## Facts

- Safety Factors, an equipment rental/sales business, bought seven “Night Warrior” portable light towers from Federal Signal, the manufacturer-seller.
- Before purchase, Safety Factors’ president discussed the towers’ capabilities with Federal Signal’s representative and compared them to an older model Safety Factors had used successfully; alleged representations were oral and/or in a brochure.
- Safety Factors briefly tested the towers, then rented them out; the first customer experienced immediate operational problems, including difficulty restarting the lights after shutoff.
- Safety Factors did not pay for the towers; Federal Signal sued on the account for the purchase price.
- Safety Factors counterclaimed for breach of express and implied warranties and sought general, incidental, and consequential damages; its only asserted mitigation effort was giving notice of the problems.
- Federal Signal asserted affirmative defenses including limited warranty, excluded damages, and disclaimer, but did not plead failure to mitigate as an affirmative defense.
- After a bench trial, the court ruled for Federal Signal, concluded no express warranties were made, rejected Safety Factors’ warranty and damages claims, and awarded Federal Signal recovery on the account without making specific findings supporting the “no express warranty” conclusion.

## Issues

1. Whether statements and promotional materials describing the light towers’ features and performance created express warranties as part of the basis of the bargain under the UCC.
2. Whether implied warranties of merchantability and fitness for a particular purpose applied and were breached.
3. Whether the seller could reduce the buyer’s recovery based on alleged failure to mitigate when failure to mitigate was not pleaded as an affirmative defense.
4. Whether asserted warranty disclaimers and damage/remedy limitations were established and enforceable, and how they affected incidental and consequential damages.

## Decision

- The Washington Supreme Court reversed portions of the trial court’s rulings and remanded for additional findings and further proceedings.
- On express warranty, the trial court’s conclusion was inadequate because it lacked findings on what representations were made and whether they became part of the basis of the bargain.
- On implied warranties, the case required further findings and proper application of merchantability and fitness standards to the parties’ commercial transaction.
- On mitigation, the court held failure to mitigate is an affirmative defense that must be pleaded; because it was not pleaded, it could not be used to limit damages on that basis.
- On damages, disclaimers, and limitations, the seller bore the burden to prove the existence and applicability of such terms; the trial court’s analysis was insufficient and required reconsideration on remand.

## Legal Principles

- Express warranties arise from affirmations of fact, promises, or descriptions relating to goods that become part of the basis of the bargain; advertising and brochures may create express warranties if part of the bargain.
- A merchant-seller generally provides an implied warranty of merchantability; goods must be fit for ordinary purposes.
- An implied warranty of fitness for a particular purpose arises when the seller knows the buyer’s particular purpose and the buyer relies on the seller’s skill or judgment.
- Failure to mitigate damages is an affirmative defense and must be pleaded to be asserted to reduce an opposing party’s damages.
- Warranty disclaimers and limitations on remedies or consequential damages must be proven by the party invoking them and evaluated under UCC standards, including clarity and applicability to the transaction and claimed losses.

## Conclusion

The court required specific findings on alleged sales representations and their role in the bargain, clarified that unpleaded failure to mitigate cannot restrict damages, and remanded for proper analysis of implied warranties and the validity and effect of disclaimers and damage limitations under the UCC.


Federal Signal Corp. v. Safety Factors, Inc., 125 Wash. 2d 413, 886 P.2d 172 (1994)