Opinion ID: 361103
Heading Depth: 3
Heading Rank: 1

Heading: The Statute of Limitations and Count I

Text: 26 Chronology is important to a precise understanding of the issues. The machine was delivered and assembled at Standard Alliance's plant in the fall of 1967. The machine proved defective, and Standard Alliance wrote Black Clawson on December 27, 1967, delineating exactly what was wrong with the machine and requesting that Black Clawson fix it. Black Clawson worked on the machine until June 21, 1968, when it abandoned repair efforts. This suit was filed on May 29, 1969. 27 The original contract contained a one-year limitations period; the minimum allowable under UCC § 2-725(1). 13 UCC § 2-725(1) also provides that the limitations period begins to run when the cause of action accrues. UCC § 2-725(2) 14 explains that a cause of action accrues when a breach occurs. A breach of warranty is deemed to occur upon tender of delivery except that where a warranty explicitly extends to future performance of the goods and discovery of the breach must await the time of such performance the cause of action accrues when the breach is or should have been discovered. UCC § 2-725(2). Black Clawson argues that the machine was tendered in the fall of 1967 and that, even granting that the warranty extends to future performance, the cause of action under Count I accrued no later than December 27, 1967, when Standard Alliance wrote its letter claiming that the machine was defective. Standard Alliance makes numerous arguments in reply. Primarily, we must consider the question of when breach occurred. This involves analysis of two separate issues: when tender of delivery was made; whether the warranty extended to future performance. In addition, we must consider various estoppel and policy arguments. 28 Standard Alliance first contends, with some support in the record, that novel machines like the one here often have long shake-down periods before they can be made to function properly. The import of its argument is that tender of a defective machine should not be deemed to take place until the machine is made to run properly. Since the machine in the instant case did not function properly when initially installed in October of 1967, Standard Alliance argues, tender of delivery was never really made until June 21, 1968, when Black Clawson halted its efforts to get the machine going. Thus, even assuming that the warranty did not extend to future performance, the earliest a breach could have occurred and a cause of action accrued, on Standard Alliance's theory was June 21, 1968. 29 This argument is plausible, but whithers upon proper examination of the Uniform Commercial Code. UCC § 2-503(1) defines tender of delivery as requiring . . . that the seller put and hold conforming goods at the buyer's disposition. . . . Comment 1 to UCC § 2-503 explains that at times tender means due tender meaning . . . an offer coupled with a present ability to fulfill all the conditions resting on the tendering party (which must be) followed by actual performance if the other party shows himself ready to proceed. At other times (tender) is used to refer to an offer of goods or documents under a contract as if in fulfillment of its conditions even though there is a defect when measured against the contract obligation. Id. We think that tender as used in UCC § 2-725(2) is the latter and not the former. A contrary interpretation would extend the statute of limitations indefinitely into the future since a defect at the time of delivery would prevent proper due tender from taking place until it was corrected. Under section 2-725, a cause of action accrues upon initial installation of the product regardless whether it functions properly or not so long as the warranty does not extend to future performance. See Val Decker Packing Co. v. Corn Products Sales Co., 411 F.2d 850 (6th Cir. 1969). 30 Secondly, Standard Alliance argues that the page twelve warranties did extend to future performance under section 2-725(2), and that the statute of limitations thus ran from the date of discovery of the defect. It particularly points to the phrase, Black Clawson warrants that the subject machinery Will perform the following mechanical functions. 15 Plaintiff's argument proves too much. Since all contracts contain future promises, words of futurity such as will are common. When the contract at issue here was signed, the machine was not yet built; the word will was necessarily used. The proper question is whether the statute of limitations is meant to run from the day of delivery or from the day when a defect is found sometime in the future. 31 Most courts have been very harsh in determining whether a warranty explicitly extends to future performance. Emphasizing the word explicitly, they have ruled that there must be specific reference to a future time in the warranty. As a result of this harsh construction, most express warranties cannot meet the test and no implied warranties can since, by their very nature, they never explicitly extend to future performance. See Holdridge v. Heyer-Schulte Corp. of Santa Barbara, 440 F.Supp. 1088 (N.D.N.Y.1977) (representation of product's condition at time of delivery); Raymond-Dravo-Langenfelder v. Microdot, Inc., 425 F.Supp. 614 (D.Del.1976) (specifications for pier construction); Binkley Co. v. Teledyne Mid-America Corp., 333 F.Supp. 1183 (E.D.Mo.1971), Aff'd, 460 F.2d 276 (8th Cir. 1972) (welder performance warranty did not make reference to future time); Centennial Ins. Co. v. General Electric Co., 74 Mich.App. 169, 253 N.W.2d 696 (1977) (one year warranty to repair or replace defective parts); Voth v. Chrysler Motor Corp., 218 Kan. 644, 545 P.2d 371 (1976) (one year auto warranty to repair/replace defective parts); Beckmire v. Ristokrat Clay Products Co., 36 Ill.App.3d 411, 343 N.E.2d 530 (1976) (implied warranty of merchantability of brick facing); General Motors Corp. v. Tate, 257 Ark. 347, 516 S.E.2d 602 (1974) (implied warranty of merchantability of automobile); Wilson v. Massey-Ferguson, 21 Ill.App.3d 867, 315 N.E.2d 580 (1974) (implied warranty of merchantability of tractor). 32 Two rare examples where express warranties were found to explicitly extend to future performance are Rempe v. General Electric Co., 28 Conn.Super. 160, 254 A.2d 577 (1969) (product was to work properly for a lifetime) and Mittasch v. Seal Lock Burial Vault, Inc., 42 A.D.2d 573, 344 N.Y.S.2d 101 (1973) (warranty that vault will give satisfactory service at all times). 33 It is clear that a buyer and a seller can freely negotiate to extend liability into the future; that is why specific allowance was made for warranties explicitly extending to future performance. See Raymond-Dravo-Langenfelder v. Microdot, Inc., supra at 618; 2 Anderson on the Uniform Commercial Code, Section 2-725:5, 24 (1970). In the absence of explicit agreement, however, UCC § 725(2), reflecting the drafters' intention to establish a reasonable period of time, four years, 16 beyond which business persons need not worry about stale warranty claims is applicable. This policy consideration underlying § 2-725 makes it acceptable to bar implied warranty claims brought more than a specified number of years after the sale; otherwise merchants could be forever liable for breach of warranty on any goods which they sold. See Beckmire v. Ristokrat Clay Products Co., supra ; General Motors Corp. v. Tate, supra ; Wilson v. Massey-Ferguson, supra. Similarly, an express warranty which makes no reference at all to any future date should not be allowed to extend past the limitations period. Thus, where a manufacturer warrants that a welder will meet certain performance warranties, but makes no mention of how long the warranties are meant to last; the statute of limitations begins to run at delivery. See Binkley Co. v. Teledyne Mid-America Corp., supra. See also Holdridge v. Heyer-Shulte Corp. of Santa Barbara, supra; Raymond-Dravo-Langenfelder v. Microdot, Inc., supra. 34 Where, however, an express warranty is made which extends for a specific period of time, i. e. one year, the policy reasons behind strict application of the limitations period do not apply. If a seller expressly warrants a product for a specified number of years, it is clear that, by this action alone, he is explicitly warranting the future performance of the product or goods for that period of time. As J. White & R. Summers Uniform Commercial Code 342 (1972), points out, if an automobile is warranted to last for twenty-four thousand miles or four years, the warranty should extend to future performance. If the car fails within the warranty period, the limitations period should begin to run from the day the defect is or should have been discovered. 35 In the case at bar, Black Clawson expressly warranted the machine for a period of one year. Thus, we hold that the warranties explicitly extended to future performance for a period of one year. Therefore, under § 2-725(2) the cause of action accrued when Standard Alliance discovered or should have discovered that the machine was defective, so long as the defect arose within the warranty period. 17 36 Unfortunately, this holding does not assist the plaintiff. Under the contractual limitations period, Standard Alliance had one year from the date of discovery of defect to bring suit. Standard Alliance reported the machine's problems to Black Clawson by letter on December 27, 1967. At least as of this date, Standard Alliance had discovered the breach. Since suit was not brought until over a year later, on May 29, 1969, this action is barred by section 2-725(2) 18 . See Gemeni Typographers v. Mergenthaler Lino Co., 48 A.D.2d 637, 368 N.Y.S.2d 210 (1975). 37 Plaintiff thirdly argues that Black Clawson should be estopped from asserting the statute of limitations as a defense because it promised to repair the defects and spent over five months attempting to do so. In effect, plaintiff contends that it reasonably relied on the repair efforts, to its detriment. Decisions in other jurisdictions are split. For cases where alleged reliance on a seller's repair efforts did not toll the statute of limitations, See Binkley Co. v. Teledyne Mid-America Corp., supra, (Missouri law); Bobo v. Page Engineering Co., 285 F.Supp. 664 (W.D.Pa.1967), Aff'd, 395 F.2d 991 (3d Cir. 1968) (Pennsylvania law); Zahler v. Star Steel Supply Co., 50 Mich.App. 386, 213 N.E.2d 269 (1973). For cases where the statute was tolled, See MidCity Finance Co. v. Coleman, 232 So.2d 918 (La.App.1970); Mack v. Hugh W. Comstock Assoc., Inc., 225 Cal.App.2d 583, 37 Cal.Rptr. 466 (1964); Aced v. Hobbs-Sesack Plumbing Co., 55 Cal.2d 573, 360 P.2d 897, 12 Cal.Rptr. 257 (1961); Nowell v. Great Atlantic and Pacific Tea Co., 250 N.C. 575, 108 S.E.2d 889 (1959). 38 We must determine what the Ohio courts would do if confronted with this issue. 19 Although we have been unable to find direct case authority, an examination of the statute is illuminative. UCC § 2-725(4), as promulgated by the drafters of the Uniform Commercial Code, states: 39 This section does not alter The law on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this Act becomes effective. (Emphasis added) 40 Ohio's version of UCC § 2-725(4) is codified at Ohio Rev.Code § 1302.98(D). That section provides:This section does not alter Sections 2305.15 and 2305.16 of the (Ohio) Revised Code on tolling of the statute of limitations nor does it apply to causes of action which have accrued before this Act becomes effective. (Emphasis added) 41 Thus, when the Ohio legislature adopted the Uniform Commercial Code, it substituted sections 2305.15 and 2305.16 of the (Ohio) Revised Code for the law in the text of UCC § 2-725(4). This significant change in the UCC's wording requires that we limit our analysis to the two Ohio statutes cited. 42 An examination of these statutes reveals that the limitation period is tolled if a defendant has removed himself from the state, Ohio Rev.Code § 2305.15, or if a plaintiff has suffered from some type of disability. Ohio Rev.Code § 2305.16. Neither is applicable here. 43 It is, of course, quite possible that the Ohio courts would apply the doctrine of equitable estoppel in a case where an innocent purchaser has relied to his detriment on a seller's promises to repair. The principle that '. . . no man may take advantage of his own wrong' prevents a defendant whose actions have induced a plaintiff to delay filing a suit until after the running of the limitation period from asserting the statute of limitations as a defense to the action. Ott v. Midland Ross Corp., 523 F.2d 1367, 1370 (6th Cir. 1975). See Markese v. Ellis, 11 Ohio App.2d 160, 229 N.E.2d 70 (1967). Here, however, we have two corporate behemoths, well able to look out for themselves, and no evidence that one lulled the other into not suing on time. See Bowman v. Oklahoma Natural Gas Co., 385 P.2d 440 (Okl.1963). 44 Standard Alliance's two remaining arguments, unsupported by any authority, merit only brief mention. Standard Alliance argues that this Court should toll the running of the limitations period or otherwise find timely filing because the limitations period was contractually reduced from four years to one year. It would also find significant that approximately one-half the one-year limitations period was spent in attempted repairs. 45 The one-year limitations period is specifically allowed by UCC § 2-725(1). We see nothing unfair about this provision in a negotiated contract between two parties of equal bargaining power. Similarly, we find no prejudice to plaintiff resulted from the lengthy repair time. Standard Alliance still had time to file suit on the original breach of warranty claim even after termination of the repair efforts; it also had a cause of action under Count II for failure to fulfill the repair or replacement warranty. 20