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Hungerford & Terry, Inc. v. Waterlink Separations, Inc.

A-4909-05T3 (N.J. Super. App. Div. 2007) (Unpublished)

UCC; WAIVERS —Credit documents can expressly disclaim implied warranties, if the disclaimer is properly displayed, and can also expressly relieve one party of any liability for consequential damages or for lost profits.

A contractor entered into an agreement with a manufacturer of water treatment equipment to provide a water treatment system for the contractor’s customer, a municipality. The treatment system was intended to “purify gray water,” or secondarily treated waste water, from the municipality’s water supply. The contract specifications called for a continuous sand filtration system to reduce phosphates suspended in the water to a specified level. The question before the lower court was whether the communications from the manufacturer rose to the level of an express warranty. Based on the record provided, the lower court concluded that the communications did not rise to level of assurance necessary to form an express warranty; any implied warrant of merchantability was disclaimed; that consequential damages resulting from the performance of the filters had been contractually abandoned; and that no performance guarantee for two additional filters could be found. Thus, the lower court found for the manufacturer and dismissed the complaint.

On appeal, the Appellate Division reviewed the grant of summary judgment and agreed with the lower court. Article 2 of the Uniform Commercial Code (UCC) describes conditions under which express warranties may be created. In particular, the statute provides that “any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.” It goes on to say “any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.” The Court affirmed the lower court’s decision, agreeing that none of the communications described in the record could be understood to make “an affirmation or representation” that the system’s filters would reduce phosphates in the treated water to the contractor’s desired level of 5 parts per million. Each discussion was predicated by ‘howevers’ or ‘buts,’ and by an express statement that “we can’t give you a process guarantee without a sample.” According to the manufacturer, a representation of performance could not be made in absence of testing.

Any implied warranty was excluded by a disclaimer because there were specific disclaimers of implied warranties of merchantability, and they were prominently displayed. There was language in the purchase order documents expressly relieving the manufacturer of liability for incidental or consequential damages or for lost profits and the Court deemed those provisions to be effective. The contractor’s president testified that he knew the manufacturer wasn’t “going to give a promise of guarantee for the performance of two filters without a second round of testing.” Therefore, the contractor could not claim that it received a guarantee in the absence of the required testing.

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