Court Opinion

ID: 9701588
Source: CourtListenerOpinion
Date Created: 2023-08-25 22:26:28.036031+00
Date Added: 2024-06-11T18:21:25.492156
License: Public Domain

PASHMAN, J.,
concurring.
I fully agree with the majority that Uniroyal’s “guarantee” constitutes an express warranty and not merely a promise of replacement. Ante at 327. I also agree that the limitation of remedies contained in the warranty is unenforceable. The majority perceives the disclaimer to be “so deceptive, confusing or misleading as to constitute an inadequate communication to purchasers concerning the [full] meaning of the express warran*337ty.” Ante at 332. While I agree with this characterization, I write to elaborate a second premise for refusing enforcement. The manufacturer has artfully placed within a “linguistic maze,” ante at 333, a provision that defeats a consumer’s reasonable expectations. This involves not only surprise to the consumer because of a lack of clarity, see ante at 330-331; cf. N.J.S.A. 12A:2-316(2), (3)(a); N.J.S.A. 12A:1-201(10), but the same “unfair surprise,” N.J.S.A. 12A:2-302, N.J. Comment 1, that supported this Court’s decision in Collins v. Uniroyal, 64 N.J. 260 (1974), aff’g 126 N.J.Super. 401 (App.Div. 1973). The warranty’s limitation is not only unenforceable because of the manner in which it was drafted, it is unenforceable because of its content. Thus, I would follow the approach taken by both the trial court and the Appellate Division and hold the disclaimer unconscionable as a matter of law.
It is clear that plaintiff would be able to seek recovery for the property damage alleged here in the absence of the limitation imposed by Uniroyal. New Jersey’s Uniform Commercial Code provides that the usual measure of damages given a buyer for breach of warranty includes recovery for consequential damages. N.J.S.A. 12A:2-714(3). These damages cover injuries to property proximately resulting from any breach of warranty. N.J.S.A. 12A:2-715(2)(b). A sales agreement may limit recovery for consequential damages “unless the limitation or exclusion is unconscionable.” N.J.S.A. 12A:2-719(3). “Limitations of consequential damages for injury to the person in the case of consumer goods is prima facie unconscionable but limitation of damages where the loss is commercial is not.” Id. Because this case involves only property damage, plaintiff does not have the benefit of this presumption of unconscionability. The limitation here must therefore be assessed under a traditional analysis of unconscionability. See N.J.S.A. 12A:2-302.
The question of unconscionability is one of law for the court. N.J.S.A. 12A:2-302(1). The statute, however, does not provide any definition of unconscionability. The comments following N.J.S.A. 12A:2-302 offer only the most general sense of direction. They broadly describe the governing principle as “one *338of the prevention of oppression and unfair surprise * * N.J.S.A. 12A:2-302, N.J. Comment 1. Case law on the subject affords greater guidance, but is similarly lacking in a universally accepted standard. In one of the leading cases in this area, Judge J. Skelly Wright observed that “[ujnconscionability has generally been recognized to include an absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party.” Williams v. Walker-Thomas Furniture Co., 350 F.2d 445, 449 (D.C. Cir. 1965). See Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 554 (1967). More recently, this Court in Kugler v. Romain, 58 N.J. 522 (1971), described unconscionability as “an amorphous concept obviously designed to establish a broad business ethic” and noted that the intent of the doctrine is “to make realistic the assumption of the law that the agreement has resulted from real bargaining between parties who had freedom of choice and understanding and ability to negotiate in a meaningful fashion.” Id. at 543-544.
By avoiding any precise definition of the unconscionability concept, “[t]he framers of the Code naturally expected the courts to interpret it liberally so as to effectuate the public purpose, and to pour content into it on a case-by-case basis.” Kugler, 58 N.J. at 543. Thus, in applying these general notions to a particular contract, a court must assess a variety of factors, the relevance and significance of which will vary from case to case. They include the commercial setting, any “course of dealing,” N.J.S.A. 12A:1-205(1), or “usage of trade,” N.J.S.A. 12A:1-205(2), the purpose and effect of the contract, the relative bargaining strengths of the parties, the presence of fine print, the conspicuousness of the clause in question, unfair surprise and the presence of oppressive or manifestly unreasonable terms. See N.J.S.A. 12A:2-302(2); Williams v. Walker-Thomas Furniture Co., 350 F.2d at 449; Schroeder v. Fageol Motors, 86 Wash.2d 256, 544 P.2d 20, 23 (Sup.Ct.1975) (en banc); see generally White & Summers, Uniform Commercial Code, § 4-1 to 4-7 at 112-130, § 12-11 at 383-392 (1972); Spanogle, “Analyzing Unconscionability Problems,” 117 U.Pa.L.Rev. 931 (1969).
*339An application of these principles in the present case compels the conclusion that the remedy limitation is unconscionable. The commercial setting in this case evidences a severe imbalance in bargaining power and a lack of meaningful choice by the consumer. Although one party’s superior bargaining power is not in itself a sufficient basis for a finding of unconscionability, see N.J.S.A. 12A:2-302, N.J. Comment 1, it is clearly an important consideration. By contrast, courts are hesitant to relieve strong, knowledgeable and experienced parties from a bargain which they actively negotiated when later events prove the bargain to be less advantageous than one party would prefer. See, e. g., S. M. Wilson & Co. v. Smith Int’l, Inc., 587 F.2d 1363 (9th Cir. 1978); Royal Indemnity Co. v. Westinghouse Elec. Corp., 385 F.Supp. 520 (S.D.N.Y.1974) (applying New Jersey law); Wille v. Southwestern Bell Tel. Co., 219 Kan. 755, 549 P.2d 903 (Sup.Ct.1976); Abel Holding Co., Inc. v. American Dist. Tel. Co., 138 N.J.Super. 137 (Law Div.1975), aff’d, 147 N.J.Super. 263 (App.Div.1977).
When individual consumers enter into sales contracts with large commercial concerns, the word “bargain” is hardly appropriate. The terms of the agreement are rarely negotiated; more often the stronger party simply dictates them. The consumer is in a “take-it-or-leave-it” situation. He is able to seek more favorable terms only regarding matters as to which any competitors permit deviation. Often he is left without any meaningful choice. See Ellsworth Dobbs, Inc., 50 N.J. at 554-555; cf. Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 403-404 (1960) (applying pre-Code law). This is borne out by the facts of this case. The parties did not bargain over the terms of Uniroyal’s guarantee. Uniroyal determined the extent of its liabilities unilaterally.
The result of plaintiff’s lack of bargaining power is a clause excluding the manufacturer’s liability for any consequential damages for breach of its express warranty. The unconscionability of this limitation becomes apparent once proper consideration is given to the type of product involved—an automobile tire. A failure in the performance of such an item carries a *340significant probability that personal injury, property damage or both will result. It is highly foreseeable that the consequences of the tire’s malfunctioning will be much more severe than the mere loss of the tire itself. Thus, a consumer’s major concern is with safety, not the availability of a replacement. This fact is evidenced in this case by the testimony of the car’s owner that he specifically requested steel belted radial tires because he wanted “better” tires.
In my view, both courts below correctly recognized the importance of the consumer goods involved in this case when assessing unconscionability. See also ante at 335. In excising the limitation clause from consideration at trial, Judge Shelton made the following comparison:
[I]f [a] water carafe dripped water out and spoiled a piece of something or other, then it seems to me that it would probably not be unconscionable to limit the liability of the manufacturer of the water carafe, [to] the replacement of the water carafe, because the consequential damage to property resulting from the leaking of water could not ordinarily be foreseen as one * * * which would constitute substantial damage. I think that is in contrast to the manufacture of a tire.
The tire is the essential element of a motor vehicle in keeping the motor vehicle in contact with the road. Many other things can happen to a motor vehicle, but so long as it has brakes and tires and steering, most problems can be taken care of. It may stop. It may not be able to go. The electrical system fails, it can probably be driven off the side of the road. But when a tire fails * * * there is the likelihood of damage resulting. That, I think, is a common fact.
On the question of unconscionability, it seems to me that regardless of whether the damage resulting from the failure of a tire was property damage or personal injury, it would be unconscionable to permit the manufacturer to limit liability to replacement of the tire. Obviously, the replacement of a tire is something less than $100 in today’s market and the possibility of substantial damage from the failure of the tire is something that is a matter of common fact as the Collins case in the Appellate Division indicated. * * *
In the same way, it seems to me that the reliability of a tire and the consequential damages that can flow from the failure of a tire are such that it would be unconscionable to limit liability to replacement of the tire. [Emphasis added]
In affirming, the Appellate Division noted that
the natural and reasonable expectation of the purchaser of the tire is the same as in the case of personal injuries resulting from a breach of the warranty— concern for the safety feature of the tire to the extent of its potential for property, as well as personal, damage. It was entirely reasonable for the purchaser of this tire here to have expected to recover the larger loss, damage to the car, and not simply the replacement of the tire. [Emphasis added]
*341I agree with the courts below that there is no principled distinction between the remedy limitations in this case and those in Collins. Despite the difference in the type of damages, the basic considerations which supported the finding of unconscionability in Collins apply with equal force here. The commercial setting and type of product are the same. The “natural reliance” and “reasonable expectation of the purchaser flowing from the warranty,” Collins, 64 N.J. at 263, are present in both cases. These expectations render “patently unconscionable” the manufacturer’s attempt to limit its damages for breach of warranty to a refund or replacement. Id.
This same result was reached in McCarty v. E. J. Korvette, Inc., 28 Md.App. 421, 347 A.2d 253 (Ct.Spec.App.1975). In that case plaintiffs were involved in an automobile accident as a result of an alleged blowout of the right rear tire. The blowout caused personal injuries to the plaintiffs as well as property damage to their car. Finding the road hazard tire guarantee to constitute an express warranty against blowouts, the court turned to the effect of the following language:
Neither the manufacturer nor Korvette Tire Centers shall be liable for any consequential damage and our liability is limited solely to replacement of the product. [28 Md.App. at 423, 347 A.2d at 256]
The court concluded that the clause “purports to exclude liability for both personal injury and property damage.” 28 Md.App. at 432, 347 A.2d at 261. It went on to find the attempted exclusion of consequential damages for personal injury unconscionable as a matter of law under Md.Comm.Law Code Ann. § 2-719(3) (identical to N.J.S.A. 12A:2-719(3)). As to the exclusion of property damages, the court noted that no statutory presumption existed with respect to sales of consumer goods. It nevertheless concluded that “the rationale in Collins persuades us that the clause here, which attempts to exclude liability for both personal injury and property damage is so tainted by unconscionability as to warrant deletion in its entirety.” 28 Md.App. at 433, 347 A.2d at 262. See also Mieske v. Bartell Drug Co., 92 Wash.2d 40, 593 P.2d 1308 (Sup.Ct.1979) (en banc) (company lost 32 rolls of individual’s exposed movie film, clause limiting damages to retail cost of film unconscionable).
*342Defendant argues that it is not unconscionable to limit the remedies available to a tire purchaser for breach of a warranty that goes beyond what the law requires. Since Uniroyal could have refrained from giving this “added protection,” it is argued, it should be permitted to limit the remedies for the failure of its product to live up to this higher standard. See N.J.S.A. 12A:2-316, 2-719, N.J. Comment 3; Collins, 64 N.J. at 263-264, 268 (Clifford, J., dissenting). This same argument was correctly rejected by the Court in Collins as “not consonant with the commercial and human realities.” 64 N.J. at 262. Express warranties are used by manufacturers to increase the attractiveness of their products to consumers. The inclusion of warranties is not a result of corporate benevolence. Conversely, purchasers rely on warranties; they reasonably expect them to have meaning beyond a mere promise of replacement. When compared with those expectations, even a clear disclaimer clause presents an unfair surprise to the consumer. Collins, 64 N.J. at 263. This is particularly true when, as here, malfunction of the items carries a significant potential for damage to person and property-
For the foregoing reasons, I concur in the opinion of the Court.