Hartwig Farms, Inc. v. Pacific Gamble Robinson Co.

• Decision Date: 03 March 1981
• Docket Number: No. 3561-III-1,3561-III-1
• Citation: 625 P.2d 171,28 Wn.App. 539
• Court: Washington Court of Appeals
• Parties: , 30 UCC Rep.Serv. 1552 HARTWIG FARMS, INC., a Washington Corporation; Donald R. Rizzuti and Maryanne Rizzuti, husband and wife, and Dale Anderson, Respondents, v. PACIFIC GAMBLE ROBINSON CO., a Foreign Corporation, d/b/a Pacific Fruit & Produce Co., Respondent, v. TOBIASON POTATO COMPANY, INC.; Orvil Gilleshammer and Joyce Gilleshammer, his wife, Appellants, and State of North Dakota and North Dakota State Seed Department, Defendants.

Page 539

28 Wn.App. 539

625 P.2d 171, 30 UCC Rep.Serv. 1552

HARTWIG FARMS, INC., a Washington Corporation; Donald R.

Rizzuti and Maryanne Rizzuti, husband and wife, and Dale Anderson, Respondents, v. PACIFIC GAMBLE ROBINSON CO., a Foreign Corporation, d/b/a

Pacific Fruit & Produce Co., Respondent, v. TOBIASON POTATO COMPANY, INC.; Orvil Gilleshammer and Joyce

Gilleshammer, his wife, Appellants,

and

State of North Dakota and North Dakota State Seed

Department, Defendants.

No. 3561-III-1.

Court of Appeals of Washington, Division III, Panel 2.

March 3, 1981.

Homer A. Crollard, Gavin, Robinson, Kendrick, Redman & Mays, Yakima, for appellants.

Steven N. Sackmann, Sackmann & Sackmann, Othello, for respondents Hartwig Farms, Rizzuti and Anderson.

Diehl R. Rettig, Raekes, Rettig & Osborne, Kennewick, for respondents Pacific Gamble.

John G. Layman, Layman, Mullin & Etter, Spokane, for respondents State of North Dakota and North Dakota State Seed Dept.

ROE, Acting Chief Judge.

This case involves the validity of a disclaimer placed on an invoice after a contract of sale has been made. The trial court held as a matter of law that such a disclaimer was not effective. We agree.

In 1977, plaintiff Hartwig Farms, Inc., which usually grew russet potatoes, purchased blue tag certified Norgold seed potatoes from Pacific Gamble Robinson. Plaintiffs Rizzuti and Anderson also purchased blue tag certified Norgold seed potatoes from Pacific that spring. Blue tag certified seed potatoes are those which have passed field inspections and are certified by the North Dakota State Seed Department to be within specified disease tolerances, including a 1 percent tolerance for Blackleg. When the potatoes planted by the plaintiffs came up, however, there was a 75 to 80 percent infestation of Blackleg, resulting in crop loss for which they sought damages.

The plaintiffs then sued Pacific, alleging negligence and breach of express and implied warranties. Pacific, in turn, cross claimed against Tobiason Potato Co., from whom Pacific had purchased the seed, and Gilleshammer, who grew the seed. Tobiason made a tender of defense to Gilleshammer, who accepted the tender. ¹ After a 4-week trial, at which evidence concerning warranties and the language of the disclaimer was presented, the court ruled as a matter of law the warranties had not been disclaimed and refused to give instructions on any disclaimers. It did, however, instruct on the plaintiffs' theory of negligence, as well as on breach of express warranty and the implied warranty of merchantability. The jury found for both plaintiffs; in answer to special interrogatories, it found there was no negligence but that both Pacific and Tobiason had breached the implied warranty of merchantability. As a result, it gave judgment to Pacific over against Tobiason on its cross claim. Tobiason has appealed, urging the trial court erred in its ruling that there had been no disclaimer.

Tobiason does most of its business by telephone. Seed brokers, such as Pacific, call and order seed; an oral agreement for sale is made at that time. After the sale is complete, Tobiason sends a written confirmation of sale which the broker signs and returns. The confirmation of sale does not contain any disclaimer of warranties. Tobiason ships the seed at the time it is needed by the broker. The invoice which accompanies each shipment does contain a disclaimer. ² Tobiason argues this disclaimer was effective to exclude the implied warranty of merchantability.

The Uniform Commercial Code allows a seller to give warranties ³ and also to limit or exclude them. ⁴ Disclaimers however, are not favored in the law; as a result, courts have added two conditions for effectiveness: a disclaimer must be explicitly negotiated or bargained for and it must set forth with particularity the qualities and characteristics being disclaimed. ⁵ Berg v. Stromme, 79 Wash.2d 184, 484 P.2d 380 (1971); Dobias v. Western Farmers Ass'n, 6 Wash.App. 194, 200, 491 P.2d 1346 (1971); DeCoria v Red's Trailer Mart, Inc., 5 Wash.App. 892, 491 P.2d 241 (1971). A disclaimer which is made after a sale is completed cannot be effective because it was not a part of the bargain between the parties. Dorman v. International Harvester Co., 46 Cal.App.3d 11, 120 Cal.Rptr. 516 (1975); Cambern v. Hubbling, 307 Minn. 168, 238 N.W.2d 622 (1976); Sugarland Indus., Inc. v. A. J. Falco, 360 S.W.2d 806 (Tex.Civ.App.1962). Here, the sale of seed was an oral contract; both Tobiason's confirmation of sale, which did not contain a disclaimer, and the invoice, which did, were sent to Pacific after the sale was complete. There was no discussion between Pacific and Tobiason concerning the disclaimer and no agreement that Pacific would be bound by it. Any disclaimer on Tobiason's invoice was unbargained for and thus not effective to exclude any warranty.

Tobiason relies upon RCW 62A.2-207 ⁶ to argue the disclaimer was effective based on the fact that prior invoices sent by Tobiason and received by Pacific incorporated the disclaimer into the present contract. RCW 62A.2-207 allows an offeree to add additional terms to his acceptance without rejecting the contract. Between merchants ⁷ such terms become part of the contract unless such terms materially alter it. If the terms are such as to materially alter the contract, they do not become a part of it unless accepted by the offeror. In Roto-Lith, Ltd. v. F. P. Bartlett & Co., 297 F.2d 497 (1st Cir. 1962), the court held the disclaimer on a sales acknowledgment to be a material alteration and an acceptance conditional on the offeror's assent to the additional term. The Roto-Lith court also held a buyer, when he accepted goods, became bound by the additional terms set by the seller. This result has not been followed by all courts and we decline to follow it here. To interpret this section as the Roto-Lith court did would always put the advantage in the sales transaction on the offeree; he would always have a contract on his own terms. The better interpretation of this section is to view the contract as containing the terms agreed to by both parties and to supply the other terms as the code dictates. ⁸ Southern Idaho Pipe & Steel Co. v. Cal-Cut Pipe & Supply, Inc., 98 Idaho 495, 567 P.2d 1246 (1977). The code does not imply disclaimers; in fact, disclaimers are not favored in the law. Thus, RCW 62A.2-207 should not be used to supply the negotiated agreement required for an effective disclaimer. Merely because Pacific had notice of the disclaimer's language does not mean it agreed to it. We will not supply that agreement.

Tobiason's other arguments concerning the validity of its disclaimer rest upon interpretations of RCW 62A.2-316. ⁹ First, it argues the language of the disclaimer is sufficiently like "as is" to effectively disclaim the implied warranty of merchantability under subsection (3). However, the purpose of this section is to protect buyers from clauses in sales contracts which seek to exclude "all warranties, express or implied." Uniform Commercial Code, Official Comment 1, RCWA 62A.2-316 (1976). Thus, the language must be sufficiently clear to put the buyer on notice that warranties are excluded. Tobiason's disclaimer does not make it clear the buyer is assuming the risk as to the quality of the goods purchased. Uniform Commercial Code, Official Comment 7, RCWA 62A.2-316 (1976). The language of the disclaimer is not similar enough to "as is" or "with all faults" to give it effect under subsection (3).

In addition, the trial court found the disclaimer inconspicuous. The type used to set the disclaimer is the smallest used on the entire invoice. Although subsection (3) itself does not require conspicuousness, courts have supplied such a requirement. Woodruff v. Clark County Farm Bureau Cooperative Ass'n, 153 Ind.App. 31, 286 N.E.2d 188 (1972); Fairchild Indus., Inc. v. Maritime Air Serv., Ltd., 274 Md. 181, 333 A.2d 313 (1975); Gindy Mfg. Co. v. Cardinale Trucking Corp., 111 N.J.Super. 383, 268 A.2d 345 (1970). We also believe any disclaimer, regardless of form, should be conspicuous to give the buyer notice of it. If a buyer is unaware of a potential disclaimer, he cannot effectively bargain for it. Tobiason argues Pacific's knowledge of the disclaimer renders it conspicuous. However actual knowledge of the disclaimer is insufficient to give it effect. Dobias, supra, 6 Wash.App. at 200, 491 P.2d 1346. Without negotiation and agreement, no disclaimer, including the present one, can be effective. ¹⁰ The question of conspicuousness is one of law for the trial court. Mieske v. Bartell Drug Co., 92 Wash.2d 40, 593 P.2d 1308 (1979); Schroeder v. Fageol Motors, Inc., 86 Wash.2d 256, 544 P.2d 20 (1975). The trial court determined that Tobiason's disclaimer was "anything but conspicuous." We agree.

Tobiason next argues the implied warranty of merchantability was effectively disclaimed by a course of dealing ¹¹ or by trade usage. ¹² RCW 62A.2-316(3)(c). It urges that because Pacific had accepted the invoices containing the disclaimer for approximately 15 years, there was a course of dealing between the parties to exclude warranties. In Nakanishi v. Foster, 64 Wash.2d 647, 393 P.2d 635 (1964), the plaintiff seed buyer sought damages for crop loss due to defendants' mislabeling of lettuce seed. In reversing the trial court's decision that the defendants were liable as a matter of law, the Supreme Court stated:

(P)laintiffs had been doing business with (defendants) for more than 15 years, during which time tags with the printed disclaimer of warranty were attached to all bags of seed and appeared on all orders and invoices, thus proving a custom in the sale of seed between plaintiffs and (defendants).

Nakanishi v. Foster, supra, 64 Wash.2d at 654, 393 P.2d 635. The disclaimer language there was contained not only on the tags, but also on the defendants' letterheads, invoices and contracts. The buyer agreed at...