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Kanefsky v. Trex Company, Inc.

A-2870-00T2 (N.J. Super. App. Div. 2002) (Unpublished)

UCC; WARRANTIES— A warranty that limits itself to replacement of a product fails of its essential purpose if the product itself is inherently defective; therefore, a consumer is not limited to that “exclusive” remedy under the UCC.

A consumer sued the manufacturer of “plastic lumber” that was generally recognized to be a failing product, contrary to the manufacturer’s marketing campaign which assured consumers that “it won’t crack, split, splinter or rot.” The manufacturer sold the product with a “Limited Warranty” against cracking, splitting, splintering, rotting, and other defects of like nature. The warranty provided that the buyer’s sole remedy “shall be replacement with new” product from the same manufacturer. The warranty also stated that the manufacturer would “not be liable for installation or re-installation costs or for any indirect, punitive, or consequential damages of any kind whatsoever.” Lastly, the warranty provided: “THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ANY AND ALL OTHER WARRANTIES WITH RESPECT TO [THIS BRAND OF PLASTIC WOOD], INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.” The consumer argued that the terms of the express warranty were unconscionable because they excluded the cost for labor and other materials and excluded consequential damages. The consumer asked that the warranty be reformed by striking those provisions. Its basic complaint was that the warranty provision limited recovery to replacement with product of a like nature. Consequently, the consumer’s “overriding contention [was] that this product [was] inherently defective.” Under that theory, the consumer asserted that “replacement with more of the same defective product does not constitute a cure, and is thus not a remedy at all.” The lower court, on a motion for summary judgment, dismissed the consumer’s claim because “the warranty exclusion in this case appears to be clear and reasonable on its face.” The Appellate Division agreed with that analysis, but did not believe that the analysis should have ended at that point. Under New Jersey law, it is acceptable to exclude consequential damages unless the exclusion is unconscionable. Unconscionability “is an amorphous concept obviously designed to establish a broad business ethic,” which courts should interpret ‘liberally so as to effectuate the public purpose, and ... pour content into it on a case-by-case basis.’” Some of the factors are “the purpose and effect of the contract, the relative bargaining strengths of the parties, ... and [the presence of oppressive or manifestly unreasonable terms].” Accepting as true the consumer’s contention that the product was inherently defective, that the consumer had no bargaining power, and further that the consumer relied on knowingly false representations and omissions of the manufacturer to his detriment, the Court could not say, “as a matter of law, that the warranty [was] not unconscionable or that the exclusive remedy [had] not failed of its essential purpose.” Consequently, the matter was remanded to the lower court to rule on the issues of unconscionability and failure of essential purpose of the limited warranty. As to the counts in the consumer’s complaint alleging breach of express and implied warranties, the manufacturer asserted that the buyer had failed to observe the requirements of the Uniform Commercial Code by failing to give the manufacturer reasonable time to correct any alleged deficiency. What happened here was that the consumer’s attorney sent a lengthy and detailed demand letter to the manufacturer, including notice of breach of warranty and a demand to cure, only one day before filing a complaint. Enclosed with the letter was a copy of the lengthy complaint. The complaint, itself, was served about a month later. The manufacturer never responded. Even when the complaint was served, the manufacturer did not attempt to cure the defect or resolve the dispute. Instead, it sought to dismiss the complaint. Further, the consumer was not seeking to enforce the warranty as written. “He did not want to obtain a load of new [plastic lumber], a product he contend[ed] [to be] inherently defective… .” Here, although the Court did not find the notice to be adequate as a matter of law, it found that the manufacturer was not prejudiced by any asserted lack or insufficiency of notice. Similarly, the Court found that the consumer had made a proper claim under the Consumer Fraud Act, especially because violation of the Act regarding a misrepresentation requires a consumer to show only that the “misrepresentation was material to the transaction, or the statement of fact, found to be false, [and was] made to entice the buyer to make the acquisition.”

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