Valley Paving, Inc., Appellant, vs. Dexter & Chaney, Inc., a foreign business corporation, Respondent.

This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480 A. 08, subd. 3 (1998).

 

STATE OF MINNESOTA

IN COURT OF APPEALS

C2-00-361

 

Valley Paving, Inc.,

Appellant,

 

vs.

 

Dexter & Chaney, Inc.,

a foreign business corporation,

Respondent.

 

Filed August 22, 2000

Affirmed Willis, Judge

 

Scott County District Court

File No. 199906311

 

John M. Harens, Holly J. Newman, Moore, Costello & Hart, PLLP, 701 Fourth Avenue South, Suite 1350, Minneapolis, MN  55415 (for appellant)

 

David Bradley Olsen, Henson & Efron, PA, 1200 Title Insurance Building, 400 Second Avenue South, Minneapolis, MN  55401 (for respondent)

 

            Considered and decided by Randall, Presiding Judge, Lansing, Judge, and Willis, Judge.

U N P U B L I S H E D   O P I N I O N

WILLIS, Judge

Appellant Valley Paving, Inc., challenges the district court's grant of partial summary judgment to respondent Dexter & Chaney, Inc., arguing that (1) respondent breached implied and express warranties; (2) appellant asserted its right to a refund within the limited-warranty period; (3) respondent's promises to repair tolled the limited-warranty period; (4) the exclusive remedies provision in the parties' agreement failed of its essential purpose; and (5) appellant properly revoked acceptance of the software.  We affirm.

FACTS

In October 1996, appellant purchased computer software from respondent for its construction contracting business.  Appellant had difficulty using the software and found that it did not meet its particular business needs.  Respondent attempted to remedy the alleged problems and added customized programming.  Appellant was dissatisfied and demanded a refund.  Respondent refused, citing expiration of the six-month limited-warranty period described in the parties' written sales and license agreement. 

Appellant sued to recover its purchase price, and respondent counterclaimed to collect the balance due for the custom-programming work.  The district court granted respondent's motion for partial summary judgment and dismissed appellant's claim with prejudice.  This appeal follows.

D E C I S I O N

On appeal from summary judgment, we determine whether there are genuine issues of material fact and whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The evidence must be viewed in the light most favorable to the party against whom judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn. 1993).

I.          Disclaimer of Warranties

            Appellant argues that the district court erred in concluding that respondent properly disclaimed all implied and express warranties. 

            A.        Implied Warranties

            A warranty of merchantability is implied in a contract for the sale of goods "[u]nless excluded or modified." Minn. Stat. § 336.2-314(1) (1998).  For goods to be merchantable, they must be "fit for the ordinary purposes for which such goods are used."  Id. (2)(c).  A warranty of fitness for a particular purpose is implied "unless excluded or modified" when a seller "has reason to know any particular purpose for which the goods are required and that the buyer is relying on [the] seller's skill or judgment to select or furnish suitable goods."  Minn. Stat. § 336.2-315 (1998).   

            Appellant argues that the district court erred in concluding that respondent properly disclaimed the implied warranties of merchantability and fitness.  To exclude or modify an implied warranty of merchantability, the contract language must mention merchantability, and, if there is a writing, the exclusion or modification must be conspicuous.  Minn. Stat. § 336.2-316(2) (1998).   To exclude or modify an implied warranty of fitness, the exclusion must be in writing and must be conspicuous.   Id.   A contract term or clause is "conspicuous"

when it is so written that a reasonable person against whom it is to operate ought to have noticed it.  A printed heading in capitals (as: NON-NEGOTIABLE BILL OF LADING) is conspicuous.  Language in the body of a form is "conspicuous" if it is in larger or other contrasting type or color * * * . Whether a term or clause is "conspicuous" or not is for decision by the court.

 

Minn. Stat. § 336.1-201(10) (1998). 

The construction and effect of an unambiguous contract are questions of law, which this court reviews de novo.  See Wolfson v. City of St. Paul, 535 N.W.2d 384, 386 (Minn. App. 1995), review denied (Minn. Sept. 28, 1995).  The relevant portion of the sales and license agreement reads:

DISCLAIMER OF RESPONSIBILITY FOR DAMAGES:  In no event will DCI have any obligation or liability for damages, including but not limited to consequential damages, arising out of or in connection with the use or performance of the SOFTWARE.  There are no warranties which extend beyond the description of the face hereof, either express or implied, including the implied warranties of merchantability or fitness for a particular purpose. 

 

And "[l]anguage to exclude all implied warranties of fitness is sufficient if it states, for example, that ‘There are no warranties which extend beyond the description on the face hereof.'" Minn. Stat. § 336.2-316(2) (1998); Dubbe v. A.O. Smith Harvestore Prods., Inc., 399 N.W.2d 644, 647 (Minn. App. 1987), review denied (Minn. Mar. 13, 1987). The agreement here has a clause containing this language.  And the comments to the Uniform Commercial Code (the Code) state that the definition of conspicuous "is intended to indicate some of the methods of making a term attention-calling * * * the test is whether attention can reasonably be expected to be called to it."  Minn. Stat. Ann. § 336.1-201 U.C.C. cmt. 10 (West 1966).  "Courts have considered capitalization, typeface, contrasting color, and location of the clause in determining whether it is conspicuous."  Agristor Leasing v. Guggisberg, 617 F. Supp. 902, 909 (D. Minn. 1985) (citation omitted).  Here, the disclaimer of warranties is not all in capital letters or in contrasting typeface or color.  But as the district court noted, the disclaimer "was not hidden in an obscure part of a long, complicated document."  The disclaimer is the last section on the first page of a two-page contract and is signaled by a heading that includes the term "DISCLAIMER."   Therefore, we conclude that the district court did not err in concluding that the disclaimer of warranties is conspicuous and properly disclaims the implied warranties of merchantability and fitness for a particular purpose.

B.        Express Warranties 

            Appellant argues that the district court erred in finding that any express warranties, other than the limited warranty provided for in the parties' agreement, were validly disclaimed.  An express warranty arises from

[a]ny 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. 

 

 Minn. Stat. § 336.2-313(1)(a) (1998).  Appellant contends that respondent orally warranted that the software would meet appellant's particular business needs and that such warranty became the basis of the bargain.  But the parties' written agreement contains a disclaimer of all warranties.  And unless a contract is ambiguous, a clause stating that the "written agreement is a complete and exclusive statement of the terms of the agreement" will be sufficient to exclude any evidence of an oral warranty.  St. Croix Printing Equip., Inc. v. Rockwell Int'l Corp., 428 N.W.2d 877, 880 (Minn. App. 1988) (quotation omitted), review denied (Minn. Nov. 16, 1988).  Here, the integration clause in the parties' agreement unambiguously states that the agreement and schedules

are the final expression of the agreement of the parties, and the complete and exclusive statement of the terms agreed upon, all prior agreements and understandings being merged herein, and that there are no representations, warranties, or stipulations, either oral or written, not herein contained.  No modification of this agreement may be made except by a like signed agreement.

 

Therefore, we conclude that the district court did not err in concluding that the parties' written agreement validly disclaims any express warranties not provided for in the agreement. 

II.        Limited Warranty

            Appellant argues that the district court erred in concluding that appellant did not assert its right to a refund within the six-month limited-warranty period provided for in the agreement.  Appellant further argues that the limited-warranty period never started because appellant did not receive all of the software and manuals that it contracted to buy.  Under the Code, "receipt" means "taking physical possession of [goods]."   Minn. Stat. § 336.2-103(1)(c) (1998).

The software was delivered to appellant on October 14, 1996.  Although appellant had numerous exchanges with respondent regarding appellant's dissatisfaction with the software, it did not demand a refund until May 27, 1997, which is more than six months after the date of its receipt of the software.[1]  It is unclear from the record whether one instruction manual, which was on back order, was ever delivered.  It also appears that some customized programming that was later completed by respondent was not delivered by October 14, but the written agreement provides only for delivery of a standard software package.  Nevertheless, appellant had six months from the date it took possession of the software to return what was delivered to it for a refund.  Because appellant waited until May 27, 1997, it is not entitled to a refund.  The district court did not err in concluding that appellant failed to assert its right to a refund within the six-month limited-warranty period.

III.       Equitable Estoppel

            Appellant argues that respondent's repeated efforts to repair the software and assurances of appellant's satisfaction estop it from asserting that expiration of the six-month limited-warranty period bars appellant's claim.  See generally Hydra-Mac, Inc. v. Onan Corp., 450 N.W.2d 913, 919-20 (Minn. 1990) (assuming for sake of argument that promises to repair could provide basis for application of equitable estoppel to toll statute of limitations).  Appellant claims that because material facts are in dispute regarding its claim of equitable estoppel, the district court erred in granting partial summary judgment to respondent.  A party seeking to invoke the doctrine of equitable estoppel must prove that:  (1) promises or inducements were made; (2) it reasonably relied on the promises; and (3) it will be harmed if estoppel is not applied.  Hydra-Mac, 450 N.W.2d at 919. 

But the sales and license agreement specifically states that "[n]o modification of this agreement may be made except by a like signed agreement."  Therefore, even if respondent made an oral promise or inducement that appellant relied on, the underlying agreement between the parties provides that it can be modified only in writing.  In Martin v. American Family Mut. Ins. Co., the Eighth Circuit rejected an equitable-estoppel claim that was based on an oral promise where the parties' written contract provided that their agreement could not be modified except by a writing.  157 F.3d 580, 582 (8th Cir. 1998).  The court concluded that, in light of the contract language, reliance on the statements was not reasonable.  Id.; cf. Rooney v. Dayton-Hudson Corp., 310 Minn. 256, 266-67, 246 N.W.2d 170, 175-76 (1976) (holding that where offer of sale in option agreement could not be extended except by a writing, equitable-estoppel claim could not avoid bar of statute of frauds).  Similarly, here, any reliance by appellant on any oral promises or inducements by respondent was not reasonable.

The district court did not err in concluding that that there were no factual issues for trial regarding appellant's reliance on any inducements by respondent.  

 IV.      Exclusive-Remedy Provision

            Appellant claims that the district court erred in concluding that the exclusive-remedy provision in the parties' agreement did not fail of its essential purpose.  The agreement provides that

[t]he Customer's exclusive remedy shall be either (a) return of the price paid or, (b) repair or replacement of the SOFTWARE, at the Customer's option.  This remedy represents DCI's entire liability.      

 

The Code provides that a contract may limit or alter the damages recoverable, but where circumstances cause an exclusive or limited remedy to fail of its essential purpose, any remedies provided for in the Code may be pursued.  Minn. Stat. § 336.2-719(1), (2) (1998). 

An exclusive remedy fails of its essential purpose if circumstances arise to deprive the limiting clause of its meaning or one party of the substantial value of its bargain.

 

Durfee v. Rod Baxter Imports, Inc., 262 N.W.2d 349, 356 (Minn. 1977) (holding that repair-and-replacement clause in automobile owner's manual failed of its essential purpose when car could not or would not be placed in reasonably good operating condition) (citation omitted).  So long as the seller repairs the goods each time a defect arises, a repair-and-replacement clause does not fail of its essential purpose.  Id. 

            Here, appellant argues that respondent failed to correct defects in the computer software, rendering the repair-and-replacement clause in the parties' agreement ineffective.  But even if that clause failed, appellant also had the option of returning the goods within the limited-warranty period.  Appellant argues that because one remedy failed, respondent's attempted limitation of remedies is entirely ineffective.  But where one remedy fails of its essential purpose, "other clauses in the contract which limit remedies for breach may be left to stand or fall independently of the stricken clause."  International Fin. Servs., Inc. v. Franz, 534 N.W.2d 261, 267 (Minn. 1995) (quotation omitted).  Thus, the remedy allowing for return of the purchase price remained valid and did not fail of its essential purpose simply because appellant did not timely exercise its rights under the parties' agreement.  The district court did not err in concluding that the exclusive-remedy provision did not fail of its essential purpose.

V.        Revocation of Acceptance

            Appellant also claims that genuine issues of material fact exist regarding whether appellant validly revoked acceptance of the software.  A buyer may revoke acceptance of goods whose

nonconformity substantially impairs its value to [the buyer] if [it was accepted] (a) on the reasonable assumption that its nonconformity would be cured and it has not been seasonably cured; or (b) without discovery of such nonconformity if the acceptance was reasonably induced either by the difficulty of discovery before acceptance or by the seller's assurances. 

 

Minn. Stat. § 336.2-608(1) (1998).  "Goods * * * are ‘conforming' * * * when they are in accordance with the obligations under the contract."  Minn. Stat. § 336.2-106(2) (1998).  Thus, goods are nonconforming when they are not in accordance with the obligations under the contract.  A buyer must revoke acceptance of nonconforming goods within a reasonable time after the buyer discovers or should have discovered the ground for the revocation.  Minn. Stat. § 336.2-608(2) (1998).  A seller's attempts to remedy the defect toll the time within which the buyer must revoke acceptance.  Federal Motor Truck Sales Corp. v. Shanus, 190 Minn. 5, 11, 250 N.W. 713, 715 (1933). 

But the district court found that "there is no evidence in the record showing that the standard software package was defective" and that appellant "purchased a standard software package that did not perform exactly as [appellant] would have liked."  We agree.  Appellant has presented no evidence to support its theory that the software delivered by respondent is nonconforming.

The district court did not err in granting partial summary judgment to respondent.

Affirmed.

           

[1] Appellant argues that its letter to respondent dated March 25, 1997, constituted a demand for a refund, but the letter merely advised respondent of appellant's intention to demand a refund if necessary.