Cases of Note

Baptist

OVERVIEW: The court held that the exclusive remedy provision in the parties' contract applied to bar the indemnity. As permitted by T.C.A. § 47-2-719(2001), the parties agreed to limit the remedies, stating that the limitations had been taken into account in establishing the price under this contract. The language was very broad, providing that the stated remedies were the only available remedies for breach of warranty or for other claims regarding the products, whether arising in contract, warranty, tort, strict liability, or otherwise. The court concluded that the claim for indemnity came within the broad language of the exclusive remedy provision. The contractual remedy did not fail of its essential purpose, even if the defect in the pipe was latent and could not have been discovered within the contractual one-year period. The remedy included refund of the purchase price as well as repair and replacement and thus provided a minimum adequate remedy that could not fail of its essential purpose. The dispute did not involve a consumer but arose between two business entities, fully capable of bargaining over items such as the breadth and time period of the warranties on the product sold.

This case stands for the proposition that commercial entities need to pay attention to purchase orders, invoices and similar forms, which may have limitations of remedies that shield the vendor from liability for defective products, and which saddles the innocent contractor with the responsibility for the defective construction. In this instance, there was no way for the contractor to know that steel was missing from the interior of the pipe walls, which later failed.

(To read or download a copy of the court's opinion, click here.)