Collins Radio Co. of Dallas v. Bell
623 P.2d 1039 (1981)
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Rule of Law:
Under the Uniform Commercial Code (UCC), the law of the state with the 'most significant relationship' to the transaction governs a sale of goods contract, which may be where a continuing relationship is centered rather than the place of delivery. A disclaimer of implied warranties is 'conspicuous' if, based on a totality of the circumstances including the buyer's sophistication, a reasonable person ought to have noticed it, even if it is on the reverse side of a contract.
Facts:
- LeFlore County Broadcasting Company (Bell), which operated an FM radio station, decided to upgrade its power and purchase a new transmitter.
- Bell's facility only had single-phase electricity, while the new transmitter sold by Collins Radio Company required three-phase electricity, a fact Bell communicated to Collins.
- Before signing a contract with Collins, Bell independently contracted with a third party, Garner Electric Company, to supply and install a 'Rotoverter' phase-converter to adapt his power supply.
- Bell and Collins then executed a one-page written sales contract for the transmitter, which specified delivery as 'f.o.b. Dallas, Texas.'
- The contract contained a warranty disclaimer and a limitation of remedies clause in all capital letters on the reverse side, with a reference to those terms printed on the front above the signature line.
- After installation, the Collins transmitter and the Garner-supplied Rotoverter did not function properly together, causing the radio station to experience substantial 'downtime.'
- Bell used the transmitter for over two years but refused to pay the outstanding balance of the purchase price to Collins.
Procedural Posture:
- Collins Radio Company sued R. B. Bell in an Oklahoma trial court to recover the unpaid purchase price for radio equipment.
- Bell filed a counterclaim against Collins alleging breach of warranty and tort claims, and also filed a third-party petition against Zelman Garner, d/b/a Garner Electric Company.
- The trial court entered a directed verdict for Collins on its claim for the purchase price.
- The case proceeded to trial on Bell's counterclaims, where a jury returned a verdict in favor of Bell for $200,000 on his breach of warranty claim against Collins.
- The jury found in favor of Collins on Bell's tort claims and in favor of Garner on Bell's third-party claim.
- Collins Radio Company appealed the jury's verdict on the breach of warranty claim to the Court of Appeals of Oklahoma.
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Issue:
Does a seller of radio equipment breach an express or implied warranty when the equipment functions as designed when provided with the correct electrical input, but fails when connected to a third-party power converter chosen and supplied by the buyer?
Opinions:
Majority - Romang, J.
No. A seller does not breach a warranty when its product performs as warranted but fails due to external factors not within the seller's control, such as its use with incompatible equipment selected by the buyer from a third party. The evidence conclusively showed that the Collins transmitter operated as warranted whenever it received the correct electrical input. Bell failed to present any evidence that a defect in the transmitter was the proximate cause of the station's downtime; the issues stemmed from the power conversion system that Bell independently procured. Furthermore, no implied warranty of fitness for a particular purpose arose because Bell, a sophisticated businessman with 27 years of experience, did not rely on Collins's skill or judgment in solving his power supply issue, but rather on his own. The court also found that the disclaimer of implied warranties was conspicuous and therefore valid, considering the capitalization, placement, reference on the front of the contract, and sophistication of the parties.
Analysis:
This decision establishes the 'most significant relationship' test as the choice-of-law rule for UCC cases in Oklahoma, prioritizing the jurisdiction most connected to the parties and performance over the traditional, more rigid 'place of delivery' rule. The case is also significant for its flexible, totality-of-the-circumstances approach to determining whether a warranty disclaimer is 'conspicuous.' By weighing factors like party sophistication alongside typographical features, the court signals that in commercial transactions between experienced entities, less prominent disclaimers may be upheld, which shifts some risk onto buyers to read contracts carefully. This contrasts with consumer cases and creates a more nuanced, fact-dependent standard for enforcing disclaimers.
