Opinion ID: 1280742
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Heading Rank: 1

Heading: Limitation of Warranties in the GMPP.

Text: Unconscionability under the KCPA is a question of law for the trial court. See K.S.A. 50-627(b); Waggener v. Seever Systems, Inc., 233 Kan. 517, 521-22, 664 P.2d 813 (1983). This court's review of conclusions of law is unlimited. U.S.D. No. 352 v. NEA-Goodland, 246 Kan. 137, 140, 785 P.2d 993 (1990). The trial court made the following ruling concerning the GMPP: Defendants engaged in unconscionable acts and practices in violation of K.S.A. 50-627. The Court ruled that the General Motors Protection Plan Service Agreement contained a clause that limited damages for breach of the implied warranty of merchantability and fitness for a particular purpose and remedies provided by law for breach of those warranties. This limitation of damages clause violates K.S.A. 50-627 and Defendant General Motors Corporation is found to have engaged in unconscionable acts and practices for this violation. The GMPP contract contains the following exclusion: We will not pay anything under this Agreement ... [f]or loss of time, inconvenience, lodging, food or other incidental or consequential loss or damage that may result from a FAILURE. The GMPP is a written contract. Regardless of the construction given a written contract by the trial court, an appellate court may construe a written contract and determine its legal effect. State v. Smith, 244 Kan. 283, 284, 767 P.2d 1302 (1989). K.S.A. 84-2-314 provides, in part: (1) Unless excluded or modified (section 84-2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. K.S.A. 84-2-315 provides: Where the seller at any time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose. K.S.A. 84-2-715 provides that incidental and consequential damages are recoverable. The Uniform Commercial Code contemplates that implied warranties may be limited. K.S.A. 84-2-316(2) provides: Subject to subsection (3), to exclude or modify the implied warranty of merchantability ... the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that `There are no warranties which extend beyond the description on the face hereof.' K.S.A. 50-639 provides: (a) Notwithstanding any other provisions of law, with respect to property which is the subject of or is intended to become the subject of a consumer transaction in this state, no supplier shall: (1) Exclude, modify or otherwise attempt to limit the implied warranties of merchantability and fitness for a particular purpose; or (2) exclude, modify or attempt to limit any remedy provided by law, including the measure of damages available, for a breach of implied warranty of merchantability and fitness for a particular purpose. Then, K.S.A. 50-627(b)(7) provides that such a limitation is an unconscionable act or practice. The drafters of this act, however, made clear that the supplier may make other express promises and those additional promises may be limited. K.S.A. 50-639(f) provides: The making of a limited express warranty is not in itself a violation of this section. Both parties argue extensively over whether the GMPP is an express warranty or not, and whether it is subject to K.S.A. 50-639(f). K.S.A. 50-639 only prohibits limitation of implied warranties. Subsection (f) merely restates the obvious  that other promises, in addition to ones implied by law, may be limited. In connection with their argument, the Farrells cite Corral v. Rollins Protective Services Co., 240 Kan. 678, 732 P.2d 1260 (1987). In Corral, the plaintiff had contracted to have an alarm installed in his home. The contract provided that the alarm was to remain Rollins' property, that Corral was to pay a periodic fee, that Rollins would maintain the alarm, and that Rollins would not be liable for any consequential damages resulting from the failure of the alarm in excess of a specified amount. This court first held that common-law implied warranties arise from transactions other than sales, i.e., from sources other than UCC article 2. This court then held that under the then-existing statutory language in the KCPA, these common-law implied warranties could not be excluded. 240 Kan. at 688-90. Since then, K.S.A. 50-639(a)(1) has been amended to make it expressly clear that the only prohibition on limitation of warranties is of UCC warranties. K.S.A. 1990 Supp. 50-639(a)(1). The Farrells, however, argue that this amendment took effect after this cause of action arose and does not apply. We do not find Corral to be relevant. Here, the issue is whether the GMPP excluded the UCC-implied warranties. We are not faced with common-law warranties. It does not matter whether the GMPP is an express warranty or a separate contract. The rule is the same  the GMPP may not limit the implied warranties. Does the GMPP limit the implied warranties? In Stair v. Gaylord, 232 Kan. 765, 659 P.2d 178 (1983), the express warranty in question clearly provided that it was in lieu of all other warranties expressed or implied. This court said: The appellees rely on K.S.A. 1982 Supp. 50-639(f) which states: `The making of a limited express warranty is not in itself a violation of this section.' This section, however, is not applicable to the present controversy. It merely recognizes that since an express warranty is not required to be made at all, a limited express warranty is proper. It does not allow a supplier to use a limited express warranty to exclude implied warranties. 232 Kan. at 776. Gaylord, then, presented a situation where a supplier clearly and expressly attempted to limit implied warranties. Here, the GMPP clearly provides that [w]e will not pay anything under this Agreement ... [f]or loss of time, inconvenience, lodging, food or other incidental or consequential loss or damage that may result from a FAILURE. The GMPP simply does not intend to limit the car owners' rights under implied warranties. The GMPP must provide something in addition to implied warranties or it would be valueless, as the implied warranties already exist. It is permissible for GM to limit the consequential damages recoverable in an agreement that provides extra benefits in addition to the implied warranties. Both parties seem to be arguing that GM's conduct is relevant. GM did (at least initially) breach its implied warranties in addition to breaching the GMPP. If the GMPP contract was ambiguous, then the parties' conduct would be relevant in interpreting the contract. First Nat'l Bank of Olathe v. Clark, 226 Kan. 619, Syl. ¶ 7, 602 P.2d 1299 (1979). However, because the contract is unambiguous, conduct is not relevant. Just because GM breached various warranties and contracts does not mean the GMPP disclaimed the damages recoverable under the implied warranties. There is a difference between breaching a warranty and disclaiming it. The trial court erred and its judgment for civil penalties on this issue is reversed.