Cate v. Dover Corp.
790 S.W.2d 559, 12 U.C.C. Rep. Serv. 2d (West) 47, 33 Tex. Sup. Ct. J. 535 (1990)
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Rule of Law:
A written disclaimer of the implied warranty of merchantability is not conspicuous, and is therefore unenforceable, when it is printed in the same typeface, size, and color as the surrounding text within a warranty document. However, such a disclaimer may be enforced if the seller proves the buyer had actual knowledge of its terms.
Facts:
- In September 1984, Edward Cate, owner of Cate’s Transmission Service, purchased three vehicle lifts for his business.
- The lifts were manufactured and designed by Dover Corporation.
- The purchase included a written express warranty document provided by Dover Corporation.
- The warranty document contained a paragraph disclaiming all implied warranties, but this paragraph was written in the same typeface, size, and color as the rest of the warranty text.
- The document's heading was 'WARRANTY' and the text extolled the virtues of the warranty, with nothing to specifically draw attention to the disclaimer clause.
- The lifts consistently malfunctioned after purchase and never functioned properly.
- Despite repair attempts by both the seller and Dover Corporation, the functional problems with the lifts persisted.
Procedural Posture:
- Edward Cate brought a claim against Dover Corporation for breach of implied warranty in a state trial court.
- Dover Corporation moved for summary judgment, arguing its written disclaimer barred Cate's claim.
- The trial court granted summary judgment in favor of Dover Corporation.
- Cate, as appellant, appealed the decision to the intermediate court of appeals.
- The court of appeals affirmed the trial court's judgment in favor of Dover Corporation, the appellee.
- Cate, as petitioner, then sought review from the Supreme Court of Texas.
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Issue:
Does a written disclaimer of the implied warranty of merchantability, which is printed in the same typeface, size, and color as the surrounding text of an express warranty document, satisfy the legal requirement of being 'conspicuous' under the Texas Business & Commerce Code?
Opinions:
Majority - Justice Doggett
No. A disclaimer of the implied warranty of merchantability contained in text that is undistinguished in typeface, size, or color from the surrounding text is not conspicuous and is unenforceable unless the buyer has actual knowledge of the disclaimer. The test for conspicuousness is objective, based on whether a reasonable person ought to have noticed the term. Here, the disclaimer was buried within a document that purported to grant, not limit, a warranty, and was not set apart by contrasting type, size, or color, rendering it inconspicuous as a matter of law. While an inconspicuous disclaimer can be enforced if the buyer had actual knowledge, Dover failed to meet its summary judgment burden of proving that Cate actually knew about the disclaimer, as his testimony only showed awareness of the express warranty's duration, not its limitations.
Concurring - Justice Spears
Yes, this disclaimer is unenforceable, and I concur in the court's opinion, but the legislature should go further and prohibit all disclaimers of implied warranties. The UCC provision allowing disclaimers (§ 2-316) undermines the very purpose of implied warranties, which is to protect consumers. In the modern marketplace, disclaimers are not freely bargained-for terms; they are hidden in standard form contracts that buyers do not read, understand, or have the power to negotiate. Courts are forced to use 'covert tools' like the conspicuousness requirement to achieve just results, when the more effective and predictable solution would be for the legislature to declare such disclaimers void as against public policy.
Concurring in part and dissenting in part - Justice Ray
Yes, the disclaimer must be conspicuous, but the majority errs by creating an 'actual knowledge' exception. I concur with the holding that a written disclaimer must be conspicuous to a reasonable person. However, I dissent from the court's creation of an exception for when the buyer has actual knowledge of an inconspicuous disclaimer. The statute provides no such exception, and the judiciary should not invent one. The purpose of a rigid conspicuousness requirement is to avoid factual disputes and 'swearing matches' about what a buyer knew; the majority's new rule erodes this objective standard and invites litigation over subjective awareness.
Analysis:
This case establishes a significant two-part test for the enforceability of warranty disclaimers in Texas. It solidifies the 'conspicuousness' requirement as an objective standard, focusing on a reasonable person's perception of the text's physical characteristics, rather than the subjective knowledge of a particular buyer. The decision makes it difficult for sellers to enforce disclaimers buried in uniform text, especially under misleading headings like 'WARRANTY'. However, by introducing the 'actual knowledge' exception, the court provides an alternative path for sellers to enforce even poorly drafted disclaimers, potentially shifting the litigation focus from the document itself to the buyer's state of mind and the circumstances of the sale.
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