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Waiver doctrine doesn’t apply to warranty exclusion – 7th Circuit

The Seventh Circuit provides a useful discussion of the limits of the waiver doc­trine:  As noted in another post, the buyer of an allegedly-defective rec­re­a­tion­al ve­hicle was unable to assert a warranty claim because he had arranged to take title in the name of an LLC that he controlled — and the contract’s lim­it­ed war­ran­ty ex­press­ly ex­clu­ded coverage in that situation.  The buyer tried arg­uing that the manu­fac­turer, by making efforts to fix the problems, had sup­posedly waived the cov­erage exclusion, but the Seventh Circuit was having none of it:

This supposed right of Jayco’s [to assert the warranty exclusion]—if it is a right at all—is not the kind read­ily subject to waiver; it gives Jayco no power to compel Knopick’s performance of a duty of any kind. The war­ranty exclusion instead clar­i­fies that Knopick and his LLC have no right to compel Jayco’s performance of duties that could other­wise be enforced against it under the manu­fac­tur­er’s warranty.

The exclusion clause serves as a defense, shielding Jayco from liability under the express warranty, based on Knopick’s (and perhaps the deal­er’s) choice about how to handle the purchase and title of the RV. Knopick’s waiver argument would turn the warranty and the rule of wai­ver on its head by transforming waiver’s limited role as a shield (ex­cu­sing non-performance) into a sword capable of compelling performance and creating new duties.

The effects of such a new rule would not be benign. Merchants and other contracting parties could not act as good business partners, go­ing beyond their strict contractual duties, without fear of obliging them­selves to perform new and broader duties, beyond the express terms of the contract.

The facts of this case illustrate the reasons for the rule. A seller that wants to do a good turn for a customer by undertaking $500 in repairs should be able to do so without putting itself on the hook for more than $50,000 in re­pairs. In business generally and in consumer markets, a contracting par­ty’s will­ing­ness to go beyond her strictly enforceable legal obligations is a key com­­mer­cial lubricant. It facilitates trust, long-term relationships, repeat cus­tom­ers, and referrals.

Attaching legal liability an order of magnitude or two beyond the cost of the “good-will” repairs, as Knopick would have us do, would discourage low-cost and amicable resolutions to minor commercial disputes.

Knopick v. Jayco, Inc., No. 17-2285, part II-B, slip op. at 8-9 (7th Cir. July 11, 2018 (emphasis and extra paragraphing added; footnote omitted).  In the om­it­ted footnote, the court pointed out that the disgruntled customer had not al­leged estoppel as a basis for its suit:

This case does not involve the doctrine of equitable estoppel. Knopick has not argued, and nothing in the record suggests, that Jayco performed the good-will repairs to lull him into sleeping on his legal rights under a “lemon law” or other consumer protection law and then stopped repairing the vehicle after those rights expired.

Id., slip op. at 9 n.1.

I imagine I’ll be adding this case to my contract-drafting course materials.

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