Court Opinion

ID: 9655166
Source: CourtListenerOpinion
Date Created: 2023-08-23 19:01:55.526033+00
Date Added: 2024-06-11T09:50:15.300147
License: Public Domain

*564SPEARS, Justice,
concurring.
Although I concur in the court’s opinion, I write separately to declare that the time has come for the legislature to consider the realities of the marketplace and prohibit all disclaimers of the implied warranties of merchantability and fitness.
These implied warranties, created by common-law courts long before the adoption of the U.C.C., developed to protect purchasers from losses suffered because of “the frustration of their expectations about the worth, efficacy, or desirability” of a product. W. Keeton, Prosser and Keeton on The Law of Torts § 95A (5th ed. 1984). Implication of these warranties into every goods contract, without regard to the parties’ actual assent to their terms, served “to police, to prevent, and to remedy” unfair consumer transactions. Llewellyn, On Warranty of Quality, and Society, 39 Colum.L.Rev. 699, 699 (1936); Humber v. Morton, 426 S.W.2d 554, 557-58 (Tex.1968). These implied warranties also serve other important purposes: they create incentives to produce and market higher quality products; they discourage shoddy workmanship and unethical trade practices; and they place responsibility on those who profit from the sale of goods, have the greatest control over the products, and are better able to bear the risk of loss. See Humber, 426 S.W.2d at 562; Decker & Sons v. Capps, 139 Tex. 609, 610, 164 S.W.2d 828, 829 (1942). Section 2-316 of the U.C.C., however, subverts all of these purposes by giving sellers almost unlimited license to disclaim implied warranties.
We live in an age when sellers of goods “saturate the marketplace and all of our senses” with the most extraordinary claims about the worth of their products. Anderson, The Supreme Court of Texas and the Duty to Read the Contracts you Sign, 15 Tex.Tech.L.Rev. 517, 544 (1984); Henningsen v. BloomField Motors, Inc., 32 N.J. 358, 161 A.2d 69, 84 (1960). Yet, the same sellers under the carte blanche granted them by section 2-316 of the U.C.C. refuse to guarantee and indeed expressly disclaim that their products are merchantable or even fit for their intended purposes. Under section 2-316, not much is actually required for an effective disclaimer. To disclaim the implied warranty of merchantability the seller need only include the word “merchantability” in a conspicuous fashion. Tex.Bus. & Com.Code Ann. § 2.316(b) (Vernon 1968). To disclaim the implied warranty of fitness the seller must use a writing and must make the disclaimer conspicuous. Id. at § 2.316(2). No particular form of words is needed to disclaim an implied warranty of fitness, nor does section 2.316 require the buyer to be actually aware of the disclaimer before it will be enforced. All implied warranties can be disclaimed by the mere inclusion of expressions like “as is” or “with all faults”. Id. at § 2.316, comment 1. Finally, as today’s majority makes clear, section 2.316 does not even require the disclaimer to be conspicuous if the buyer’s actual knowledge of the disclaimer can be shown.
By establishing specific “requirements” for disclaimers, section 2.316 ostensibly “seeks to protect a buyer from unexpected and unbargained language of disclaimer.” Tex.Bus. & Com.Code § 2.316, comment 1 (Vernon 1968). In reality, however, section 2.316 completely undermines implied warranties. Implicitly, section 2.316 adopts the position that disclaimers should be enforced because society benefits when parties to a contract are allowed to set all the terms of their agreement. The problem with this position, and with section 2.316 generally, is two-fold: it ignores the fact that governmental implication of protective terms into private contracts is commonplace (e.g. the implied warranties of merchantability and fitness); and, more importantly, it rests on the faulty premise that contractual disclaimers are generally freely bargained for elements of a contract.
Freedom of contract arguments generally, and section 2.316 specifically, presuppose and are based on “the image of individuals meeting in the marketplace” on equal ground to negotiate the terms of a contract. Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv.L. Rev. 1174, 1216 (1983). At one time, this image may have accurately reflected marketplace realities. However, the last half *565of the twentieth century has witnessed “the rise of the corporation” and, increasingly, the displacement of physical persons as sellers in consumer and commercial contracts. Phillips, Unconscionability and Article 2 Implied Warranty Disclaimers, 62 Chi.-Kent L.Rev. 199, 239 (1985). This development has led to innumerable situations in which consumers deal from an unequal bargaining position, the most prominent example being the ubiquitous standard form contract which is now used by most sellers of goods and which invariably contains an implied warranty disclaimer. See Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 355 (Tex.1987); Henningsen, 161 A.2d at 86-89; Slawson, Standard Form Contracts and Democratic Control of Lawmaking Power, 84 Harv.L.Rev. 529, 529 (1971) (“standard form contracts probably account for more than ninety-nine percent of all the contracts now made”); L. Void, Handbook of the Law of Sales 447 (2d ed. 1959) (dramatic rise in corporate power has yielded the standard form contract whose terms are drafted by the seller and usually contain implied warranty disclaimers).
The great majority of buyers never read an implied warranty disclaimer found in a standard form contract.1 Even when implied warranty disclaimers are read, their legal significance is not generally understood. Such disclaimers include unfamiliar terminology (e.g. “implied warranty of merchantability”), and comprehending their legal effect requires one not only to understand what substantive rights are involved, but also to grasp that these rights have been lost via the disclaimer. Phillips, Un-conscionability and Article 2 Implied Warranty Disclaimers, 62 Chi.-Kent L.Rev. 199, 243 (1985); see also Federal Trade Commission, Facts for Consumers (Mar. 23, 1979) (more than 35% of those surveyed mistakenly believed that an “as is” disclaimer meant the dealer would have to pay some, if not all, costs if a car broke down within 25 days of a sale). Finally, even if a buyer reads and understands an implied warranty disclaimer, chances are he will be without power to either strike these terms or “shop around” for better ones. If the buyer attempts the former, he will likely run into an employee who is unauthorized to alter the form contract; if he attempts the latter, he will likely confront a competitor who offers substantially the same form terms. Henningsen, 161 A.2d at 87. In short, the “marketplace reality” suggests that freedom of contract in the sale of goods is actually nonexistent; a buyer today can either take the contract with the disclaimer attached or leave it and go without the good.
Increasingly, the courts and legislatures of other states have acted to ameliorate or to avoid entirely the harsh consequences wrought by section 2.316. Several courts have refused to enforce disclaimers, on public policy grounds, unless the disclaimer sets forth the particular qualities and characteristics of fitness being waived, is clearly brought to the buyer’s attention and is expressly agreed to by the buyer. See, e.g., Hiigel v. General Motors Corp., 190 Colo. 57, 544 P.2d 983 (1975); Jensen v. Siegel Mobile Homes Group, 105 Idaho 189, 668 P.2d 65 (1983); Louisiana Nat’l Leasing Corp. v. ADF Serv., Inc., 377 So.2d 92 (La.1979); Scientific Application, Inc. v. Delkamp, 303 N.W.2d 71 (N.D.1981); Zabriskie Chevrolet, Inc. v. Smith, *56699 N.J.Super. 441, 240 A.2d 195 (1968); Woods v. Secord, 122 N.H. 323, 444 A.2d 539 (1982); Seibel v. Layne & Bowler, Inc., 56 Or.App. 387, 641 P.2d 668 (1982); Berg v. Stromme, 79 Wash.2d 184, 484 P.2d 380 (1971).
A number of other courts have found even conspicuous disclaimers to be unconscionable under section 2-302 of the U.C.C., despite the disclaimer’s compliance with § 2-316. See, e.g., FMC Fin. Corp. v. Murphree, 632 F.2d 413 (5th Cir.1980); A & M Produce Co. v. FMC Corp., 135 Cal. App.3d 473, 186 Cal.Rptr. 114 (1982); Chrysler Corp. v. Wilson Plumbing Co., 132 Ga.App. 435, 208 S.E.2d 321 (1974); Hahn v. Ford Motor Co., 434 N.E.2d 943 (Ind.App.1982); Sarfati v. M.A. Hittner & Sons, 35 A.D.2d 1004, 318 N.Y.S.2d 352 (1971), aff'd 30 N.Y.2d 613, 331 N.Y.S.2d 40, 282 N.E.2d 126 (1972); Evans v. Graham Ford, Inc., 2 Ohio App.3d 435, 442 N.E.2d 777 (1981); Eckstein v. Cummins, 41 Ohio App.2d 1, 321 N.E.2d 897 (1974); Durham v. Ciba-Geigy Corp., 315 N.W.2d 696 (S.D.1982); Rottinghaus v. Howell, 35 Wash.App. 99, 666 P.2d 899 (1983); See generally Phillips, Unconscionability and Article 2 Implied Warranty Disclaimers, 62 Chi.-Kent L.Rev. 199, 262-63 (1985) (arguing that § 2-302 should be aggressively applied to invalidate disclaimers of implied warranties, and concluding that such disclaimers should be “per se unconscionable” in consumer cases).
Several states have gone even further by enacting protective legislation which forbids implied warranty disclaimers or by repealing section 2-316 of the Code. See, e.g., ALA.CODE §§ 7-2-316(5), 7-2-719(4) (1975); CONN.GEN.STAT. § 42-179 (1984); D.C.CODE ANN. § 28:2-316.1 (1984); KAN.STAT.ANN. § 50-636(a) (1983); ME. REV.STAT.ANN. tit. 11, § 2-316 (1973); MD.COM.LAW ANN. § 2-316 (1982); MASS.ANN.LAWS ch. 106, § 2-316A (1984); MINN.STAT.ANN. § 336.2-316 (1982); 1976 Miss.Laws, Ch. 385, Preamble; MISS.CODE ANN. § 11-7-18; YT.STAT. ANN. tit. 9A, § 2-316(5) (1981); WASH. REV.CODE § 62A.2-316(4) (1966); W.YA. CODE § 46A-6-107 (1980); see also Uniform Consumer Credit Code § 2.308 (1974); Model Consumer Credit Act §§ 2.503, 8.108 (1973).
Finally, the federal Magnuson-Moss Warranty Act places severe limits on the seller’s ability to disclaim implied warranties in the sale of consumer goods. 15 U.S.C. § 2301-12 (1982). The Act’s most important clause essentially provides that if a seller gives a written express warranty, he cannot disclaim the implied warranties. Id. § 2308(a). The Act effectively prohibits the common practice of a seller boldly announcing an express warranty of limited value and then disclaiming the more valuable implied warranties, leaving the consumer with a delusive remedy at best.
Our own prior decisions reflect a growing hostility toward attempted disclaimers of important rights. For example, in Cro-well v. Housing Authority of City of Dallas, we held that an exculpatory provision exempting a landlord from liability for negligence was void as against public policy because of the disparate bargaining positions of the parties and the “take it or leave it” nature of the contract. 495 S.W.2d 887, 889 (Tex.1973). More recently, in Melody Home Mfg. Co. v. Barnes, we created a new common-law implied warranty of good and workmanlike repair and further held that the new warranty could not be waived or disclaimed. 741 S.W.2d 349, 354-55 (Tex.1987). In so holding, we recognized that “[i]t would be incongruous if public policy required the creation of an implied warranty, yet allowed the warranty to be disclaimed and its protection eliminated merely be a pre-printed standard form disclaimer or an unintelligible merger clause” Id. at 355; see also. Crowder v. Vandendeale, 564 S.W.2d 879, 881 (Mo.1978) (boilerplate waiver provisions, even if conspicuous, would not be allowed to extinguish so important a creature of public policy as the implied warranty of habitability and workmanship).
In other contexts, the Texas legislature has refused to allow the rights and remedies it creates to fall victim to skillfully drafted waiver provisions or disclaimers. See, e.g., Tex.Bus. & Com.Code Ann. § 17.42(a) (Vernon Supp.1990) (DTPA waiv*567er unenforceable and void as against public policy unless defendant proves consumer is not in a significantly disparate bargaining position, the consumer is represented by legal counsel, and the waiver is by express provision in a written contract signed by both consumer and his counsel); Tex.Rev. Civ.Stat.Ann. art. 5221f, § 18 (Vernon Supp.1987) (waiver of the provisions of the Manufactured Housing Standards Act unenforceable and void); Tex.Bus.Com. Code Ann. §§ 9.504, 9.506 (Vernon Supp. 1985) (debtor may not waive, until after default, rights to notice of sale and to redemption of collateral); Tex.Bus.Comm. Code Ann. § 2.719(c) (presumptively invalidating disclaimers of liability for personal injuries in contracts for the sale of consumer goods).
The realities of the modern marketplace demand that the legislature prohibit implied warranty disclaimers by repealing section 2-316 of the U.C.C. Without such action, Texas courts will be forced to rely on “covert tools”, such as the unconsciona-bility provision in section 2-302 or the “conspicuous” requirement in section 2-316, to reach a just and fair result in disclaimer suits. When these tools are used, guidance, predictability and consistency in the law is sacrificed, while limited judicial resources are spent policing unjust bargains that could have been avoided. Were it up to the judicial branch, the courts could declare such disclaimers void as against public policy. If the legislature has the interests of Texas citizens at heart, it will repeal section 2-316 because, no matter how conspicuous, such disclaimers are abusive of consumers.
MAUZY, J., joins in this concurring opinion.

. See RESTATEMENT (SECOND) OF CONTRACTS § 211, Comment b (1981):
A party who makes regular use of a standardized form of agreement does not ordinarily expect his customers to understand or even to read the standard terms. One purpose of standardization is to eliminate bargaining over details of individual transactions, and that purpose would not be served if a substantial number of customers retained counsel and reviewed the standard terms ... Customers do not in fact ordinarily understand or even read the standard terms.
Id.; see also Rakoff, Contracts of Adhesion: An Essay in Reconstruction, 96 Harv.L.Rev. 1174, 1179 n. 21 (1983) (citing numerous commentators who declare that standard terms not read or understood, and some empirical studies asserting same proposition); Phillips, Unconscion-ability and Article 2 Implied Warranty Disclaimers, 62 Chi.-Kent L.Rev. 199, 243 (1985) (many sales do not involve a written sales contract that is presented before the goods change hands; usually, the disclaimer is inside the package and is not seen until after the sale is completed).