Massey-Ferguson v. Utley

Kentucky Court of Appeals · Contracts

ContractsWarrantiesAssignmentsUCC 2-316UCC 9-206conspicuous disclaimerimplied warranty of merchantabilityimplied warranty of fitness

Facts

Utley bought a Massey-Ferguson cornhead combine attachment from Farmers Implement Sales Company, made a down payment, and signed an installment sales contract that was immediately assigned to Massey-Ferguson. The contract contained language on the back purporting to exclude implied warranties and also provided that the buyer would not assert against the assignee any claims or defenses he had against the seller. Utley defaulted on the first installment, and Massey-Ferguson sued for the full deferred balance. Evidence showed that a factory representative participated in the sale and that Massey-Ferguson routinely supplied contract forms and took immediate assignments from the dealer.

Issue

Whether Utley could assert breach of implied warranties against Massey-Ferguson despite contractual language excluding implied warranties and despite his covenant not to assert seller-related defenses against the assignee. Also, whether Massey-Ferguson was entitled to holder-in-due-course-type protection under KRS 355.9-206.

Rule

Under KRS 355.2-316(2), an exclusion of implied warranties must be in writing and conspicuous; language in ordinary type on the back of a form, without contrasting type or sufficient notice on the front, is not conspicuous. Under KRS 355.9-206(1), a buyer's agreement not to assert claims or defenses against an assignee is enforceable only by an assignee who takes for value, in good faith, and without notice of a claim or defense; a manufacturer whose conduct places it in the status of a seller is not entitled to assignee protection against defenses arising from its actions as a seller.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Tulsa, Nora Bennett bought a commercial grain dryer from Red Prairie Equipment, signing a printed installment contract. On the back page, among dense boilerplate, a paragraph titled "WARRANTY TERMS" in bold capitals stated in the same small type as the rest of the text that all implied warranties were excluded; the front page contained no prominent notice calling attention to that clause.

If Nora later defends a collection action by arguing breach of implied warranties, what is the strongest argument against the exclusion clause's effectiveness?

Explanation. Under the majority rule, a disclaimer of implied warranties must be in writing and conspicuous. Language in the body of a form is generally conspicuous only if it appears in larger or contrasting type or color, and placement on the back of a form without adequate front-page notice weighs against conspicuousness. A bold heading alone is not enough, especially if it does not clearly alert the buyer to a disclaimer. (Derived from Massey-Ferguson v. Utley (n.d.).)