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Under the Uniform Commercial Code as adopted by Alabama, a manufacturer may disclaim the implied warranties of merchantability and fitness provided that the disclaimer is in writing and conspicuous, Ala. Code § 7-2-316(2) (1984), and provided that the disclaimer is part of the parties' bargain. If a disclaimer was conspicuous to the purchaser before the sale, a court will generally hold the disclaimer effective based on the assumption that the disclaimer formed a part of the basis of the bargain. If, however, the disclaimer was not presented to the purchaser before the sale, the court will hold such a disclaimer ineffective because it did not form a part of the basis of the bargain. This "basis of the bargain" rule protects purchasers from unexpected and coercive disclaimers.
In December 1989, Rachel Bowdoin was using the spray rig lent to them by Showell Growers when an article of her clothing caught in the safety shield covering the spray rig’s power take-off shaft. Rachel Bowdoin was pulled into the shaft and suffered severe injuries. The spray rig in question was manufactured by FMC Corporation, an Illinois corporation. The safety shield and drive shaft component were manufactured for FMC by NEAPCO, Inc., a Pennsylvania corporation. Showell purchased the spray rig from FMC through an FMC dealer. An instruction manual was included with the spray rig when it was delivered to Showell, which stated that the warranty was “expressly in lieu of any and all other warranties, express, implied, statutory or otherwise.” Plaintiffs filed a diversity action against Showell, FMC, and NEAPCO, alleging, among others, breach by FMC and NEAPCO of the implied warranties of fitness and merchantability. FMC and NEAPCO moved for summary judgment on this count. The district court concluded that the law of Alabama applied to the warranty claims and that under Alabama law, FMC and NEAPCO had effectively disclaimed the implied warranties with the disclaimer in the instruction manual. The district court therefore granted summary judgment in favor of FMC and NEAPCO, and dismissed with prejudice the plaintiffs' implied warranties claims. Plaintiffs appealed, contending that the disclaimer of the implied warranties of fitness and merchantability were not effective as a matter of law.
Were the defendants’ disclaimer of the implied warranties of fitness and merchantability effective as a matter of law, thereby justifying the district court’s decision?
The court reversed the district court’s judgment, noting that Showell purchased the spray rig at least two weeks before it was delivered, and the instruction manual, which included the disclaimer relied upon by the defendants, was also delivered at that time. The court held that such a post-sale disclaimer was ineffective because it did not form a part of the basis of the bargain. Moreover, it was irrelevant that the disclaimer was conspicuous, that the purchaser was a sophisticated commercial enterprise, and that the purchaser had bought a similar product, which included the disclaimer, in the past. Unless a disclaimer of implied warranties was conspicuously given prior to the purchase, it was ineffective.