# FILED May 6, 1998 Cecil W. Crowson Appellate Cou rt Clerk CONTOUR MEDICAL TECHNOLOGY, INC., ) ) Rutherford Chancery Plaintiff/Appellant, ) No. 95MI-705 ) VS. ) ) Appeal No. FLEXCON COMPANY, INC., ) 01A01-9707-CH-00315 ) Defendant/Appellee. )

IN THE COURT OF AP PEALS OF TENNESSEE MIDDLE SECTION AT NASH VILLE APPEAL FROM

CHANCERY COURT OF RUTHERFORD COUN TY AT MURFREESBORO, TE NNESSEE HONORABLE DON R. AS H, JUDGE

John F. Quinn 2200 First Union Tower 150 Fourth Avenue

North Nashville, TN 37219 ATTORNEY FOR PLAINTIF F/APPELLANT Gregory Mitchell The Southern Turf Building 222 Fourth Avenue

North Nashville, TN 37219 ATTORNEY FOR DEFENDANT/APPELLEE



### AFFIRMED AND REMANDED.

HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION

CONCURS: BEN H. CANTRELL, JUDGE CONCURS IN RESULT: WILLIA M C. KOCH, JR., JUDGE-2-

CONTOUR MEDICAL TECHNOLOGY, INC., ) ) Rutherford Chancery Plaintiff/Appellant, ) No. 95MI-705 ) VS. ) ) Appeal No. FLEXCON COMPANY, INC., ) 01A01-9707-CH-00315 ) Defendant/Appellee. )



## O P I N I O N
The plaintiff, C ontour M edical Technology, Inc., ha s appealed from a partial summary judgment dismissing

that part of plaint

iff’s claim aga

inst the defendant,

Flex con Com pan y, Inc., which seeks consequential damages resulting from defects in material purchased by plaintiff from defendant. The Trial Judge directed entry of final judg ment as provided by TRCP Rule 54.02.

The sole issue on appeal is whether the Trial Judge erred in the entry of said partial summary judgment.

Plaintiff is a manufacturer and distributor of devices used in health care to administer electroc ardio gram

tests which involve

s the attachment o

f electrical co

nductors (wire)

to various parts of the human body to monitor the characteristics of

pulses of blood circulation. Plaintiff’s product, called an electrode, is attached to the end of each con ductor a nd the electrode is then attached t o the body of the patient

by an adhesive substance. The electrodes involved in this case were supplied with small strips or patches of adhesive material one side of which was suppose

d to stick securel

y to the elec

tr ode , and the other side of which was supposed to stick to t

he skin of the patie

nt until removed at t

he conclusion of th

e test.

The defendant manufactured and sold to plaintiff sheets of adhesive mater ial out of which defendant cut the

small patches to fit to the electrodes. The material was covered on b oth sides with a protec

tive material whic

h was “peeled” o

r removed from on

e sid e of th e-3-

adhesive material immediately before attaching it to the electrodes and, l ater, imm ediately before attachi

ng the electrod

e to the skin of the p

atient.

The alleged defe

ct inthe adhesive material was that it did not adhere satisfactorily

to the electrode or thepatient’s skin. Whether the goods were actually defective is disputed and remai ns unres olved at the trial level. This appeal only concerns the validity of the limited remedy con

tained in the selle

r’s forms.

It is undisputed that the particular shipment of material involved in this case was ordered by telephone as a result of previous oral solicitation by defendant’s salesman. There is no written order in the record.
The material was shipped on August 20, 1993. On the same date, defendant mailed to plaintiff an “Acknowledgment,” thanking plaintiff for the order. On the face of this order was the following message:

Thank you very much for y

our order. We ha ve entered and scheduledyour

ord er per the above

specifications.

If this is not correct, please contact us immediately. Refer to our prod uction order numbers sho wn at the upper ri

ght. This order is sub ject to the terms and conditions shown on the reverse side of

this acknowledg

ment.
CUSTOMER ACKNOWLEDGMENT
On the reverse side

of the acknowled

gment in fine b ut readable print were 24 numbered “Term

s and Conditions” of

which number 10 re

ads as follows: Seller warrants that the materials will be delivered fre e from any lawful

security in

terest or other lien or encumbrance unk nown t o buyer and that the materials will be free from defects in mat erial and workmanship. There is no implied warranty of merchant abili ty or fitness for a particular purpose. There is no other warranty expressed or implied, except such as is expre ssly set forth herein. Seller will not be liable for any general, con sequ ential or incidental damages, including withoutlimitation any

dama ges f

or loss of use or loss of profits, for any breach of warranty or for negligence, seller’s lia bility and buye r’s exc lus ive rem edy b ein g ex pres sly l imite d1 The buyer’s objection to the seller’s limiting language is base d on a “conspicuous” or “circle of assent” argument. Significantly, the buy er does not object on the basis of the “battle of forms” in TCA § 47-2-207. Therefore, we will not address that problem, either.
-4- to the repair of de fect ive materials or the shipment of equivalent

mater ia ls F.O.B. the shipping point indicated on th e face of order a

cknowledgment,

or the repay

ment of th e purchase price upon return of

the materials, or the granting of a reason able allowance on account of any defects as seller may elect. Except as otherwise stated, any claim on account of defective materials or for any other c

ause whatsoever will conclusively

be deem ed waived by bu yer unless written notice thereof is given to s eller within thirty days after date of shipment. Notwithstan ding the foregoing, if buyer c laims materials does not c onform to the order, buyer must notify seller with ten day s of receipt of shipment. Seller will be givenreasonable

opportunity t

o investigate al

l claims, and no materials may be returned by

buyer to sel

ler until after receipt by buyer of definite ship ping instructions from seller. (Emphasis supplied) The invoice for the shipment contained the following typed note: If this invoice is paid and postmarked on or before 8/20/93, you may deduct

a 1.0% discount

on $1,918.88 in the amount of $19.19. The total invoice amount due would be $1,973.09. DI SCO UNTS ARE NOT ALLOWED ON THE S & H PORTION OF THIS INVOI CE.
Printed on the fac

e of the invoice in

bold type we

re the words: OUR LIABIL

ITY IS LI MITED TO THE VALUE OF MATERIAL

OR REPLACEMENT O F SAME It is undisputed that the invoice was discounted and paid by the plaintiff.

The buyer arg

ues that t he seller’ s language limiting the buyer’s remedies did not become a part of the cont

ract, or if it

did, it failed of its essential purpose. See TCA § 47-2- 719(2). 1 Plaintiff’s first a

rgument is: I. The Trial Courterred in holding that the language on the back of Flexcon’ s acknowledgme nt o f order form was both cons picuous and formed a part of the parties’ circle of assent.-5- We note that this contro versy con cerns a limitation of the buye

r’s remedies und

er TCA § 47-2-719 and is not about an e xclusion or modifica

tion of warrantie

s under TCA § 47-2-316.
TCA § 47-2-719 pro

vides: (1) Subject

to the provisions of subsections (2) and (3) of this section andof the preceding section on liquidation and limitation of da

mages: (a) The agreement may provide for remedie s in add ition to or in substitution f or those provided in this

chapter and may

limit or alter the measure of dama

ges recovera

ble under this chapter, as by limiting the buyer’s remedies

to return of the goods and

repayment of

the price or to repair and replacement of nonconforming goods or parts; and (b) resort

to a remedy a

s provided is

optional unless the remedy is expressly agre e d to be exc lus ive , in whi ch ca se i t is the sol e rem edy. (2) Where circumstances cause an exclusive or limited remedy to fail of

its essential purpose, remedy may be had as provided in chapters 1-9 of this title. (3) Consequential damages may be li mited or excluded unless the limitation orexclusion is unconscionable. Limitationof consequentia l da mages for injury to the person in the case of cons

umer goods is prim

a facie unconsc

ionable butlimitation of damages where the loss is commercial

is not.

It is apparent that this sec tion does not impose a requirement that contract clauses limiting remedies be cons picuous. In tha

t respect it

is different fro

m TCA§ 47-2-316, which applies to written

contract provisi

ons that exclude or m

odify warr

anties.

The plaintiff, nevertheless, relies on this cour t’s op inion in Board of Directors v. Southwestern

Petroleum Corp. , 757 S.W.2d 669 (Tenn. App. 1988), for the proposition that
a limita tion of remedy provision must be conspicuous. In that case, however , the cour t discussed the requirement of conspicuousne

ss only in conne

ction with the seller’s argument-6-

about the disclaimer of warranties. Thus, there is no requirement

in the Code or in our

case law that limitation o

f remedies clau

ses must be conspic

uous.
They should, however, be a part of the parties’ agreement. In other words, they

should be within the “circl

e of assent,” of

which we spoke in Parton v. Mark Pirt le Oldsmobile , 730 S.W.2d 634 (Tenn. App. 1987). In Parton we quoted Pr ofessor Karl Llewellyn on the problem of contract formation for the sale of goods under the Uniform Commercial Code:

Instea d of thinking about “assent” to boilerplate clauses, w e can recognize that so far as concerns the specifi c, there is no assent at a ll. Wha t ha s in fact been ass ent ed t o, s peci fic all y, are the few dickered terms, and the broad type o f th e transaction, and but one m ore. T hat one thing more is a blanket assent (not a spec

ific assent) to an

y not unrea

sonable or indecent terms the seller may have on his form,, wh ich d o notalter or eviscerate the reasonable meaning of the dickered terms. The fine print which has not been read has no business to cut under the meaning of those dickered terms which constitute the dominant and on

ly real expression of agreement, butmuch of it commonly belongs in. K. Llew ellyn, T he Common Law Tradition: Deciding Appeals § 370 (1960)
. 730 S.W.2d at 637.
In One Stop Supply, Inc. v. Ransdell , No. 01-A-01-9509-CV-00403 (filed at Nashvil le April19, 1996), we held that the circle of assent included “the provisions in the f orm o ver which the parties actually bargained and such other provisions th at are not unrea

sonable in view of the circums tances surrounding the transaction.” In this case we think the buy er actually a ssented to the selle

r’s terms.

Plaintiff emphasizes the obscurity of the disclaimer in the midst of the fine print on the
reverse side of the acknowledgment

quoted above, but does not discuss the more conspicuous text on the face of

the acknowledgment. The acknowledgment drew attention to the terms on the reverse side. But, of greater impor tan ce, is the invoice itself, which accompanied each shipmentof the material and included on its face, in bold face type, the statement that “OUR LIABIL ITY IS LIMI TED TO THE VALUE OF MATERIAL OR REPLACEMENT OF SAME.” The invoice also included a one percent discount for prompt payment. When the-7-

plaintiff paid the invoice in question it took the discount. We think that assent to the oth er terms on the face

of the invoice may

be inferred fr

om these facts.

If we assume, however , that t he plaintiff did no

t specifically

accept the selle

r’s terms, they still fall within the circle of assent because they are reasonable in view of the circumstances surroundi ng the transaction. We are dealing with a transaction between commercial ent iti es, sop his tic ate d pa rti es t hat buy a nd s ell good s wi th r egul ari ty. Limitation of damages clauses are part of the world in which they

operate; they are expressly a pproved by the bible of commercial transactions, the Uniform Commercial Code. Therefore, we cannot say that the terms were unreasonable.

Board of Directors of City of Harriman Sc hool District v. Sout

hwestern Petr. Corp ., Tenn. App. 1988, 757 S.W.2d 6 69, involved the re

newal of a felt a

nd asphalt roof on

a school. The defendant furnished the material, but the material was applied

by an independent roofer who had been designated as its sales representative. The school supe rintendent signed the order to purchase the materials.
The opinion of this Co

urt states: SWEPCO rel ies on language on the back of the “S WEPCO ORDER FORM” - a form that Superinten den t Williams signed. In a small block on the back of the form withthe heading “Co

nditions” rests the

following lang

uage in extremely sma

ll print: It is mutually agreed betwee n buyer and se lle r that this non-cancelable order contains the entire agree

ment of t he parties. Neither buyer nor s eller shall be bound by any agreements,

representa

t ions or warranties either express or implied including the warranty of fitness for a particular purpose not shown on the original of this order. No verbal statements

or agreements

s hal l vary any part of this contract. There follows further language equally small but in bo lder type disclaiming responsibility for resale applica tion and damages resulting fr om application, and then a further-8- paragraph in the same

extremely small print

regarding c

redit, title, interest, c

ollection, and ship

ment.
At no point does the quo

ted opinion state th

at a visible notice of the disclaimer appeared on the face of the invoice in plain, readable print as in the present case.

The cited authority is distinguishable from the pre sent case in respect to visible notice
on the faceof the instrument. The cited authority is also based upon a finding that the man who applied the material was an authorized representative of the manufactur er a nd that he made express oral warranties contrary to the exclu sionary clause. Special damages were claimed in the cited case. On this subject, this Court said:

[7] SWEPCO argues that bec au se Williams signe d the “SWEPCO ROOF PRODU CTS LIMITE D GUARANTEEREGI STRATION CARD ,” SWEPCO effectively

limited the Board of Education’s remedies under the contract. We cannot agree. Parties to a co ntract m ay modify or limit the remedie

s available under

that contr act under t he term s of Tennessee Code Annotated § 47-2-719, which in pertinen

t part reads as f

ollows:

- - - - (3) Consequential damages may be limited or excluded unless the limitati on or exclusion is unconscionable. Limitationof consequential damages for injury to the person in the case of cons

umer goods is

prima facie unconscio

nable butlimitation of damag

es where the loss

is commercial is not. In Parton v. Mark Pirtle Oldsmobile-Cadillac-Isuzu, Inc. , Tenn. App. 1987, 730 S.W.2d 634, there was a r

epair order with a parts warranty on the face of the order a nd a disclaimer of liability for fire or theft in fine print on the reverse side. The vehicle was stolen from the premises of th e rep air shop. The owner sued the shop and obtained judgment. This Court affirmed and said:

The only issu

e raised by

the appellant is: “The trial court erre

d in denying

the validity of an exculpatory clause in the contract betweenthe part ies executed by Mr. Parton releasing the d

ealership from any liability for damage to the motor

vehicle caused by theft.” The appellant argues that Tenn es see recognizes the validity of exculpatory

provisions, or that one party may ag ree that another party

will n ot be liable for future acts of negligence. As a statement of a legal principle, the-9- appellant’s conte ntio n is co rrect . In Empr ess H ealth and Beauty Spa, Inc. v. Turner , 503 S.W.2d 188, 190 (Tenn.1973), our Supreme Court said: It is well settled in this State that parties may contract that on e shall not be liable for his negligence

to another

but thatsuch other shall assume the risk incident to such negligence.
The party who si

gns a prin

ted form furnished by the other party will be bound by the provisions in the form over which the parties actually bargained and such other provisions that are not un re asonable in view of the circumstances surrounding the transaction.

- - - - We th ink it is simply a matter of ascertaining the agreement of the parties in light of modern notions of fair play: a matter of finding the elusi

ve “circle of a

ssent” which cont

ains t h e agreement of t

he parties. [3] With these principles in mi nd , we think the language relied on by

the appellant did n

ot fall w ithin that circle of assent and therefore did not become a part of the agreement

between the parties. The provision is hidden in the fine print above the appellee’s signature; the section is headed by larger print “Terms cash unless arrangement made.” Then a ppearing in larger print

immediately

above the appell

ee’ s signature are the terms of the parts warranty. There is no indication in the record that the pr ov ision contained in the fine print was point ed out to the appellee or that a person of ordi nar y intelligence and experience would expect that the signed wr iting relieved the appellant of all liability for damages which might occur while the automobile was in its possession. Therefore, th e pr ovision relied on by the appellant did not reliev e it

from liability for theft of the automobile

which the tri al fudge found to be a result of the appellant’s negligence.
The present cas e is disti nguishable on a number o f gr ounds . Although there is no document signed by t

he plaintiff, ther

e was a plain

notice on the face of the acknowledgment that terms and conditions appeared on the reverse. Also, the exculpatory lang uage did not exclude actual damage

s, but only special and consequential damages, which, accor ding to the above quoted authority are more often upheld as being “w ithin the circle of assent.”

Under the facts and cir

cumstances of the

present c ase, the evidence does not preponderate against the finding that the partial limitation of liability was enforc eable.-10- Since this ruling does not exclude the damages actually sought in the complaint (refund of price paid for ma

terial purchase

s), the fine print e

xclusio n does not destroy the essential remedy, i.e., rescission and refund.

In Arcata Graphics v. Hildeberg Harris , 874 S.W.2d 15 (Tenn. App. 1993), this court found such remedies to be “fair and adeq uate ” and noted that TCA § 47-2-719(2) “i

s concerned

with the essential

purpose of th

e reme dy chosen by the parties, not with the essential purpose

of the Code or of c

ontract law, or w

ith justice and/or equity.” 874 S.W.2d at 29.

In contrast, the remedy

in Bd. of Directors v. Southwestern Petroleum Corp. , 757 S.W.2d 669 (Tenn. App. 1988), was limited to replacing the defective goods up to the total amount of th e original purc

hase. On more tha

n one occasion the

seller sent repla

cement mate

rials , but they also proved to be totally inadequate for the buyer’s purposes. Therefore, when the limited replacement remedy failed, the buyer was left without a remedy --a result that violates the letter and the spirit of the UCC. The Comments to § 47-2-719 make it clear tha t “at least minimum adequate remedies be available.”Since we have held in Arcata Graphics that the replacement or refund remedies are adequate, we conclude

that they are adequate under the circumstances of this case.

The plaintiff also

contends that the limited remedy is unconscionable because the defect was latent and could not have been discovered until the harm occurred. See § 47-2-719(3). While there are holdings to that effect, see Latimer v. Williams Mueller & Son, Inc. , 386 N.W.2d 618 (19 8 6), Nevill Chem. Co. v. Union Carbide, Corp. , 422 F.2d 1205 (3rd Cir. 1968), Frank’s Maintena

nce & Eng’

g, Inc. vs. C.A. Roberts Co. , 408 N.E.2d 403 (Ill. App. 1980), the cases seem to be about evenly split. Cf. F leming Farms v. Dixie Agric. Supply, Inc. , 631 So. 2d 922 (Ala. 1 994); Kleven v. Geigy Agric. Chem. , 227 N.W.2d 566 (Minn. 1975); Estate of Arena v. Abbott & Cobb, Inc. , 551 N.Y. S.2d 864 (N .Y. App. D iv. 1990). We-11-

would hesitate to adopt either rule in this case; we think that unconscionability depends more on the circumstances surrounding the transaction than on the latency of the defec t. Indeed,
a latent defect tha

t cannot be discov

ered (even by

the seller), ma

y be a go od reason for the seller to barga

in for a limitation on

the buyer’ s remedies.

But we think the record shows that the alleged defect in the defendant’s product was not in fact latent. The plaintiff had previously encountered a similar problem with the defendant’s product and had tested the

product o n a lim ited basis. The re cord shows that ra

ndom tests could have been

made without

destroying an appreciable amount of the product and that the tests would have caught any defects in the areas te sted.
TCA § 47-2-719(3)

provides: (3) Consequential damages may be limited or excluded unless the limitation or exclusion is unc onsciona ble. Limitationof consequential damages for injury to the person in the case

of consumer goo

ds is prima facie u

nconscionable butlimitation of damag

es where the loss

is commercial is not. [Acts 1963, ch. 81, § 1 (2-719).]
This case does not invo

lve personal injur

y or consume

r goods, but comme

rcial loss. Therefore, the limitation of consequential damages is not presumed unconscion abl e. The evidence in this record does not demonstrate that the limitation of liabi lity was unconscionable.-12- The judgment of the T

rial Court is affir

med. Costs of this app

eal are asse ssed against the appellant and

its surety. The cause is remanded to the Trial Court for further pro

ceedings.


### AFFIRMED AND REMAND ED .

HENRY F. TODD PRESIDING JUDGE, MIDDL E SECTION
CONCURS:
BEN H. CANTRELL, JUDGE

CONCURS IN RESULT:

WILLIA M C. KOCH, JR., JUDGE