Brief Fact Summary. Floyd E. Coursey and Michael B. Coursey (Plaintiffs) brought this action against Caterpillar, Inc. (Defendant) for breach of warranty. Plaintiffs appeal from a judgment of the district court granting Defendant’s Motion for Summary Judgment.
Synopsis of Rule of Law. In order for a disclaimer of consequential damages to be valid and effective, it must be both conspicuous and conscionable.
Issue. Whether the disclaimer of consequential damages was conspicuous and unconscionable?
Held. Yes. Judgment affirmed.
A term is conspicuous when it is written so that a reasonable person against whom it is to operate would have seen it. Here, the court found that the disclaimer of warranties was conspicuous and a reasonable person would have seen it. It was not buried in its interior of the manual, it had its own section. Further, the warranties appeared in darker text than the rest of the manual.
Consequential damages may be limited or excluded unless the limitation is unconscionable. Limitation of consequential damages for injury to persons in consumer goods in prima facie unconscionable however limitation of damages where the loss is commercial is not. The buyer carries the burden of proving the unconscionability of a limiting clause. Factors considered by the courts include procedural and substantive factors in deciding unconscionability. Procedural factors include the “meeting of the minds” of the parties, age, intelligence, education and business experience of the parties, the relative bargaining power, who drafted the contract, etc. Substantive factors include the terms of the contract and require a determination about whether they were commercially reasonable. There is a balancing of these various factors to determine unconscionability.
Here, Plaintiffs failed to prove that the disclaimer of consequential damages was either procedural or substantive unconscionable. Therefore, the disclaimer of the remedy of consequential damages was valid and effective. Defendants were entitled to summary judgment.
Discussion. Michigan Compiled Laws Annotated Section 440.1201 defined conspicuous as a term that is “so written that a reasonable person against whom it is to operate ought to have noticed it.” The statute explained further that a printed heading in capitals is conspicuous and language in the body is conspicuous if it is larger or contrasting type of color. Michigan Comp. Laws Ann. Section 440.2719 states that consequential damages may be excluded or limited unless it is unconscionable to do so. It is per se unconscionable if the consequential damages limitations affects a consumer good, but is not where the goods are commercial.