Moore v. MacK Trucks, Inc.
2001 Ky. App. LEXIS 36, 44 U.C.C. Rep. Serv. 2d (West) 416, 40 S.W. 3d 888 (2001)
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Rule of Law:
Under the Uniform Commercial Code, a seller may contractually limit a buyer's remedies for breach of warranty to repair and replacement of defective parts and exclude liability for consequential damages, and such limitations will be upheld unless the limited remedy fails of its essential purpose.
Facts:
- James A. Moore purchased a truck from Worldwide Equipment, Inc., which was manufactured by Mack Trucks, Inc.
- A Worldwide sales representative, Jerry Caudill, told Moore the truck's transmission had been 'completely redone by Mack' and that the truck would suit Moore's needs for hauling on hills.
- The sales agreement signed by Moore explicitly disclaimed implied warranties, incorporated the manufacturer's warranty, and specifically disclaimed liability for consequential damages.
- Mack's manufacturer's warranty limited its obligation to repairing or replacing defective parts and stated it was made in lieu of liability for consequential and incidental damages.
- The truck experienced mechanical difficulties, and Moore brought it in for repairs on two separate occasions over several months.
- Moore was unable to use the truck in his business due to the mechanical issues, which caused him to default on his payments.
- The truck was ultimately repossessed.
Procedural Posture:
- James A. Moore sued Mack Trucks, Inc. and Worldwide Equipment, Inc. in the Floyd Circuit Court, a state trial court.
- Moore sought to recover business losses and losses associated with the repossession of his truck.
- The trial court granted a motion for summary judgment in favor of Worldwide.
- The trial court granted a motion for summary judgment in favor of Mack on all claims.
- Moore filed a motion to vacate the summary judgment orders, which the trial court denied.
- Moore, as appellant, filed a notice of appeal to the Kentucky Court of Appeals, an intermediate appellate court, challenging the trial court's orders.
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Issue:
Does a seller's valid, written disclaimer of consequential damages and limitation of remedy to 'repair and replacement' prevent a buyer from recovering business losses, even if an oral express warranty was created, when the limited remedy has not failed its essential purpose?
Opinions:
Majority - McAnulty, Judge
No. A seller's contractual limitation of remedies to repair or replacement and exclusion of consequential damages is enforceable, preventing a buyer from recovering business losses, unless the limited remedy fails of its essential purpose. Although the salesman's statements may have created an express warranty, both Worldwide and Mack included valid limitations in their written agreements pursuant to KRS 355.2-719. Such limitations are permissible and allow sellers to exclude consequential damages unless the exclusion is unconscionable. A buyer may only overcome this limitation if the exclusive remedy, like repair and replacement, 'fails of its essential purpose,' which occurs when the warrantor fails to correct the defect within a reasonable time. Here, the truck was only brought in for repairs twice and was operational after the first repair, which does not rise to the level of a failure of essential purpose, unlike prior cases involving eight or nine unsuccessful repair attempts. Therefore, the contractual exclusion of consequential damages is valid, and the buyer cannot recover for business losses.
Analysis:
This decision reinforces the significant power of sellers under the Uniform Commercial Code to contractually manage their risk by limiting remedies and disclaiming consequential damages. It clarifies the high evidentiary bar a buyer must clear to prove that a 'repair and replace' warranty has 'failed of its essential purpose.' The ruling illustrates that even if a buyer can prove the existence of an express warranty, written contractual limitations can still prevent the recovery of consequential damages like lost profits, making the buyer's potential recovery much smaller. This precedent strengthens the position of manufacturers and distributors who use clear disclaimer language in their sales agreements.
