This is an action by the seller (Gindy) of twenty-five 1967 semi-trailers for a deficiency of $13,052.37 after repossession and resale following defendant's default in payment under a conditional sales contract. The defense and counterclaim are based on the assertion that the trailers were delivered with faulty radius rods which caused premature tire wear and consequent monetary loss.
The matter is before the court on plaintiff's motion for summary judgment. Plaintiff contends that the installment sales contract expressly excluded all warranties. Accordingly, plaintiff seeks a judgment for the amount of the deficiency, with interest and costs, and a dismissal of the counterclaim.
On or about June 1, 1967, the parties entered into a written installment sales contract in the total sum of $141,756, inclusive of finance charges. The contract, provided by plaintiff, was a one-page form contract with considerable close print. The only additions were by typewriter to show the name and address of the buyer, the various charges and installment payments involved, and the due date of the first installment. Also, in prominent position, a description of the trailers was typed in under various headings in the printed form as shown below, with the typewritten portions indicated by my use of italics:
Used Year Trade Name Description Model Serial No.
New 1967 Gindy semi-trailer C240AV9 38480 thru
The printed form also contained the following paragraph:
H. WARRANTIES. Buyer is buying the vehicle "as is" and no representations or statements have been made by Seller except as herein stated, so that no warranty, express or implied, arises apart from this writing. Buyer warrants that any property which is offered in trade for the vehicle is free from any lien, claim, encumbrance or security interest.
Plaintiff contends that the above clause, particularly the provision that the vehicles are sold "as is," excludes all warranties. Plaintiff further contends that the recital in the contract that the "writing contains the full, final and exclusive statement of the agreement of the parties" precludes any modification by oral agreement or otherwise of the specific provision excluding warranties. There was also a separately signed provision that: "No modification of this contract may be made except in writing signed by Seller." Since defendant failed to meet installment payments due for May, June, July and August of 1968, defendant was in default under the agreement, and plaintiff had the right to repossess and resell the trailers and sue for the deficiency. The only question, therefore, is whether defendant can assert as an offset or by way of counterclaim damages caused by the alleged defects in the vehicles furnished.
Defendant asserts that it has been doing business with Gindy for 20 years and had purchased hundreds of trailers, none of which were purchased "as is." Defendant asserts that in past dealings with Gindy and in accordance with the custom of the trade all defects in the manufacture of the trailers were the responsibility of Gindy. Defendant further asserts that in the past Gindy did correct at its own cost manufacturing defects whenever they appeared; that in the present transaction, when the defect caused by faulty radius rods appeared, Gindy agreed to replace them and ordered defendant to take the trailers to the Husky Trailer Company with whom Gindy contracted to have the repairs made at Gindy's expense; that Gindy sent new parts to be installed in the trailers in question in replacement of the defective parts; that every trailer which defendant purchased from Gindy was purchased brand new; that Gindy knew defendant's operation and, in fact, when Gindy started in business the founders of defendant corporation helped Gindy in designing the trailers; that defendant was not aware of the existence of the "as is" provision in the contract; that on June 12, 1967 another installment sales contract in an amount
in excess of $200,000 entered into with Gindy by a corporation related to defendant did not have an "as is" clause; that the inclusion of the "as is" clause is contrary to the custom in the trade which provides implied warranties that all new equipment will perform as represented and will do the job for which it was purchased; that used equipment may be purchased "as is," and the absence of warranties in such case is reflected in the price of the equipment; and that at no time in the dealings between the parties during the period when defects arose on the trailers did Gindy ever take the position that the equipment had been purchased "as is." These assertions in the affidavit of defendant's president are uncontroverted in the record before me.
N.J.S.A. 12A:2-314(1) provides that an implied warranty of merchantability accompanies a sale of goods by a merchant of goods of that kind unless such warranty is excluded or modified pursuant to N.J.S.A. 12A:2-316. N.J.S.A. 12A:314(2)(c) provides that merchantable goods must be "fit for the ordinary purposes for which such goods are used."
For contract purposes an issue may be raised as to whether the defects in question were minor, unremarkable defects which require adjustment and correction without constituting a breach of an implied warranty of merchantability. Compare Adams v. Peter Tramontin Motor Sales, Inc. , 42 N.J. Super. 313, 325 (App. Div. 1956), where it was held that defects in motor tuning, door locks, dome light and the like did not make a new car unmerchantable, with Zabriskie Chevrolet, Inc. v. Smith , 99 N.J. Super. 441, 457 (Law Div. 1968), where a faulty transmission, making an auto inoperable, justified the buyer's rejection.*fn1 See also Henningson
v. Bloomfield Motors Inc. , 32 N.J. 358, 410 (1960), where the allegedly defective steering mechanism created a jury question as to the breach of warranty of merchantability.*fn2
The Code itself attempts to adjust the buyer's need for exact performance -- failure to conform "in any respect" (N.J.S.A. 12A:2-601) -- with the seller's needs, by allowing a seller to cure defects within the time for performance or when the seller had "reasonable grounds to believe" the buyer would accept "with or without money allowance." N.J.S.A. 12A:2-508. To revoke acceptance the non-conformity must substantially impair the value of the goods to the buyer. N.J.S.A. 12A:2-608; Zabriskie Chevrolet, Inc. v. Smith, supra. Often, as in the case at hand, adjustment of the competing interests of the seller and buyer is accorded by custom of the ...