32 N.J. 358 (1960).

One-Sentence Takeaway: Automobile manufacturers and dealers cannot disclaim and/or limit the implied warranty of merchantability.

Summary: On May 9, 1995, Plaintiff’s husband purchased a new car.  After the purchase, the car was driven 468 miles.  During that time, the car was not serviced, and there were no mishaps until Plaintiff had an accident on May 19, 1955.  The car had been driven on short trips over paved roads.

On May 19 (i.e., 10 days after Plaintiff’s husband purchased the new car), while Plaintiff was driving the vehicle, she heard a cracking noise under the hood.  Moments later, the steering wheel spun in her hands, the car veered sharply to the right and crashed into a wall.

Plaintiff sued Defendants (the manufacturer and dealer) for the injuries caused by the accident.

Since the vehicle was badly damaged in the accident, it was impossible to determine in what condition the steering mechanism was prior to the accident.  However, an expert witness gave his opinion based upon evidence that the accident was caused by a mechanical defect or failure.  After noting that Plaintiff had negatived any cause of the accident other than a mechanical defect in the car, the court held that the evidence was sufficient to go to the jury on her breach of implied warranty of merchantability theory.

Defendants, however, made several arguments to defeat Plaintiff’s implied warranty of merchantability theory.

Defendants presented evidence that it was Plaintiff’s husband and not Plaintiff who had signed a purchase contract .  In addition, Defendants pointed to the fine print in that contract excluding all warranties except for a limited warranty concerning the replacement of defective parts.

Based on the foregoing, Defendants first argued that Plaintiff’s lawsuit failed because of lack of privity.  The court rejected Defendants’ privity defense.  Noting the reality of modern marketing conditions, in which the ordinary layperson must rely on the manufacturer to make the product safe, the court concluded that “when a manufacturer puts a new automobile in the stream of trade and promotes its purchase by the public, an implied warrant that it is reasonably suitable for use as such accompanies it into the hands of the ultimate purchaser.”  In the court’s view, that warranty “ran with the goods” to protect not only Plaintiff’s husband, but also Plaintiff.

As to Defendants’ argument based on the express limit on the scope of warranty set forth in the purchase agreement, the court rejected that argument based on reasoning that resembled the unconscionability doctrine of contract law (noting the unequal bargaining power between the parties, the sharpness of the bargain, and the procedural problems of adhesion contract and fine print). The court condemned the lack of arms-length negotiation between consumer and manufacturer in the sale of automobiles and characterized the task of the judiciary as “protect[ing] the ordinary man against the loss of important rights through what, in effect, is the unilateral act of the manufacturer.”

The court held that Defendants’ warranty disclaimer was void and against public policy.

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