “See Terms and Conditions.”  The National agent, however, did not inform the driver’s where the terms and conditions could be found, nor did the agent make a representation about the scope of the CDW or the exclusions of the CDW.  The terms and conditions of the CDW were found on the inside of the envelope.

 

Paragraph 7 in the terms stated that

1.  CDW is not insurance, and

2.  By purchasing the CDW, if the car sustains collision damage, the financial responsibility will be eliminated, except the driver uses the car pursuant to a prohibited use, including the driving while intoxicated.

 

 

Part II

Three days later, Lauvetz was charged with reckless driving.  National filed suit seeking damages for the wreck alleging that Lauvetz was intoxicated at the time of the accident.  National claimed that the CDW did not apply because the vehicle was used in a prohibited manner.

 

 

The Trend in the Interpretation of Adhesion Contracts:

Some courts construe the enforceability of terms in an adhesion contract based on where a layperson would understand the terms, if a layperson were to read them. Most, however, emphasize the reasonableness of the term or condition, no matter how clear its meaning might be to the layperson, even if she happened to read it.