P bought three lifts manufactured by D. None of them ever functioned properly.
D claims that the implied warranty of merchantability is barred by a disclaimer contained within the express, written warranty.
The express warranty was to replace those parts returned to the factory which prove upon inspection to be defective.
The disclaimer of implied warranties, although contained in a separate paragraph within the warranty text, is in the same typeface, size, and color as the remainder of the text.
P sued D for breach of implied warranty.
Procedural History:
Lower court granted summary judgment for the D, implied warranty disclaimer valid.
TX COA affirmed, implied warranty disclaimer valid.
TX Supreme Court reversed, new trial for P, implied warranty disclaimer not valid.
Issues:
How can a disclaimer of an implied warranty be enforceable?
Holding/Rule:
To be enforceable, a written disclaimer of the implied warranty of merchantability made in connection with a sale of goods must be conspicuous to a reasonable person.
Such a disclaimer contained in text undistinguished in typeface, size, or color within in a form purporting to grant a warranty is not conspicuous, and is unenforceable unless the buyer has actual knowledge of the disclaimer.
Reasoning:
A term or clause is conspicuous when it is so written that a reasonable person against whom it is to operate ought to have noticed it.
Nothing distinguishes the third paragraph containing the disclaimer of implied warranty.
Although the warranty in its entirety may be considered conspicuous, the disclaimer is hidden among attention-getting language purporting to grant the best warranty available.
Because the object of the conspicuousness requirement is to protect the buyer from surprise and an unknowing waiver of his rights, inconspicuous language is immaterial when the buyer has actual knowledge of the disclaimer.
The seller has the burden of proving the buyer's actual knowledge of the disclaimer.
Since this is a summary judgment case, the evidence must be viewed in a light most favorable to the non-movant, the P.
From the evidence, it is not clear that the P understood any limitations or exclusions on the warranty.
Dissent:
The legislature should prohibit all disclaimers of the implied warranties of merchantability.
Without this, courts will be forced to rely on "covert tools" such as the unconscionability provision or the conspicuous requirement to reach a just and fair result in disclaimer suits.
Public policy demands it!
The extent of a buyer's knowledge of a disclaimer should be irrelevant to a determination of its enforceability.
Otherwise, courts will be called on to preside over "swearing matches" where parties dispute this knowledge.
