## Facts

- Commercial tomato farmers (Phillips Tomato Farms) bought tomato plants represented as the “Mountain Fresh” variety from a plant farm.
- The plants were grown from tomato seeds produced and distributed by a seed company (Harris Moran Seed Company, Inc. (HMSC)) and sold into the distribution chain through a dealer (Clifton Seed Company).
- The farmers alleged the tomatoes were small, misshapen, unmarketable, and caused reduced yield and lost profits.
- HMSC and Clifton had a written dealer agreement governing resale of seeds that included (1) an express warranty regarding seed quality and (2) contractual limitations on remedies and liability.
- Evidence showed HMSC understood its seeds would be resold to end-user farmers and that defective seeds could impose substantial economic losses on those end users.
- After other defendants were dismissed or never served, HMSC was the only defendant at trial.
- A jury found for the farmers on breach of contract on a theory that they were intended third-party beneficiaries of the HMSC–Clifton dealer agreement, awarding $55,000.

## Issues

1. Whether the farmers were intended third-party beneficiaries of the HMSC–Clifton dealer agreement and could sue for breach of its express warranty.
2. Whether the agreement’s limitation-of-remedies provision (limiting recovery to the purchase price of the seeds) was unconscionable and unenforceable.

## Decision

- The court held the farmers were intended third-party beneficiaries of the dealer agreement and could enforce the express warranty against HMSC.
- The court held the limitation-of-remedies clause was not unconscionable and was enforceable in this commercial setting.
- The court affirmed the finding of liability for breach of contract but reversed the damages award and remanded for damages consistent with the contractual limitation.

## Legal Principles

- A nonparty may enforce a contract only if the contracting parties intended, at least in part, to benefit that nonparty or an identifiable class to which the nonparty belongs; incidental beneficiaries lack enforcement rights.
- Contract intent may be shown by contract language contemplating downstream “end users” and by evidence that the manufacturer knew the goods were for resale to and use by that downstream class.
- In commercial transactions, limitation-of-remedies clauses are generally enforceable and will be set aside only upon a showing of unconscionability.
- Unconscionability typically requires more than a large disparity between the contract price and consequential economic loss; courts commonly enforce contractual risk allocation absent proof of oppression, surprise, or similar procedural unfairness.

## Conclusion

Downstream commercial farmers could enforce a seed manufacturer–dealer agreement as intended third-party beneficiaries, but their recovery for breach was confined to the contract’s limitation-of-remedies clause capping damages at the seed purchase price, requiring reversal of the jury’s larger damages award and remand for entry of a limited recovery.


Harris Moran Seed Co. v. Phillips, 949 So. 2d 916 (Ala. Civ. App. 2006)