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Coursey v. Caterpillar, Inc. - No. 94-1348, 1995 U.S. App. LEXIS 24397 (6th Cir. Aug. 16, 1995)

Rule:

Except in cases in which consumer goods cause personal injuries, the buyer carries the burden of proving the unconscionability of a limitation-of-remedy clause. U.C.C. 1, § 12-11 at 607 (1991). Unconscionability is rarely found to exist in a commercial setting.

Facts:

Soon after plaintiffs Floyd E. Coursey and Michael B. Coursey (the "consumers") purchased a new tractor to be used in their hauling business, the tractor developed engine problems requiring constant warranty repairs by defendant Caterpillar, Inc., the manufacturer of the tractor's engine. Eventually the consumers were forced to sell the tractor because they could not use it in their business. They brought an action against Caterpillar, Inc. in federal district court seeking consequential damages. The complaint alleged a claim for breach of warranty under Article II of the Uniform Commercial Code, codified at Mich. Comp. Laws Ann. § 440.2101 et seq. (1995). Caterpillar filed a motion for summary judgment, which was based upon its disclaimer of warranty, which was in the tractor's Operation and Maintenance Manual. The district court granted summary judgment to Caterpillar finding that the disclaimer of warranty was sufficiently conspicuous to comply with the definition of that term as found in § 440.1201(10). The district court did not rule specifically on the question of whether or not the disclaimer of consequential damages was unconscionable, but it did note its existence and implicitly recognized that the disclaimer was effective. The consumers appealed.

Issue:

Were the consumers able to show that the disclaimer of consequential damages was either procedurally or substantively unconscionable?

Answer:

No.

Conclusion:

The appellate court agreed that the disclaimer of warranty was sufficiently conspicuous. It was located in a paragraph set apart in the inside back cover of the manual, not buried in its interior. The disclaimer was located under a subsection clearly marked "Limitations." In addition, the court found that the consumers had failed to come forward with any evidence that the disclaimer of consequential damages was either procedurally or substantively unconscionable. The warranty provided for replacement of parts and labor in the event of mechanical failure and the consumers availed themselves of that warranty several times. If they did not like the terms of the warranty, they were free to purchase a tractor elsewhere. Nor did the consumers demonstrate that the limitation of damages to replacement parts and labor was commercially unreasonable.

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