Case #2 - A Little More Challenging

[GRB]

I'm certainly no attorney, but I did stay at a Holiday Inn Express once... My thoughts are that it seems there would be some sort of expressed or at least implied warranty on the shingles. I mean, a manufacturer cannot just make and sell a product and then say they have no obligation for the product to perform correctly if used in a "reasonable" manner. In other words, if the homeowner used the shingles for some other purpose than to roof his home and they failed and caused a problem, the company should not have any liability, but if they were installed properly how can they just say sorry, not our problem. I would obviously retain a lawyer and pursue the company for all of the damages. I think the homeowner has a case. Just filing an insurance claim would be my last resort.

[Jay481985]

In NJ I bet you can still sue them even with the warning.

[tigerwoodKhorns]

I'm certainly no attorney, but I did stay at a Holiday Inn Express once... My thoughts are that it seems there would be some sort of expressed or at least implied warranty on the shingles. I mean, a manufacturer cannot just make and sell a product and then say they have no obligation for the product to perform correctly if used in a "reasonable" manner. In other words, if the homeowner used the shingles for some other purpose than to roof his home and they failed and caused a problem, the company should not have any liability, but if they were installed properly how can they just say sorry, not our problem. I would obviously retain a lawyer and pursue the company for all of the damages. I think the homeowner has a case. Just filing an insurance claim would be my last resort.

When did the customer get notice of the warranty?

[dtel]

In NJ I bet you can still sue them even with the warning.

In NJ, I think they just send out a couple big Italian " family" members to "talk" with them, no need for a lawer.

[Jeff Matthews]

So, are all of you saying it does not matter what limitations of liability you want to try to put on a package, it doesn't matter?

What about all those disclaimers that come in the instruction books for software, for stereo equipment, for tools, etc.? Are you saying printed disclaimers cannot be effective?

Say you buy a new tube amp. The warranty info. in the manual says, "This product is warranted to be free from defects for 3 years. In the event of a defect, we will, at our option, repair or replace the product at no charge to you. In no event will our liability extend to any incidental or consequential damages, including loss of use or damage to other property."

Is this just meaningless gibberish?

How else could you, as a product seller, limit your exposure? Should the law be that all product sellers should have no right to limit their exposure?

What if you are a "genious" software programmer who comes up with a "genious" software package? You are going to venture into business with it. You hope to sell it to some large companies. Wouldn't you want to limit your exposure to liability? There are always possibilities, however slight, that your buddy, who wrote one of the software sub-routines in Assembly, screwed up, but you don't know that your buddy actually did anythjing wrong. So, you want to say, "Our liability is limited to replacing the software, fixing bugs, or giving a refund. We are not liable for anything else."

Can't you do that?

[Arky]

Yeah, what Mssr. Deneen said.

[mungkiman]

How soon does John need a roof?

[Jeff Matthews]

I'm really surprised. There must not be any Republicans in this bunch. What if John signed an invoice that contained the limitation of damages language?

[mungkiman]

noones playing anymore? wouldn't it be in john's best interest to
take replacement shingles instead of the check? wouldn't that leave
open the avenues for further claims?

i would want to know when the manufacturer new about the defective product relative to date of sale.

tell us, tell us, what's the answer?

[Jeff Matthews]

Let me tell you the answer by a story I once heard.

Once there was this CEO, and he was confronted with an issue. He paged his secretary and said "Get the CFO in here fast!" The CFO arives, and says "What can I do for you?" The CEO says, "I need a quick answer. What's 2 plus 2?" The CFO replies, "The answer is 4." Not quite sure, the CEO says "Get the accountant in here, fast!" The accountant arrives, and the CEO asks "Quick, what's 2 plus 2?" The accountant says, "4." The CEO wants to be absolutely sure, so he says "Get the lawyer in here." The lawyer arrives, and the CEO says, "What's 2 plus 2?" The lawyer says, "What do you want it to be?"

[Jeff Matthews]

UCC 1.201(

(10) "Conspicuous," with reference to a term, means so written, displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following:

(A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and

( language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

§ 2.316. Exclusion or Modification of Warranties

(a) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this chapter on parol or extrinsic evidence (Section 2.202) negation or limitation is inoperative to the extent that such construction is unreasonable.


( Subject to Subsection ©, to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

© Notwithstanding Subsection (

(1) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and

(2) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

(3) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

(d) Remedies for breach of warranty can be limited in accordance with the provisions of this chapter on liquidation or limitation of damages and on contractual modification of remedy (Sections 2.718 and 2.719).

Purposes:
1. This section is designed principally to deal with those frequent clauses in sales contracts which seek to exclude "all warranties, express or implied." It seeks to protect a buyer from unexpected and unbargained language of disclaimer by denying effect to such language when inconsistent with language of express warranty and permitting the exclusion of implied warranties only by conspicuous language or other circumstances which protect the buyer from surprise.
2. The seller is protected under this Article against false allegations of oral warranties by its provisions on parol and extrinsic evidence and against unauthorized representations by the customary "lack of authority" clauses. This Article treats the limitation or avoidance of consequential damages as a matter of limiting remedies for breach, separate from the matter of creation of liability under a warranty. If no warranty exists, there is of course no problem of limiting remedies for breach of warranty. Under subsection (4) the question of limitation of remedy is governed by the sections referred to rather than by this section.
3. Disclaimer of the implied warranty of merchantability is permitted under subsection (2), but with the safeguard that such disclaimers must mention merchantability and in case of a writing must be conspicuous.
4. Unlike the implied warranty of merchantability, implied warranties of fitness for a particular purpose may be excluded by general language, but only if it is in writing and conspicuous.
5. Subsection (2) presupposes that the implied warranty in question exists unless excluded or modified. Whether or not language of disclaimer satisfies the requirements of this section, such language may be relevant under other sections to the question whether the warranty was ever in fact created. Thus, unless the provisions of this Article on parol and extrinsic evidence prevent, oral language of disclaimer may raise issues of fact as to whether reliance by the buyer occurred and whether the seller had "reason to know" under the section on implied warranty of fitness for a particular purpose.
6. The exceptions to the general rule set forth in paragraphs (a), ( and © of subsection (3) are common factual situations in which the circumstances surrounding the transaction are in themselves sufficient to call the buyer's attention to the fact that no implied warranties are made or that a certain implied warranty is being excluded.
7. Paragraph (a) of subsection (3) deals with general terms such as "as is," "as they stand," "with all faults," and the like. Such terms in ordinary commercial usage are understood to mean that the buyer takes the entire risk as to the quality of the goods involved. The terms covered by paragraph (a) are in fact merely a particularization of paragraph © which provides for exclusion or modification of implied warranties by usage of trade.
8. Under paragraph ( of subsection (3) warranties may be excluded or modified by the circumstances where the buyer examines the goods or a sample or model of them before entering into the contract. "Examination" as used in this paragraph is not synonymous with inspection before acceptance or at any other time after the contract has been made. It goes rather to the nature of the responsibility assumed by the seller at the time of the making of the contract. Of course if the buyer discovers the defect and uses the goods anyway, or if he unreasonably fails to examine the goods before he uses them, resulting injuries may be found to result from his own action rather than proximately from a breach of warranty. See Sections 2-314 and 2-715 and comments thereto.
In order to bring the transaction within the scope of "refused to examine" in paragraph (, it is not sufficient that the goods are available for inspection. There must in addition be a demand by the seller that the buyer examine the goods fully. The seller by the demand puts the buyer on notice that he is assuming the risk of defects which the examination ought to reveal. The language "refused to examine" in this paragraph is intended to make clear the necessity for such demand.
Application of the doctrine of "caveat emptor" in all cases where the buyer examines the goods regardless of statements made by the seller is, however, rejected by this Article. Thus, if the offer of examination is accompanied by words as to their merchantability or specific attributes and the buyer indicates clearly that he is relying on those words rather than on his examination, they give rise to an "express" warranty. In such cases the question is one of fact as to whether a warranty of merchantability has been expressly incorporated in the agreement. Disclaimer of such an express warranty is governed by subsection (1) of the present section.
The particular buyer's skill and the normal method of examining goods in the circumstances determine what defects are excluded by the examination. A failure to notice defects which are obvious cannot excuse the buyer. However, an examination under circumstances which do not permit chemical or other testing of the goods would not exclude defects which could be ascertained only by such testing. Nor can latent defects be excluded by a simple examination. A professional buyer examining a product in his field will be held to have assumed the risk as to all defects which a professional in the field ought to observe, while a nonprofessional buyer will be held to have assumed the risk only for such defects as a layman might be expected to observe.
9. The situation in which the buyer gives precise and complete specifications to the seller is not explicitly covered in this section, but this is a frequent circumstance by which the implied warranties may be excluded. The warranty of fitness for a particular purpose would not normally arise since in such a situation there is usually no reliance on the seller by the buyer. The warranty of merchantability in such a transaction, however, must be considered in connection with the next section on the cumulation and conflict of warranties. Under paragraph © of that section in case of such an inconsistency the implied warranty of merchantability is displaced by the express warranty that the goods will comply with the specifications. Thus, where the buyer gives detailed specifications as to the goods, neither of the implied warranties as to quality will normally apply to the transaction unless consistent with the specifications.

§ 2.719. Contractual Modification or Limitation of Remedy

(a) Subject to the provisions of Subsections ( and © of this section and of the preceding section on liquidation and limitation of damages,

(1) the agreement may provide for remedies in addition to or in substitution for those provided in this chapter and may limit or alter the measure of damages recoverable under this chapter, as by limiting the buyer's remedies to return of the goods and repayment of the price or to repair and replacement of non-conforming goods or parts; and

(2) resort to a remedy as provided is optional unless the remedy is expressly agreed to be exclusive, in which case it is the sole remedy.

( Where circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided in this title.

© Consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable. Limitation of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.

Purposes:
1. Under this section parties are left free to shape their remedies to their particular requirements and reasonable agreements limiting or modifying remedies are to be given effect.
However, it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Thus any clause purporting to modify or limit the remedial provisions of this Article in an unconscionable manner is subject to deletion and in that event the remedies made available by this Article are applicable as if the stricken clause had never existed. Similarly, under subsection (2), where an apparently fair and reasonable clause because of circumstances fails in its purpose or operates to deprive either party of the substantial value of the bargain, it must give way to the general remedy provisions of this Article.
2. Subsection (1)( creates a presumption that clauses prescribing remedies are cumulative rather than exclusive. If the parties intend the term to describe the sole remedy under the contract, this must be clearly expressed.
3. Subsection (3) recognizes the validity of clauses limiting or excluding consequential damages but makes it clear that they may not operate in an unconscionable manner. Actually such terms are merely an allocation of unknown or undeterminable risks. The seller in all cases is free to disclaim warranties in the manner provided in Section 2-316.

§ 2.302. Unconscionable Contract or Clause

(a) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.


( When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.


Purposes:
1. This section is intended to make it possible for the courts to police explicitly against the contracts or clauses which they find to be unconscionable. In the past such policing has been accomplished by adverse construction of language, by manipulation of the rules of offer and acceptance or by determinations that the clause is contrary to public policy or to the dominant purpose of the contract. This section is intended to allow the court to pass directly on the unconscionability of the contract or particular clause therein and to make a conclusion of law as to its unconscionability. The basic test is whether, in the light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. Subsection (2) makes it clear that it is proper for the court to hear evidence upon these questions. The principle is one of the prevention of oppression and unfair surprise (Cf. Campbell Soup Co. v. Wentz, 172 F.2d 80, 3d Cir. 1948) and not of disturbance of allocation of risks because of superior bargaining power. The underlying basis of this section is illustrated by the results in cases such as the following:
Kansas City Wholesale Grocery Co. v. Weber Packing Corporation, 3 Utah 414, 73 P.2d 1272 (1937), where a clause limiting time for complaints was held inapplicable to latent defects in a shipment of catsup which could be discovered only by microscopic analysis; Hardy v. General Motors Acceptance Corporation, 38 Ga.App. 463, 144 S.E. 327 (1928), holding that a disclaimer of warranty clause applied only to express warranties, thus letting in a fair implied warranty; Andrews Bros. v. Singer & Co. (1934 CA) 1 K.B. 17, holding that where a car with substantial mileage was delivered instead of a "new" car, a disclaimer of warranties, including those "implied," left unaffected an "express obligation" on the description, even though the Sale of Goods Act called such an implied warranty; New Prague Flouring Mill Co. v. G. A. Spears, 194 Iowa 417, 189 N.W. 815 (1922), holding that a clause permitting the seller, upon the buyer's failure to supply shipping instructions, to cancel, ship, or allow delivery date to be indefinitely postponed 30 days at a time by the inaction, does not indefinitely postpone the date of measuring damages for the buyer's breach, to the seller's advantage; and Kansas Flour Mills Co. v. Dirks, 100 Kan. 376, 164 P. 273 (1917), where under a similar clause in a rising market the court permitted the buyer to measure his damages for non-delivery at the end of only one 30 day postponement; Green v. Arcos, Ltd. 1931 CA) 47 T.L.R. 336, where a blanket clause prohibiting rejection of shipments by the buyer was restricted to apply to shipments where discrepancies represented merely mercantile variations; Meyer v. Packard Cleveland Motor Co., 106 Ohio St. 328, 140 N.E. 118 (1922), in which the court held that a "waiver" of all agreements not specified did not preclude implied warranty of fitness of a rebuilt dump truck for ordinary use as a dump truck; Austin Co. v. J. H. Tillman Co., 104 Or. 541, 209 P. 131 (1922), where a clause limiting the buyer's remedy to return was held to be applicable only if the seller had delivered a machine needed for a construction job which reasonably met the contract description; Bekkevold v. Potts, 173 Minn. 87, 216 N.W. 790, 59 A.L.R. 1164 (1927), refusing to allow warranty of fitness for purpose imposed by law to be negated by clause excluding all warranties "made" by the seller; Robert A. Munroe & Co. v. Meyer (1930) 2 K.B. 312, holding that the warranty of description overrides a clause reading "with all faults and defects" where adulterated meat not up to the contract description was delivered.
2. Under this section the court, in its discretion, may refuse to enforce the contract as a whole if it is permeated by the unconscionability, or it may strike any single clause or group of clauses which are so tainted or which are contrary to the essential purpose of the agreement, or it may simply limit unconscionable clauses so as to avoid unconscionable results.
3. The present section is addressed to the court, and the decision is to be made by it. The commercial evidence referred to in subsection (2) is for the court's consideration, not the jury's. Only the agreement which results from the court's action on these matters is to be submitted to the general triers of the facts.

[Arky]

Hey Jeff. What the hell is the answer.[H]

[Jeff Matthews]

Here's a very similar case against a shingle manufacturer, GAF Materials Corp.:

http://www.superior.court.state.pa.us/opinions/a32025.pdf

You might wonder why I'd be knowing about a Pennsylvania case when I'm a Texas lawyer. Let's just say, if I told you, I'd have to kill you... [:#]

Just kidding, I represented some folks in a very similar case against GAF with facts more like our example problem, but with a twist. Claims adjuster filled out a standard form for replacement of the shingles. Then, he filled out a second form for submitting a claim for damage to the house and belongings. He said, "This one's for the shingles. Sign here. This one's for the rest, which I have to submit." As it turned out, each form had language stating that by signing, consumer agrees this is a full and final settlement of all claims.

I can only say the case was resolved. But it was very interesting to go to bat against standard release language in claims forms as well as the limitation of remedies language on the packaging.