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Consumer Warranty Law: 11.2.7.3 Limiting the Effect of the Offensive Term

Limiting the effect of an unconscionable term or clause is generally most appropriate for excessive price cases. In such cases, the courts can limit the price to a reasonable amount or to the amount already paid. Limiting the effect of a limitation of remedy clause might involve allowing the consumer to obtain direct or incidental damages, but not consequential damages.

Consumer Warranty Law: 11.2.7.4 Availability of Monetary Damages

Monetary damages are not available under section 2-302.162 Monetary relief is, however, available in the form of restitution, an equitable remedy, when complete rescission is ordered or in certain cases when the offensive clause is struck.163 Or the court can award the damages under other UCC sections,164 under the Magnuson-Moss Act, or under a UDAP or tort claim.

Consumer Warranty Law: 11.3.2 Good Faith Applies to Conduct Initiating the Sale and to Contract Terms

Good faith is not limited to post-sale conduct. It is most useful in protecting the buyer against unreasonable seller conduct occurring before the contract is signed. For example, a seller who fails to inform the buyer of known material defects before the contract is signed breaches the duty of good faith.179 This view is explicitly supported by comment 3 to section 2-314, which states in part that “[the seller’s] knowledge of any defects . . .

Consumer Warranty Law: 11.4.1.1 Overview

When a product does not perform as promised or expected, common law fraud and related torts are possible alternatives to a warranty cause of action. For example, an untrue oral statement that a used car has never been in a collision violates an express warranty and also may constitute fraud. The existence of a UCC warranty claim does not prevent the consumer from bringing a fraud claim.199

Consumer Warranty Law: 11.4.1.2 Advantages over Warranty Claims

In most jurisdictions, misrepresentation claims avoid the application of the parol evidence rule.202 Many courts also hold that these claims are unaffected by merger and integration clauses.203 Merger and integration clauses however may be relevant when evaluating whether the buyer’s reliance on the misrepresentation was justifiable.204

Consumer Warranty Law: 11.2.5.2.1 Overview

Procedural unconscionability involves the manner and process by which the terms become part of the contract.126 Procedural unconscionability derives from the basic contract law tenet that freedom of contract depends upon the voluntariness and knowledge of the parties. Without meaningful choice by one party, the resulting contract is no longer a true bargain or agreement; it is instead an imposition.

Consumer Warranty Law: 11.2.5.2.2 Consumer and commercial cases distinguished

Standards for procedural unconscionability differ depending on whether the two parties to the agreement are businesses or whether one party is a consumer. Between two businesses, there must be more than mere disparity of bargaining power; otherwise, few contracts would ever survive.127 Oppression or unfair surprise must infect the contract formation.128

Consumer Warranty Law: 11.2.5.2.4 Standard form contracts

Several courts have emphasized the uniformity of contracts within the industry as demonstrative of lack of meaningful choice. In the leading case of Henningsen v. Bloomfield Motors, Inc.,139 the new car buyer sued the manufacturer and dealer for breach of warranty for personal injuries. The defense raised the typical warranty disclaimer clause in the purchase order.

Consumer Warranty Law: 11.2.5.3 Substantive Unconscionability

Substantive unconscionability focuses on the terms of the agreement and whether they are unreasonably favorable to one party or are so one-sided as to shock the conscience.145 For example, courts have struck down waivers of various sorts146 and a clause in a lease requiring the lessee to assume full risk of loss of the merchandise.147 Giving the consumer one-sided contract terms in the form of a warranty that is so riddled with limitations as to be

Consumer Warranty Law: 11.2.6 Proving Unconscionability

While the burden of proof is on the party asserting unconscionability,156 the amount and type of evidence needed to meet that burden will vary. In one case it may be sufficient to show that the consumers do not understand English, that the seller knew it but did not explain the contract to them, and that the contract or clause is injurious to the consumers. In another case it may be necessary to have expert testimony on the reasonable retail value of an item sold at an exorbitant price.

Consumer Warranty Law: 11.2.7.1 Ruling the Whole Contract Unenforceable

The remedy of voiding the whole contract is appropriate when the unconscionability goes to the inducement to enter the contract, such as when there was deception about the benefits or terms of the contract.158 Voiding the contract is also appropriate when the unconscionability permeates the entire transaction so that the total effect of the contract is unconscionable.

Consumer Warranty Law: 11.4.3.1 Nature of the Tort

Misrepresentations do not have to be intentional in order to form a basis for tort liability. Even if a seller believes the false statement it is making to be true, the misrepresentation is actionable if the seller has not exercised reasonable care in ascertaining the facts.224 A tort claim based on such a misrepresentation is one for negligent misrepresentation.225 The following is a typical list of elements of such a claim:

Consumer Warranty Law: 11.4.3.2 Is Economic Loss Recoverable for Negligent Misrepresentation?

Jurisdictions differ as to whether a plaintiff may recover for purely economic loss as opposed to personal injury or property damage in a negligence action.231 While there is less case law on negligent misrepresentation than negligence on this issue, a number of cases do allow recovery for economic loss caused by negligent misrepresentation.232 Other courts do not.233 Some jurisdictions allow recovery of economic loss on a negligent misrepresentati

Consumer Warranty Law: 11.4.3.3 Recklessness As an Alternative to Negligence

In states that do not overtly recognize the tort of negligent misrepresentation, a plaintiff may be able to prevail on a claim labeled as intentional misrepresentation that might otherwise be pleaded as negligent misrepresentation. For its scienter requirement the intentional misrepresentation claim would rely not on the claim that the defendant knew that the representation was false, but that the defendant acted in reckless disregard of the truth.239

Consumer Warranty Law: 11.4.4 Innocent Misrepresentation

A seller may make a statement, reasonably believing it to be true, which later turns out to be false. For example, a seller of a used car might tell a buyer that the car had never been in an accident. If the representation was based on information offered by the person trading in the car, who concealed that the car had been in a collision and there was nothing to suggest the contrary to the seller, the seller has made an innocent misrepresentation.