## Facts

- Office Supply Co., Inc., a Wisconsin office-supplies business, contracted to buy computer hardware and related software from Basic/Four Corporation, a California seller of computer hardware and software.
- On January 31, 1975, Office Supply’s president signed the agreement; Basic/Four accepted it on February 7, 1975.
- The hardware was installed on April 1, 1975, and Office Supply undertook data input and implementation while running manual operations in parallel to verify accuracy.
- The contract provided a 90-day express hardware warranty and included an italicized disclaimer of all other express or implied warranties, along with an integration clause incorporating the software lease.
- Office Supply later complained of serious operational problems, including by letter dated October 6, 1975, after the 90-day warranty period had expired.
- Office Supply hired independent programmers and asserted the system remained defective, claiming substantial economic damages (e.g., lost profits, lost customers and goodwill, and added operating expenses).
- In 1980, Office Supply sued in federal court on diversity grounds, asserting breach of contract/warranty and negligence based on the alleged defects.

## Issues

1. Whether the contract and warranty claims were time-barred and which state’s statute of limitations governed.
2. Whether the contract’s disclaimer of implied warranties and limitation of remedies (including exclusion of incidental and consequential damages) were valid and enforceable in a commercial sale.
3. Whether purely economic losses were recoverable in negligence, or whether tort recovery was barred where the dispute was governed by contract and warranty law.
4. Whether the plaintiff produced evidence sufficient to create a genuine dispute of material fact to defeat summary judgment.

## Decision

- The court applied Wisconsin’s six-year statute of limitations to the contract/warranty claims, making those claims timely.
- The court held the contract’s italicized disclaimer of implied warranties was conspicuous and enforceable, and rejected arguments that warranty liability extended beyond the stated warranty period.
- The court enforced the limitation of remedies to repair or replacement and the exclusion of incidental and consequential damages, finding the limitations permissible in a commercial setting.
- Applying California law to the tort claim, the court held that purely economic losses were not recoverable in negligence.
- The court granted Basic/Four’s motion for summary judgment, denied Office Supply’s motions (including partial summary judgment and discovery relief), and dismissed the action with prejudice.

## Legal Principles

- In a commercial transaction governed by the U.C.C., a disclaimer of implied warranties is enforceable when presented conspicuously and assented to by the buyer.
- Contractual limitations of remedy to repair or replacement, and exclusions of incidental and consequential damages, are generally enforceable in commercial sales unless unconscionable or unless the limited remedy fails of its essential purpose.
- Where the governing tort law applies an economic-loss rule, a plaintiff may not recover purely economic damages in negligence absent personal injury or property damage; the plaintiff is confined to contract and warranty remedies.
- Summary judgment is appropriate when, after applying enforceable contract limitations and controlling tort limits, the nonmovant lacks evidence creating a genuine dispute of material fact.

## Conclusion

The court entered judgment for the seller because the buyer’s contractual remedies were restricted by enforceable, conspicuous warranty disclaimers and damage limitations, and the buyer’s negligence theory failed under the economic-loss rule for purely financial harm.


Office Supply Co. v. Basic/Four Corp., 538 F. Supp. 776 (E.D. Wis. 1982)