Opinion ID: 1740395
Heading Depth: 1
Heading Rank: 4

Heading: express and implied warranties

Text: Both parties properly argue that this transaction is covered by the Uniform Commercial Code (UCC) as a sale of goods within the meaning of that phrase as employed in the statutes, §§ 400.2-102 and 400.2-105(1). [2] Chapter 400, which embodies the UCC, is to be liberally construed and applied to promote simplification, clarity and modernization of the law governing commercial transactions, to permit the continued expansion of commercial practices, and to make uniform the law among the various jurisdictions. § 400.1-102(1). Under § 400.2-719 [3] , the central issues are, first, whether the limit on consequential damages provided in Monsanto's label booklet is unconscionable and, second, whether the restrictive remedy afforded therein fails of its essential purpose. Plaintiffs invite this Court lump the requirements of 400.2-719(2) and (3) under a broad unconscionable test, but I would decline so to do. Rather, I believe we should first determine whether the limitations imposed under Monsanto's LIMIT OF WARRANTY AND LIABILITY are unconscionable, hence unenforceable as to consequential damages. There is little Missouri case law defining the statutory term unconscionable. In Funding Systems Leasing Corporation v. King Louie International, Inc., 597 S.W.2d 624 (Mo.App.1979), unconscionability has application to both the substantive or procedural aspects of a transaction. Id. at 634. Substantive unconscionability refers to undue harshness in the contract terms themselves, whereas procedural unconscionability involves examination of the contract formation process, centering on the pressure exerted by the parties, the fine print of the contract, misrepresentation, or unequal bargaining position. Id. Generally before a contract or clause can be voided as unconscionable under § 400.2-302 [4] , both procedural and substantive unconscionability must be found. Id. In the application of these concepts, it has been suggested that there must be a balancing between the substantive and procedural aspects, and that if there exists gross procedural unconscionability, then not much is needed by way of substantive unconscionability, and that the same sliding scale be applied if there is great substantive unconscionability but little of a procedural nature. Id. [Citation omitted.] Turning to the contract formation process, plaintiffs cannot claim surprise as to the disclaimer. The LIMIT OF WARRANTY AND LIABILITY clause appears on the first page of the product booklet which appellants received when purchasing the herbicide. The disclaimers are conspicuous, as that term is used in § 400.2-316; however, I recognize the parties' disparate bargaining positions. The purchase was necessarily on Monsanto's terms or not at all as plaintiffs had neither the opportunity nor the power to negotiate the terms of their purchase. [5] They had no alternatives to Monsanto's disclaimers for as Monsanto concedes, the disclaimer it employs is virtually the same as the limitations of warranty and liability language used by all the manufacturers of herbicides. (Emphasis added.) Though the record is not yet fully developed, it may be reasonably inferred from the pleadings that plaintiffs are not a large scale farming operation. The 500 acres the plaintiffs leased does not, as Monsanto urges, indicate the plaintiffs by modern standards are large scale farmers. Examining next the issue of substantive unconscionability, it should first be observed that Comment 1 to § 400.2-719 states: it is of the very essence of a sales contract that at least minimum adequate remedies be available. If the parties intend to conclude a contract for sale within this Article they must accept the legal consequence that there be at least a fair quantum of remedy for breach of the obligations or duties outlined in the contract. Monsanto alleges that its offer to refund the purchase price or replace the herbicides meets the requirements of a minimum adequate remedy and asserts that no Missouri decision has ever set aside a manufacturer's warranty or liability limitation on grounds of unconscionability under 2-719(3). To the contrary, in Oldham's Farm Sausage Company v. Salco, Inc., 633 S.W.2d 177 (Mo.App.1982), the court held unconscionable a manufacturer's limitation of liability that attempted to exclude consequential damages where such damages approximated $215,000 and the manufacturer attempted by use of its warranty limitations to limit recovery to $4,400. Measuring the limitation clause against the comments to 400.2-719(3), the court found that the limitation failed to allow a minimum adequate remedy. Id. at 183. Such is the case before us. Monsanto would restrict appellants' recovery to $1,449.70, representing the purchase price of the herbicides, or in lieu thereof replace the herbicide with more of the same. The first provides no adequate remedy to these plaintiffs whose source of income has been substantially impaired by Monsanto's product and the second is meaningless for the damage to plaintiffs' crops cannot be rectified after the fact by the addition of more herbicide. In reaching this conclusion, I am mindful of the manner a number of sister state courts have dealt with the issue. As Monsanto notes in its brief, a majority of states which having dealt with the issue have ruled in the manufacturer's favor. In Kleven v. Geigy Agricultural Chemicals, 303 Minn. 320, 227 N.W.2d 566 (1975), the Court held it was not unconscionable for a manufacturer of herbicide to disclaim consequential damages for the failure of its product. Id. 227 N.W.2d at 572. That because of the nature of the product and the multitude of conditions and factors that affect its effectiveness such as soil, weather, seed, and weeds, limited favorable results could be anticipated. Id. See also, Southland Farms, Inc. v. Ciba-Geigy Corporation, 575 So.2d 1077 (Ala.1991); Monsanto Agricultural Products Company v. Edenfield, 426 So.2d 574 (Fla.App. 1982); Slemmons v. Ciba-Geigy Corp., 57 Ohio App.2d 43, 385 N.E.2d 298 (1978); Earl Brace & Sons v. Ciba-Geigy Corporation, 708 F.Supp. 708 (W.D.Pa.1989). However plaintiffs' position is not without support in the cases from other jurisdictions. In Johnson v. Monsanto Company, 303 N.W.2d 86 (N.D.1981), defendant accepted a trial court's ruling that its limitation of warranty and remedy provisions were unconscionable, and in a series of cases decided in South Dakota, it was held that limitations upon consequential damages by herbicide manufacturers and seed companies were unconscionable. Durham v. Ciba-Geigy Corporation, 315 N.W.2d 696 (S.D.1982); Hanson v. Funk Seeds International, 373 N.W.2d 30 (S.D.1985); Herrick v. Monsanto Company, 874 F.2d 594 (8th Cir.1989) (applying South Dakota law) [6] . The court in Durham stated: ... loss of the intended crop due to ineffectiveness of the herbicide is inevitable and potential plaintiffs should not be left without a remedy. Furthermore, the purchasers of pesticides are not in a position to bargain with chemical manufacturers for contract terms more favorable than those listed on the pre-printed label, nor are they in a position to test the effectiveness of the pesticide prior to purchase. Durham v. Ciba-Geigy Corporation, 315 N.W.2d at 701. I find such observations persuasive and would hold that the consequential damages disclaimer contained in Monsanto's LIMIT OF WARRANTY AND LIABILITY provision to be unconscionable and, therefore, unenforceable. As a final defense for the order of dismissal, Monsanto argues that there is insufficient evidence to support a determination of unconscionability and that the petition is devoid of facts that would support the position I believe this Court should take today. Monsanto also claims it has been deprived of its right under § 400.2-302(2) [7] to present evidence to the circuit court on the issue of unconscionability. I submit that these contentions are without merit. The elemental facts necessary for a determination of unconscionability have been presented to this Court by the parties in their pleadings and briefs. When this matter was first appealed, the court of appeals remanded the proceeding to afford plaintiffs an opportunity to amend their petition in response to the dismissal. In their application for transfer to this Court on the court of appeals' first opinion, plaintiffs announced their intention to stand on the allegations of their petition. [8] This apparently was the position plaintiffs assumed in the trial court. Section 400.2-302(2) provides that when the issue of unconscionability is raised the parties shall be afforded a reasonable opportunity to present evidence on that issue. Early on Monsanto was noticed that Plaintiffs sought to rely upon the claim of unconscionability. While the statute provides that the parties are to be given a reasonable opportunity to present evidence, it does not mandate that an evidentiary hearing be held, hence Monsanto has waived any claim it may have to a hearing under § 400.2-302(2). Further, there is no prejudice resulting from Monsanto's waiver [9] , and, accordingly its argument that it has been denied a right to trial by jury is not well taken. Having concluded that the consequential damages disclaimer is unconscionable, I feel there is no need to address plaintiffs' § 400.2-719(2) allegation that the limited remedy fails of its essential purpose but this issue remains a part of the case. For these reasons, I would reverse the judgment and remand to the trial court with directions to reinstate plaintiffs' action for further proceedings and with the further direction the court shall declare as a matter of law that the consequential damages disclaimer of Monsanto is unconscionable and unenforceable in this case.