## Facts

- John Schroeder, a commercial truck operator, bought a used 1970 White truck from Fageol Motors, Inc., with the odometer showing 6,180 miles.
- Fageol assured Schroeder that the original new-truck warranty remained in effect and would cover an additional 94,000 miles.
- The warranty materials were contained in an “Owner Book” separate from the purchase order; Schroeder received it after signing and was not advised of disclaimers or remedy limitations.
- The Owner Book included a clause excluding “special or consequential damages” for breach of warranty.
- On October 5, 1970, while in California and with more than 50,000 miles remaining on the warranty, the engine exploded due to a casting defect in a piston rod cap.
- Cummins Engine Co., Inc. (the engine manufacturer) directed Schroeder to a dealer, which performed repairs without charge, but the truck thereafter had persistent heating and vibration problems.
- Despite repeated repair attempts by the defendants, the truck never functioned properly, causing repair expenses and downtime.
- Schroeder sued for out-of-pocket repair costs and lost profits; the trial court awarded repair costs and consequential damages (lost profits), and denied Fageol indemnity against Cummins.
- The Court of Appeals affirmed; the Washington Supreme Court granted review.

## Issues

1. Whether a contractual clause excluding consequential damages for breach of warranty is enforceable only if negotiated and conspicuous, or instead is governed by UCC unconscionability for remedy limitations.
2. Whether a dealer that gave its own express warranty is entitled to indemnity from the manufacturer absent an indemnity agreement.

## Decision

- The Washington Supreme Court reversed the categorical refusal to apply the consequential-damages exclusion and remanded for the trial court to determine whether the exclusion was unconscionable.
- The Court held the clause was a limitation/exclusion of remedies, not a warranty disclaimer, and therefore is evaluated under RCW 62A.2-302 and RCW 62A.2-719(3), not RCW 62A.2-316.
- The Court affirmed denial of Fageol’s indemnity claim against Cummins because both were independently liable to the buyer based on separate express warranties and no indemnity agreement existed.

## Legal Principles

- Warranty disclaimers (RCW 62A.2-316) limit the existence or scope of warranty obligations, while consequential-damages exclusions (RCW 62A.2-719(3)) limit remedies after a breach.
- The enforceability of a consequential-damages exclusion is governed by unconscionability (RCW 62A.2-302), not by the formal requirements applicable to warranty disclaimers.
- Negotiation and conspicuousness are relevant facts in assessing unconscionability, but are not independent validity requirements for consequential-damages exclusions in commercial transactions.
- In commercial transactions, exclusion of consequential damages for commercial loss is generally enforceable; the party challenging the exclusion bears the burden to prove unconscionability.
- Absent an indemnity agreement, a seller’s express warranty creates joint liability with the manufacturer for damages flowing from the defect, precluding full indemnification by the seller against the manufacturer.

## Conclusion

The court required consequential-damages exclusions to be evaluated under UCC unconscionability standards rather than treated like warranty disclaimers, and it held that a dealer issuing its own express warranty is jointly liable with the manufacturer and cannot obtain indemnity absent an agreement.


Schroeder v. Fageol Motors, Inc., 86 Wn.2d 256, 544 P.2d 20 (Wash. 1975)