Norman Gershman's Things To Wear, Inc. v. Mercedes-Benz of North America, Inc.

• Decision Date: 11 November 1988
• Docket Number: MERCEDES-BENZ
• Citation: 558 A.2d 1066
• Parties: 1989-2 Trade Cases P 68,804, 9 UCC Rep.Serv.2d 541 NORMAN GERSHMAN'S THINGS TO WEAR, INC., a corporation of the State of Delaware, Plaintiff, v.OF NORTH AMERICA, INC., a corporation of the State of Delaware, and I.G. Burton & Company, Inc., a corporation of the State of Delaware, Defendants. . Submitted:
• Court: Delaware Superior Court

Page 1066

558 A.2d 1066

1989-2 Trade Cases P 68,804, 9 UCC Rep.Serv.2d 541

NORMAN GERSHMAN'S THINGS TO WEAR, INC., a corporation of the State of Delaware, Plaintiff, v. MERCEDES-BENZ OF NORTH AMERICA, INC., a corporation of the State of Delaware, and I.G. Burton & Company Inc., a corporation of the State of Delaware, Defendants.

Superior Court of Delaware New Castle County.

Submitted: Nov. 11, 1988.

Decided: Feb. 10, 1989.

Christopher J. Curtin, of Sawyer & Akin, P.A., Wilmington, for plaintiff.

L. Coleman Dorsey, and Joseph M. Bernstein, Wilmington, for defendant Mercedes-Benz of North America, Inc.

N. Maxon Terry, Jr. of Jackson, Terry & Wright, Dover, for defendant I.G. Burton & Co., Inc.

TAYLOR, Judge.

This suit involves the sale of an allegedly defective automobile to plaintiff Norman Gershman's Things to Wear, Inc. [Gershman's]. The car was distributed by defendant Mercedes-Benz of North America, Inc. [Mercedes] and sold to Gershman's by defendant I.G. Burton & Co., Inc. [Burton]. In its complaint Gershman's has alleged against both defendants breach of numerous warranties; failure of the essential purpose of the warranties; violation of Delaware's "Lemon Law"; violation of Delaware's Consumer Fraud and Deceptive Trade Practices Acts; negligent repair; and violation of the Magnuson-Moss Federal Consumer Products Warranties Act. Defendants have each moved for summary judgment on various of the above issues. In addition, Burton has also moved for summary judgment against Mercedes seeking indemnification for any damages which might be awarded to plaintiff against Burton and also for attorney's fees incurred in defending this action.

Gershman's purchased from Burton, a dealer in Mercedes-Benz automobiles, a new 1984 Mercedes-Benz 500 SEC which was distributed by Mercedes. Approximately six months after the purchase, the car's engine overheated and had to be repaired. The car was taken to Burton for repairs. Upon inspection it was determined that the overheating was caused by a hairline crack in the short block portion of the engine. This information was conveyed to Mercedes. Pursuant to instructions from Mercedes, Burton replaced the short block without expense to Gershman's.

Less than two years later the car again overheated causing extensive damage to the engine. The car was again taken to Burton for repairs. Mercedes was informed of the problem and authorized the replacement of the entire engine assembly as a covered warranty repair. Following this repair, Gershman's refused to accept redelivery of the vehicle and notified Mercedes and Burton that it was revoking its acceptance of the vehicle and demanding a full refund of the purchase price. The defendants refused to refund Gershman's the purchase price and this suit was instigated. In 1987 the car was sold at auction by agreement of the parties.

I

Count I of the complaint alleges breach of express warranties by both Burton and Mercedes. Count II of the complaint alleges breach of implied warranty of merchantability. Burton has moved for summary judgment on these issues, arguing that it had effectively disclaimed any express or implied warranties in its "Sales Contract" with Gershman's. These are governed by Article 2 of the Uniform Commercial Code, 6 Del.C. Subtitle I. "Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain" is an express warranty of the contract. 6 Del.C. § 2-313. In addition, there is an implied warranty in the contract that the goods are merchantable, unless this warranty is excluded or modified. 6 Del.C. § 2-314. Goods are "merchantable" if they are "fit for the ordinary purposes for which such goods are used." 6 Del.C. § 2-314(2)(c). In order to exclude or modify the implied warranty of merchantability, the language of the exclusion or modification must mention merchantability and in the case of a writing must be conspicuous. 6 Del.C. § 2-316(2). "Conspicuous" is defined at 6 Del.C. § 1-201(10) as follows:

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. A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous. Language in the body of a form is "conspicuous" if it is in larger or other contrasting type or color.... Whether a term or clause is "conspicuous" or not is for decision by the court.

The touchstone of conspicuousness is "whether a person's attention can reasonably be expected to be called to the disclaimer language." Lecates v. Hertrich Pontiac Buick Co., Del.Super., 515 A.2d 163, 169 (1986).

The sales contract by which Burton sold the car to Gershman's was a one-page document with writing on both the front and back. The following paragraph appears on the reverse side of the page:

The only warranties applying to this vehicle are those offered by the Manufacturer. Dealer hereby expressly disclaims all warranties, either expressed or implied, including any implied warranties of merchantability or fitness for a particular purpose, and Dealer neither assumes nor authorizes any other person to assume for it any liability in connection with the sale of this vehicle. Purchaser shall not be entitled to recover from Dealer any consequential damages, damages to property, damages for loss of use, loss of time, loss of profits, or income, or any other incidental damages....

This paragraph is one of eight paragraphs on the back page of type which is significantly smaller than type appearing elsewhere in the document. In bold type that is slightly larger than some of the other type on the front of the document is written "DISCLAIMER OF WARRANTIES--SEE REVERSE SIDE". This is the only reference to a disclaimer of warranties which appears on the front of the document. On the back of the document is a section with the bold heading "ADDITIONAL TERMS AND CONDITIONS".

The Court concludes that this warranty disclaimer does not meet the statutory requirement that the disclaimer must be conspicious. The attempt on the front of the contract was to alert the purchaser that a disclaimer of warranty of merchantability was inserted on the back of the contract. It did not identify which of the eight paragraphs on the back page contained the disclaimer. The disclaimer paragraph is in no way set off "in larger or contrasting type or color" from the other paragraphs on the back of the contract. This Court cannot say as a matter of law that "a reasonable person ought to have noticed it". As such, Burton's attempted disclaimer of both express and implied warranties is ineffective, and, therefore, Burton is not entitled to summary judgment with respect to Counts I and II of the complaint.

II

Mercedes has moved for summary judgment on Counts I and II on the ground that its exclusive express written warranty limited its obligation to repair or replacement of defective parts. It contends that its exclusive express written warranty complies with 6 Del.C. § 2-719 and that it had fulfilled its obligation under this warranty by satisfactorily repairing the car. 6 Del.C. § 2-719 provides:

(1) Subject to the provisions of subsections (2) and (3) of this section ...,

(a) the agreement may provide for remedies in addition to or in substitution for those provided in this Article and may limit or alter the measure of damages recoverable under this Article, 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

(b) 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.

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

(3) 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.

Mercedes' express written warranty provides that "any authorized Mercedes-Benz dealer of the owner's choice" will make any repairs or replacements necessary to correct defects in material or workmanship for a period of 48 months or 50,000 miles at no expense to the owner. In addition, the warranty provides:

EXCEPT FOR THE EMISSION SYSTEMS WARRANTY, THIS IS THE ONLY WARRANTY GIVEN WITH THE PURCHASE OF A MERCEDES-BENZ PASSENGER CAR.... NO PAYMENT OR OTHER COMPENSATION WILL BE MADE FOR INDIRECT OR CONSEQUENTIAL DAMAGE SUCH AS DAMAGE OR INJURY TO PERSON OR PROPERTY OR LOSS OF REVENUE WHICH MIGHT BE PAID, INCURRED OR SUSTAINED BY REASON OF THE FAILURE OF ANY PART OR ASSEMBLY WHICH MAY BE REPAIRED OR REPLACED IN ACCORD WITH THE TERMS OF THIS WARRANTY.

* * *

* * *

EXCEPT FOR THE EMISSION CONTROL WARRANTY, THIS WARRANTY AND THE LIMITED WARRANTY FOR NEW MERCEDES-BENZ VEHICLES ARE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATION. EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON THE PART OF THE WARRANTOR....

Under 6 Del.C. § 2-719(2), where circumstances cause an exclusive or limited remedy to fail of its essential purpose, the purchaser may resort to the remedies provided by the Uniform Commercial Code. An exclusive remedy of repair or replacement of defective parts will be held to have failed of its essential purpose where the warrantor refuses to repair the vehicle, the vehicle is not repaired within a reasonable time or the vehicle is not repaired in a reasonable number of attempts. See generally Annot., 2 A.L.R.4th 756 (1980); Cf. Beal v. General Motors Corp., D.Del., 354 F.Supp. 423 (1973).

In the present case Gershman's argues that the warranty failed of...