Case Summary 16.6

Necessary to Expressly Exclude Statutory Implied Conditions: Pattison Outdoor Advertising Limited Partnership v. Zon LED LCC20.

Pattison owned thousands of billboards stationed across Canada and Zon sold LED fixtures, promising reduced operating costs. Pattison ordered over 8000 units but, after installing them, the fixtures began to fail. After months of trying to find a solution, Pattison engaged a lighting expert who identified fundamental defects with the design of the fixtures.

Pattison then requested a refund of the price, claiming there had been a fundamental breach of contract.

The plaintiff sought compensation relying on the International Sale of Goods Act of BC. The plaintiff claimed there was a breach of the implied condition of fitness for intended purpose, but the defendant countered that the claim was limited by Zons written warranty.

Since Pattison was a Canadian company and Zon an American one, and since both countries are Contracting States under the United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) [CISG], that convention and the International Sale of Goods Act of BC would apply to the sale, unless a different intention was expressed in the contract. Zon claimed it contracted out of the CISG by inserting this limitation of liability:

ZON LED LLC reserves the right to make modifications or changes to any of its

products, pricing, Limited Warranty and Terms and Conditions without prior

notice, on any and all unacknowledged orders. This warranty is exclusive in lieu of

all other warranties whether written, oral, expressed or implied and shall

constitute the sole and exclusive remedy of Buyer and liability of ZON. ZON is not

liable nor warrants the installers and their installation. ZONs products are not sold

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as a consumer product under 15 U.S.C. 2301.

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Pattison signed the Special Limited Warranty without having it first reviewed by a lawyer. It now relied on the Hunter Engineering case where the Supreme Court held that Hunter Engineering did not exclude the sale of goods liability because it did not contain an express exclusion of the statutory implied conditions. (See case Summary 16.3 .)

Evidence presented in court established that the design defect was serious; the lights had only been tested indoors and were

unsuitable for outdoor use on billboards. Having found that the product was not fit for the stated purpose and that the exclusion clause did not refer specifically to the statutory implied conditions of fitness or merchantable quality, the Court held that Pattison was entitled to claim fundamental breach of contract. Pattison had paid US$4 901 893 to purchase the fixtures and was entitled to judgment for that amount.

Small Business Perspective

This and the Hunter Engineering case demonstrate that unless a sellers limitation of liability clause is worded to exclude all statutory conditions and warranties, the provisions of the international or domestic Sale of Goods Act will provide the buyer with remedies as against the seller when defective or poor quality goods are sold.