Corporate & Business/Dec 18, 2019

UCC Warranty Disclaimers and Remedy Limitations Apply to Non-parties and Have Critically Different Requirements

In Vanalstine v Land O’ Lakes Purina Feeds, LLC, 326 Mich App 641 (2018), the Michigan Court of Appeals considered the enforcement of a disclaimer of implied warranties clause in a contract, finding the disclaimers effective.

Vanalstine operated a dairy farm in Eaton County, Michigan, and purchased feed for his cows from a retailer partially supplied by Land O’ Lakes Purina Feeds. The retailer had a credit agreement with Land O’ Lakes Purina Feeds that disclaimed all implied warranties for the feed, limited express warranties to those specified on the products, and purported to limit the remedy for any breach of express warranty to repairing or replacing the product. After discovering his cows suffered from iodine toxicity, Vanalstine conducted tests on the feed, concluding the Land O’ Lakes feed was responsible.

A seller may disclaim implied warranties if the disclaimer is in the form described by the Uniform Commercial Code (in writing and conspicuous for warranties of fitness, or in writing, conspicuous, and mentioning merchantability for warranties of merchantability). MCL 440.2316(2). A limitation of remedies is similarly enforceable if it complies with the Uniform Commercial Code (where it does not “fail of its essential purpose” or where a limitation of consequential damages is “unconscionable”). MCL 440.2719. A limitation of remedies “fails of its essential purpose” when “unanticipated circumstances preclude the seller from providing the buyer with the remedy to which the parties agreed.” Severn v Sperry Corp, 212 Mich App 406, 413 (1995).

In Vanalstine, the court highlights the distinction between these two concepts: although a limitation of remedies must not fail of its essential purpose, a disclaimer of warranties has no such limitation. The court also held the disclaimer in the credit agreement applicable to the transaction between Vanalstine and the retailer. Because of this, the disclaimer of implied warranties, which was in the form mandated by statute, was effective, regardless of whether the express warranty failed of its essential purpose.

The court did NOT, however, uphold the limitation of remedies for breaches of express warranties under the “repair or replace” clause. The court did not address this issue because a breach of express warranty claim was not raised at trial. The requirements for limitations of remedies are statutorily mandated and supported by precedent, and this court’s ruling did not limit or reduce them in any way.

If possible, the best way to avoid liability, therefore, is to disclaim all warranties, both implied and express. If not, limiting remedies is an option. Either way, you will need help to effectively navigate the Uniform Commercial Code’s requirements and know whether disclaimers in contracts you are not even a party to apply to you, and the experienced attorneys at Gielow Groom Terpstra & McEvoy are well-equipped to guide you.

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