Cengage Advantage Books: Business Law 9th Edition by Arnold Goldman ,William Sigismond

Exercise 15

Vedor Construction Co. entered into a contract to build a small shopping center for Johnson, a real estate investor. Johnson requested a special type of piping called polyvinyl be used during the construction process. Vedor purchased the piping through the H R Walter Equipment Company, an international conglomerate, with the understanding that the piping was to be delivered directly to the construction site. With the shipment, H R included an installation guide delivered to the individual responsible for directing the installation of the pipe. The installation guide included an express warranty that the pipe was free from defects in workmanship and materials. In addition, H R set forth a limitation of liability clause stating there would be no liability except for breach of the express warranty and that H R would be responsible only for resupplying a like quantity of nondefective pipe. There would be no liability for any other damages. During construction, the pipeline developed more than sixty leaks. The only way these leaks could be repaired was to remove the defective joints and replace them with stainless steel sleeves. This would have required major reconstruction. Vedor Construction incurred more than $200,000 in repairs to the pipeline, and as a result, sued H R. In court, H R claimed that they were not liable for these repairs because of the limited liability clause. They claimed that they had a right under the Uniform Commercial Code (UCC) to include this limitation of liability clause in the contract and argued that the contract should be enforced. Vedor Construction argued that this limitation of liability clause was unconscionable and that the court should refuse to enforce the contract.
Questions
1. Vendor Construction Co. claimed that the limited liability clause in the H R contract was unconscionable. What does the term unconscionable mean?
2. Does the court have the authority to override the limited liability clause if it finds the clause to be unconscionable? Explain.
3. Who, in your opinion, has the better legal argument, Vendor Construction Co. or the H R Water Equipment Company? Explain.