Tennessee Carolina Transp., Inc. v. Strick Corp.

• Decision Date: 01 June 1973
• Docket Number: No. 11,11
• Citation: 196 S.E.2d 711,283 N.C. 423
• Court: North Carolina Supreme Court
• Parties: , 83 A.L.R.3d 636, 12 UCC Rep.Serv. 1055 TENNESSEE CAROLINA TRANSPORTATION, INCORPORATION v. STRICK CORPORATION.

Page 711

196 S.E.2d 711

283 N.C. 423, 83 A.L.R.3d 636, 12 UCC

Rep.Serv. 1055

TENNESSEE CAROLINA TRANSPORTATION, INCORPORATION v.STRICK CORPORATION.

No. 11.

Supreme Court of North Carolina.

June 1, 1973.

Welling & Miller by George J. Miller and Charles M. Welling, Charlotte, Schnader, Harrison, Segal & Lewis, Philadelphia, Pa., by W. P. Sandridge of Womble, Carlyle, Sandridge & Rice, Winston-Salem, for defendantappellant.

Wallace S. Osborne and Waggoner, Hasty & Kratt, by William J. Waggoner, Charlotte, for plaintiffappellee.

HUSKINS, Justice:

The sales contract here involved was executed in Pennsylvania but was to be performed, apparently, in Illinois.Although the applicable law is clear where a contract is made and is to be performed in the same foreign state, Motor Co. v. Wood, 238 N.C. 468, 78 S.E.2d 391(1953);Price v. Goodman, 226 N.C. 223, 37 S.E.2d 592(1946), no North Carolina case has determined what law applies where the place of performance Differs from the place of contracting.SeeArnold v. Charles Enterprises, 264 N.C. 92, 141 S.E.2d 14(1965);Wurfel, Choice of law Rules in North Carolina, 48 N.C.L.Rev. 243(1970).In such a situation the traditional rule appears to be that matters of performance and damages for nonperformance are governed by the law of the place of performance.Restatement (First) of Conflict of Laws, §§ 358, 372, 413(1934);3 Williston, Sales § 589(d)(1948).But seeRestatement (Second) of Conflict of Laws, §§ 188, 205, 207(1971);G.S. § 25--1--105.

However, in the case before usthe parties have not contended that any law other than the law of Pennsylvania shall govern.We proceed accordingly, noting only that the contract of sale did not attempt to choose the applicable law, but each of the six security agreements provided: 'This instrument . . . is made and accepted in Pennsylvania, and shall be governed and interpreted according to the laws of Pennsylvania.'

Therefore, the substantive issues in the case before us are to be resolved under the law of Pennsylvania, of which we are required to take judicial notice by G.S. § 8--4.With respect to procedural matters, the law of North Carolina governs.Arnold v. Charles Enterprises, supra.'In the trial of an action, whatever relates merely to the remedy and constitutes a part of the procedure is determined by the law of the forum; but whatever goes to the substance of the controversy and affects the rights of the parties is governed by the Lex loci.'Wise v. Hollowell, 205 N.C. 286, 171 S.E. 82(1933).Accord, Knight v. Associated Transport, 255 N.C. 462, 122 S.E.2d 64(1961);Clodfelter v. Wells, 212 N.C. 823, 195 S.E. 11(1937).

At trial, plaintiff stipulated that it was not relying on the implied warranty of merchantability, Pa.Stat.Ann. tit. 12A, § 2--314(1970).Therefore, the suit was only for breach of the implied warranty of fitness for a particular purpose, Pa.Stat.Ann. tit. 12A, § 2--315(1970).Defendant now contends that such a suit is tenable only where the goods were purchased for a Particular purpose.It further contends that this term does not embrace purchases of goods for the General purpose for which goods of that kind are used.Thus, defendant urges that plaintiff has failed to make out a case for the jury since it bought the trailers not for a particular purpose but rather for the general or ordinary purpose of hauling cargo.For this reason defendant assigns as error the overruling of its motions for directed verdict.

We find no merit in this assignment.Although the primary purpose of Pa.Stat.Ann. tit. 12A, § 2--315(1970) is indeed to protect a buyer who purchases goods with the intention of using them in a 'particular' manner, meaning a manner in which they would not normally be expected to be used, we do not think that section is limited exclusively to purchases of such a nature.That warranty also protects a buyer when his particular purpose Is the general or ordinary purpose.

Although no cases have been found either expressly adopting or rejecting this construction of 'particular purpose,' Professor Nordstrom so construes that term.SeeNordstrom Sales§ 78(1970): '(I)f the buyer's use of the goods is the ordinary use of those goods, . . . the buyer's particular purpose coincides with the ordinary use of the goods, and Either section 2--314 or section 2--315 will give the buyer the protection he needs.'(Emphasis added)Such was also the rule at common law.See46 Am.Jur.Sales§ 346(1943).

Despite the lack of authority expressly adopting this interpretation of 'particular purpose,' several cases have done so impliedly, without discussion of the issue.SeeAnnot.17 A.L.R.3d 1010, 1071(1968).Among these is Adams v. Scheib, 408 Pa. 452, 184 A.2d 700(1962).There, the Pennsylvania Supreme Court held that where plaintiff bought pork sausage for the purpose of consumption--obviously the ordinary purpose--an implied warranty arose, citing BothPa.Stat.Ann. tit. 12A, § 2--314 And § 2--315.See alsoL & N Sales Co. v. Stuski, 188 Pa.Super. 117, 146 A.2d 154(1958), where whiskey pourers were bought for the ordinary purpose of pouring drinks, and the Pennsylvania Superior Court, assuming that a warranty of fitness for a particular purpose arose under Pa.Stat.Ann. tit. 12A, § 2--315, held that such warranty was not excluded by an express warranty of merchantability or by a disclaimed contained in the purchase money security agreement executed after the sale.

Therefore, we think it beyond dispute that in Pennsylvania the warranty of fitness, Pa.Stat.Ann. tit. 12A, § 2--315(1970), does protect a buyer whose particular purpose Is the general or ordinary one.

Under this construction Both implied warranties would exist where the seller is a merchant with respect to goods of that kind, the buyer is buying the goods for the ordinary purpose, and the requirements of Pa.Stat.Ann. tit. 12A, § 2--315(1970) are met.Nothing in the Code prohibits such a double warranty.SeeComment 2, Pa.Stat.Ann. tit. 12A, § 2--315(1970): 'A contract may of course include both a warranty of merchantability and one of fitness for a particular purpose.'Of course, in such a situation, the warranty of fitness will not normally be needed since there will also be a warranty of merchantability.However, in the case before us the warranty of fitness is needed since plaintiff stipulated away his warranty of merchantability.

Thus, plaintiff has chosen, for reasons obscure, to rely solely on the implied warranty of fitness--a warranty that is more difficult to prove than the implied warranty of merchantability.In so doing, he has made an inexplicable choice, but one not, as a matter of law, fatal to his claim for damages.Therefore, plaintiff's choice did not entitle defendant to a directed verdict.

The contract of sale was executed on 10 July 1967.Thereafter, plaintiff executed six separate security agreements, each covering twenty-five trailers.The first of these security agreements was dated 30 August 1967; the last, 31 October 1967.Each security agreement contains in Paragraph (h) thereof the following language: 'There are no promises, understandings, agreements, representations, or warranties . . ., express or implied, respecting the Equipment which are not specified herein.'Paragraph (h) is on page 2 of the security agreement, printed in the same color as the other printing and in the smallest print used on that page.On page 3 immediately preceding the signature lines, the words 'NOTICE TO BUYER' are printed in block letters.Under these words in small print is this message: 'This contract was prepared by Strick Corporation(seller).Do not sign this contract before you read it or if it contains any blank spaces.'

Defendant contends the quoted portions of the security agreement exclude all implied warranties, and for this reason the overruling of its motions for directed verdict is assigned as error.Plaintiff contends the attempted exclusion is ineffective under the laws of Pennsylvania, and the trial judge and the Court of Appeals so held.

The Court of Appeals grounded its decision on the conclusion that the disclaimer, not being 'conspicuous' within the meaning of Pa.Stat.Ann. tit. 12A, §§ 2--316(2)and1--201(10)(1970), was therefore ineffective as a matter of law.Many cases have adopted a like approach in applying the Code, refusing to give effect to a disclaimer where it is inconspicuous without further inquiry as to whether the buyer was protected from the surprise of an unexpected and unbargained disclaimer by factors other than the physical conspicuousness of the clause itself.Eg.Entron Inc. v. General Cablevision of Palatka, 435 F.2d 995(5th Cir.1970); boeing Airplane Co. v. O'Malley, 329 F.2d 585(8th Cir.1964).

However, the purpose of the 'conspicuous' requirement, despite its unqualified language, is, as stated in Comment 1, Pa.Stat.Ann. tit. 12A, § 2--316(1970), to 'protect a buyer from unexpected and unbargained language of disclaimer by . . . permitting the exclusion of implied warranties only by conspicuous language or Other circumstances which protect the buyer from surprise.'(Emphasis added)Although the emphasized language might refer only to Pa.Stat.Ann. tit. 12A, § 2--316(3)(1970), certainly Actual awareness of the disclaimer is another circumstance which protects the buyer from the surprise of unexpected and unbargained language of disclaimer.Perhaps an additional circumstance of this sort arises where, as here, the buyer is a non-consumer with bargaining power substantially equivalent to the seller's.

Where both of these circumstances are shown--the buyer is a non-consumer on substantially equal bargaining terms with the seller and is actually aware of the disclaimer prior to entering the sales contract--possibly the disclaimer should be enforced despite its inconspicuousness, in the absence of a showing of unconscionability, since the purpose of the 'consp...