Ford Motor Co. v. Moulton

Decision Date19 February 1974
Parties14 UCC Rep.Serv. 312 FORD MOTOR COMPANY et al., Petitioners, v. Charles MOULTON et ux., Respondents.
CourtTennessee Supreme Court

Louis C. Woolf, Knoxville, for Ford Motor Co.

Stuart F. Dye and Hugh W. Morgan, Knoxville, for Hull-Dobbs.

Paul T. Gillenwater and Sumter D. Ferguson, Jr., Knoxville, for respondents.

OPINION

CHATTIN, Justice.

This is a personal injury suit brought by Moulton and his wife, Pauline, against Ford Motor Company and a retail Ford dealer, Hull-Dobbs.

Moulton seeks $1,000,000.00 in damages and charges the defendants with: negligence; breach of express and implied warranties; tortious misrepresentation based on public advertisement; and strict liability in tort.

Moulton filed a complaint on May 13, 1971, averring he purchased from Hull-Dobbs of Knoxville a 1969 Ford LTD automobile which was delivered to him on April 30, 1969.

That on July 5, 1970, while driving in a westerly direction along Interstate 40, the car suddenly veered to the right, jumped the guard rail and fell twenty-six feet to a street below. It is alleged the car suddenly went out of control because of a defect in the steering mechanism. Moulton was seriously injured.

Mrs. Moulton adopts the same facts and theories for recovery in her suit for loss of consortium.

Motions for summary judgment or dismissal were filed by both petitioners. The trial judge concluded the complaint did not state a cause of action for breach of warranty. He sustained petitioners' motion as to the warranty counts. He, also, held the counts sounding in negligence, strict liability in tort, and tortious misrepresentation based on public advertisement were barred by the statute of limitations.

The Court of Appeals affirmed the action of the trial judge in dismissing the breach of warranty counts, but reversed as to the other counts after concluding that they were not barred by the statute of limitations.

All parties petitioned this Court for the writ of certiorari to the Court of Appeals. We granted the petitions of petitioners and denied the petitions of respondents.

We think it proper for us to first point out the reasons for our denial of respondents' petitions for certiorari.

Although respondents raised numerous assignments of error, it is unnecessary to discuss each assignment of error separately since they all relate basically to two issues.

The Court of Appeals concluded that Hull-Dobbs had not given Moulton an express warranty. This conclusion is supported by the evidence. That Court found that Ford had given Moulton a one-year or twelve thousand mile express warranty. However, the Court of Appeals held that this warranty had expired, thereby precluding an action for its breach.

Both Hull-Dobbs and Ford had disclaimer clauses in their contracts with Moulton, which purportedly disclaimed all implied warranties. The Court of Appeals found these disclaimer clauses to be valid; and, therefore, sufficient to prevent respondents from having a cause of action for breach of implied warranty.

Respondents make three arguments: First, they insist the disclaimer clauses were not properly drawn in that they failed to comply with the provisions of the Uniform Commercial Code; and are, therefore, invalid. Second, if the disclaimer clauses are properly drawn, they are prima facie unconscionable under T.C.A. 47--2--715. Finally, respondents insist that the one-year or twelve thousand mile limitation on the express warranty is prima facie unconsionable under T.C.A. 47--2--719.

T.C.A. 47--2--316 provides that implied warranties of merchantability and fitness may be disclaimed if the disclaimer is conspicuous and mentions merchantability, and if it is in writing with reference to the fitness warranty. The Court of Appeals concluded that the requirement of T.C.A. 47--2--316(2) had been complied with; and, consequently, the disclaimers were validly drawn. We agree with this conclusion.

Respondents insist that even if the disclaimers were drawn in accordance with the provisions of T.C.A. 47--2--316 they are, nevertheless, invalid because they violate T.C.A. 47--2--719.

T.C.A. 47--2--719(3) provides:

'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.'

Respondents' argument is that as a result of the accident Moulton sustained personal injuries; that because of the valid disclaimer of warranties, he is unable to bring an action for consequential damages resulting from the accident; and that such an exclusion is violative of T.C.A. 47--2--719(3) since that section 'expressly prohibits exclusion of personal injuries by warranty.'

In answer to this argument, the Court of Appeals said:

'_ _ Plaintiffs misconstrues the scope of this Section. (2--719(3)). Subsection (3) thereof provides the limitation of consequential damages for injury to the person in case of consumer goods is prima facie unconsicionable, but that Section does not control disclaimer of implied warranties. Official comment 3 to T.C.A. 47--2--719 states that the seller 'in all cases is free to disclaim warranties in the manner provided in Section 2--316.'

'The latter Section, which is T.C.A. 47--2--316, provides in subsection (2) that implied warranties of merchantability and fitness may be disclaimed if the disclaimer is conspicious and mentions merchantability, and if it is in writing with reference to the fitness warranty. The disclaimer here is in writing, and merchantability is explicitly mentioned in the disclaimer of the motor vehicle sales contract.'

Most Uniform Commercial Code commentaries agree with the conclusion of the Court of Appeals that disclaimers drawn in accordance with 47--2--316 cannot be considered to violate the provisions of 47--2--719. The following analysis is offered in the one volume treatise of the U.C.C. by White and Summers:

'_ _ The proposition enunciated by _ _ (a few courts) _ _ that a disclaimer that has the effect of modifying or excluding consequential damages may be unconscionable under 2--719(3) _ _ is out of line with the scheme of the Code. Comment 3 to 2--719(3) provides: _ _ 'Subsection (3) recognizes the validity to 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 a manner provided in Section 2--316.'

'The last sentence seems to be telling the seller, 'if you really want to limit your liability why don't you disclaim all warranties? Then you wont have to worry about limiting damages.' Note that the sentence appears after the discussion of remedies limitations and after the discussion of extent to which such clauses are governed by the unconscionability doctrine and that it announces that the seller may disclaim warranties in all cases. These facts strongly indicate that the draftsmen intended for 2--316 to operate independently of 2--719(3).

'This implication is buttressed by comment to 2--316 _ _: '_ _ If no warranty exists, there is of course no problem of limiting remedies for breach of warranty.'

'The comment's reasoning is elementary: there can be no consequential damages if there is no breach; there can be no breach of warranty if there is no warranty; there can be no warranty if the seller has disclaimed them pursuant to 2--316. Although a particular disclaimer may be unconscionable under 2--302, it seems clear that the scheme of the Code does not permit a court to disregard that disclaimer on the basis that it operates to exclude the consequential damages that could not be excluded under 2--719(3).'

We think the Court of Appeals correctly determined that the disclaimer clauses did not violate the provisions of 2--719(3).

Respondents did not argue that the Court of Appeals did not consider the question as to whether a warranty disclaimer which meets the provisions of 2--316 can be considered unconscionable within in the meaning of the term as used in 2--302. Most commentaries answer this question in the negative. See Leff Unconscionability and the Code, the Emperor's New Clause, 115 U.Pa.L.Rev., 485 (1967).

Finally, respondents contend that the one-year or twelve thousand mile limitation on the express warranty is prima facie unconscionable under T.C.A. 47--2--719(3). This is essentially the same argument made above. Again, the Court of Appeals rejected respondents' reasoning stating:

'This provision has to do with limitation of remedies, and not with a limitation on the time within which a claim may be asserted. T.C.A. 47--2--607(3)(a) provides for the time within which a claim must be asserted. It states that where goods have been accepted, 'the buyer must within a reasonable time after he discovers or should have discovered a breach notify the seller of the breach or be barred from any remedy.' T.C.A. 47--1--204(1) provides that whenever any provision in the Sales Act requires an action to be taken within a reasonable time 'any time which is not manifestly unreasonable may be fixed by agreement.'

'Limitation of the periof of the express warranty is in effect a limitation of the time within which a claim must be asserted under that warranty. The warranty actually provides for repair or replacement of such parts 'found to be defective' within the limited period, and if such discovery were made presumably a further reasonable period of time would be allowed for giving notice. Here, however, no such discovery within the limited period was made. Thus, plaintiff has no valid claim of breach of express or implied warranty.

'There is no assignment of error that the limited period of express warranty is 'manifestly...

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