1. Chapter Seven Factors affecting choice of remedies

2. I. Reliance ► 1. Proof of reliance is expressly required as a condition to recovery for conscious misrepresentation, negligent misrepresentation, and innocent tortious misrepresentation, resulting in personal injury. Moreover, it is a condition to recovery for breach of the implied warranty of fitness. ► Where the plaintiff is not required to prove reliance, he may nevertheless lose if the evidence shows that he did not either expresslsy or impliedly rely on the defendant or his product.

3. ► 2. The underlying basis for requiring proof of some sort of reliance, at least in the case of misrepresentation, is that the misrepresentation creates special expectations regarding product use over and above those presumed to be held by the ordinary consumer. ► 3.This analysis breaks down where the representations affirm ordinary expectations, and where the reliance is that of another or where it induces purchase rather than use.

4. II. Disclaimers and limitations of remedies II. Disclaimers and limitations of remedies ► A. In general: ► 1. Contractual restrictions for physical harm may be effective in negligence or warranty, even though not in strict tort. ► Where that remedy is unavailable, however, owning to some defense such as the statute of limitations, or because the court finds the law of strict liability is inapplicable, then a contractual restriction may be effective under negligence or warranty law.

5. ► 2. The Uniform Commercial Code distinguishes between disclaimers and limitations of remedies: ► (1) A disclaimer arises when no remedy is given; ► (2) Limitation of remedies exists when the plaintiff is given some remedy which may be different from or less than that otherwise provided by law; ► However, tort law draws no such distinction, the term disclaimer will be used generically to discribe both concepts.

6. ► B. General requirements: ► 1. Conspicuousness and clarity: ► A disclaimer will be invalidated if it is inconspicuous or unclear. A disclaimer on the back of a purchase form, or one hidden away in the small print of a contract, may be ineffective for lack of conspicuousness. Hunt v. Perkins Machinery Co. (Mass.1967). ► 2. Timeliness: ► A disclaimer must be timely delivered in order to be effective. This means that it must be delivered by the time the agreement has been concluded in order to become part of the contract. Stevens v. Daigle and Hinston Ramber, Inc. (La.App.1963).

7. ► 3. Conscionability: ► If the court finds a contract or contract clause to be unconscionalbe, it may refuse to enforce the contract or enforce it without the unconscionable clause. ► A leading case dealing with unconscionability is Henninsen v. Bloomfield Motors, Inc. (N.J. 1960). There the court refused to enforce a limited- remedy clause excluding recovery for consequential damages, including personal injuries, because the contract was a standardized form use by virtually the entire automobile industry with the buyer having no real choice in the matter.

8. ► C. As affected by the claims asserted: ► 1. Disclaimers of fraud or deceit are unenforceable. Epperson v. Roloff (Nev. 1986). ► 2. A number of courts hold that a disclaimer of liability for negligence is invalid as against public policy. See DCR Inc. v. Peak Alarm Co. (Uta. 1983). ► 3. Courts tend to invalidate disclaimers whose effect is to relieve the seller of an obligation imposed by statute.

9. ► 4. It is widely held that strict products liability in tort cannot be disclaimed where personal injuries are involved. ► 5. Where no physical injury-either to person or property-is involved, but only economic loss, the cases are sharply divided as to whether a suit can even be brought in tort.

10. ► D. Scope and effect of disclaimers: ► A disclaimer is effective to bind only those who either directly or indirectly are a party to the agreement. A subcontractor was not bound by a disclaimer of liability between his seller and the manufacturer in Groppel Co. Inc. v. U.S. Gypsum Co. (Mo. App. 1981).

11. III. Recovery of solely economic loss ► A. The rule and its rationale: ► 1. Many courts hold that a plaintiff cannot recover in tort — either in negligence or in strict liability – when he or she has suffered solely economic loss from a defective product. The plaintiff ’ s remedy for solely economic loss is in warranty, and the warranty remedy is available only if there is privity of contract, the court said in Tonmka v. Hoechst Celanese. (Iowa 1995).

12. ► 2. The rationale for the rule is that a plaintiff could not sue a remote manufacturer in strict tort for solely economic loss, since if such an action could be brought, the “ manufacturer would be liable for damages of unknown and unlimited scope. ”

13. ► B. Definitions of solely economic loss: ► Economic loss is typically defined as loss in value, loss of use, cost of replacement, lost profits, and damage to business reputation, where no sudden, physical accident is involved. ► Where there is an accident, a tort action can normally be maintained without privity to recover all damages suffered, including economic losses.

14. Questions ► 1. What are the requirements of disclaimers? ► 2. Please comment the rule of recovery of solely economic loss.