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Valazquez v. Bronish Motors, Inc.

A-6331-00T3 (N.J. Super. App. Div. 2002) (Unpublished)

WARRANTIES—Ambiguities in a warranty are to be interpreted to conform with the reasonable expectation of its beneficiary.

The buyer of a used car also bought a limited warranty from a third party warranty company. After experiencing problems starting the car, the buyer brought the car back to the seller and inexpensive repairs were made including the replacement of a “serpentine belt.” No claim was submitted to the warranty company. About four months after the purchase, the car failed completely and the car was brought to a service facility. The buyer informed the service facility of the warranty. About a month later, the warranty company sent a letter to the owner denying coverage for the engine stating, “[T]here [was] a material failure of the accessory serpentine belt which failed and got caught between the crank pulley and the timing belt, which caused the timing belt to jump time and the reported damage.” Consequently, the expensive motor replacement was paid for directly by the buyer. The lower court found that under the limited warranty, “the timing belt [was] a covered component while the serpentine belt [was] not a covered component.” The Court concluded, however, “that while it was clear that there was no warranty coverage for damage to covered components that results from the failure to a non-covered component, the warranty terms were ambiguous as to whether there was coverage for damage caused by a non-coverage component.” The lower court resolved the ambiguity in favor of the car owner. The Appellate Division saw the coverage question as truly a legal one. Consequently, it was not bound by the lower court’s findings of fact. It began its analysis by “evaluating the relationship of the parties in light of the intended circumstances and the goals to be achieved.” In other words, it sought to interpret the contract in accordance with its express general purpose. It held that the warranty was an “assurance that the warranty company would assume certain responsibilities for the automobile that was sold to [the buyer]. Furthermore, the warranty agreement was clearly a contract of adhesion.” Contracts of adhesion are construed liberally in favor of the consumer. If the terms of such a contract are unclear to the average person, “a court will adopt the construction which results in fulfilling the consumer’s reasonable expectations.” The Court was disturbed that “the terms listing the covered components [were] written in small print boilerplate, using technical automotive language.” From what the Court could determine from the record, the seller of the warranty intended that it would not be triggered “if damage to covered components resulted from the failure of a non-covered component.” The Appellate Division agreed with the lower court, however, that “this facially obfuscated language [was] open to more than one interpretation.” Consequently, it agreed with the lower court’s ruling adopting the interpretation most favorable to the buyer.

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