Decided: June 27, 1986.
KEARNEY & TRECKER CORPORATION, PLAINTIFF-APPELLANT,
MASTER ENGRAVING CO., INC., DEFENDANT-RESPONDENT
On appeal from Superior Court of New Jersey, Law Division, Bergen County.
Pressler, Dreier and Gruccio. The opinion of the court was delivered by Dreier, J.A.D.
[211 NJSuper Page 378] This is an appeal by plaintiff, Kearney & Trecker Corporation (Kearney), the manufacturer and seller of the Milwaukee-Matic 180 tooling machine (MM180). Kearney sold the MM180 to defendant, Master Engraving Inc. Company (Master), for approximately $167,000. The seller contests a jury verdict on Master's counterclaim finding Kearney in breach of contract and awarding $57,000 damages to which the court added $14,873.78 in prejudgment interest. Kearney defended on the basis
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of contractual provisions limiting the buyer's remedy to repair or replacement of the machine and excluding consequential damages. Since we find these limitations mutually dependent and the limited remedy of repair or replacement failed of its essential purpose, we do not disturb the award.*fn1
At issue is the reconciliation of two "boilerplate" provisions limiting remedies and damages set forth both in a written proposal and in an acceptance form. The provisions appeared after the seller's express warranty that the machine will:
and a disclaimer that the "WARRANTY EXPRESSED HEREIN IS IN LIEU OF ANY OTHER WARRANTIES, EXPRESS OR IMPLIED." The brochure describing the machine contained additional representations, discussed infra.
One of the provisions under review limits the buyer's remedy to "REPAIR OR REPLACEMENT OF THE DEFECTIVE PART OR PRODUCT, OR AT SELLER'S OPTION, RETURN OF THE PRODUCT." The other states "UNDER NO CIRCUMSTANCES WILL SELLER BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR FOR ANY OTHER LOSS, DAMAGE OR EXPENSE OF ANY KIND, INCLUDING LOSS OF PROFITS."
After hearing testimony of Master's revenue loss occasioned by the repeated malfunctioning of the machine beginning on the date of its initial use and of Kearney's unsuccessful attempts to repair the machine, the jury returned a verdict sheet containing what at first appear to be inconsistent answers. It found that Kearney was in breach of contract but that Kearney did not sell a defectively designed or manufactured product. We read this
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response, in light of the charge given,*fn2 to mean that the jury believed that the limited remedy failed of its essential purpose. N.J.S.A. 12A:2-719(2).
Under appropriate circumstances the designation of a sole remedy, N.J.S.A. 12A:2-791(1)(b), or the exclusion of consequential damages, N.J.S.A. 12A:2-791(3), will be enforced. Gladden v. Cadillac Motor Car Division, General Motors Corp., 83 N.J. 320, 330 (1980); Monsanto Company v. Alden Leeds, Inc., 130 N.J. Super. 245, 260 (Law Div.1974). But "[w]here circumstances cause an exclusive or limited remedy to fail of its essential purpose, remedy may be had as provided (under the U.C.C.)." N.J.S.A. 12A:2-719(2). Cf. Ventura v. Ford Motor Corp., 180 N.J. Super. 45, 65-66 (App.Div.1981), providing for a "rescission-type remedy" where revocation of acceptance was justified.
Plaintiff relies upon Chatlos Systems v. National Cash Register Corp., 635 F.2d 1081, 1086 (3d Cir.1980) for the proposition that a judicial rejection of the limitations of remedy has no effect upon the clause limiting consequential damages. That
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court, after determining that a limited remedy had failed, stated that "the better reasoned approach is to treat the consequential damage disclaimer as an independent provision, valid unless unconscionable."
A contract, however, must be read as a whole to give effect to the parties' mutual intention. Gladden v. Cadillac Motor Car Division, General Motors Corp., supra, 83 N.J. at 333; Monsanto Company v. Alden Leeds, Inc., supra, 130 N.J. Super. at 260. Here the failure adequately to repair the machine rendered ineffective the exclusion of consequential damages. The allocation of risk through exclusion of consequential damages was inextricably tied to the limitation of remedies. Master may have agreed to bear the consequential loss stemming from the short periods that it would have expected the MM180 to be inoperable while being repaired or replaced; but any loss occasioned by the complete failure of that remedy was not contemplated by the exclusion of damages provision. The type of loss suffered here was outside the scope of the parties' agreement.
Moreover, although the trial judge appropriately found that the parties had substantial experience with the sale and purchase of similar tooling machines, an interpretation of the remedy and damage limitations to include such a substantial failure of performance would not reflect negotiated aspects of the bargain. According to the testimony of Kenneth Raindorf, Master's president, he purchased the machine in reliance on representations by Bill Gillmore, Kearney's salesman, that the machine would require little maintenance. The brochure mailed by Gillmore to Raindorf stated that the machine:
[c]ombines simplicity with efficiency. It was designed using fewer parts. It is this simplicity of design that does much to explain the MM180's amazing low maintenance requirements.
Parol evidence of this bargaining process was properly before the judge and jury below, notwithstanding the form language in the two documents. See Computerized Radiological Services v. Syntex Corp., 595 F. Supp. 1495, 1507 (E.D.N.Y.1984).
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This is particularly so where the express representations were claimed to be inconsistent with the limited 12-month or 4,000 operating hours warranty. Gladden v. Cadillac Motor Car Division, General Motors Corp., supra, 83 N.J. at 332. Thus it was proper for the trial court to have admitted evidence of the express representations concerning the product. Here, as in Gladden, however, we need not reach the issue of unconscionability of the limitation, since as noted earlier we have determined the case on the failure of the stated remedy to effect its purpose. N.J.S.A. 12A:2-719(2).
Kearney also challenges the trial court's inclusion in the final judgment of $14,873.28 prejudgment interest. Prejudgment interest, which generally will not be allowed on unliquidated claims, Jardin Estates, Inc. v. Donna Brook Corp., 42 N.J. Super. 332, 341 (App.Div.1956), may be awarded upon the application of equitable principles. Cf. Manning Engineering, Inc. v. Hudson Cty. Park Comm'n., 71 N.J. 145, 159 (1976), vacated on other grounds, 74 N.J. 113 (1977); Bak-A-Lum Corp. v. Alcoa Building Prod., 69 N.J. 123, 131 (1976). As explained in Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 506 (1974), one purpose of prejudgment interest is to compensate a party for the benefit of a sum of money to which it has been entitled, but that has been retained by another.
Here when Master paid for the MM180 it was entitled to an operable machine. Yet for the time that Master had to do without the use of the machine, Kearney retained the benefit of the sales price. The trial judge recognized this inequity by awarding prejudgment interest. He stated that
This reasoning and the ensuing award were far from a "manifest denial of justice;" thus this court "will defer to the trial court's exercise of discretion involving prejudgment interest."
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A.J. Tenwood Associates v. Orange Senior Citizens Housing Co., 200 N.J. Super. 515, 525 (App.Div.1985).