Sierra v. Burroughs

Sierra Diesel Injection Service, Inc. ("Sierra Diesel"), a small family business, planned to purchase a posting machine from Burroughs Corporation ("Burroughs" now part of https://www.unisys.com/).

Burroughs advised that Sierra Diesel purchase a B-80 computer which would provide complete control over inventory, receivables, & invoicing.

The 2 parties executed hardware & software agreements for the B-80 computer; both agreements disclaimed express & implied warranties (merchantability & fitness were disclaimed).

The disclaimers were in bold & large print.

When the computer malfunctioned, Sierra Diesel sued Burroughs for breach of express warranty & the implied warranty of merchantability.

The civil trial took place in the U.S. district court in Nevada.

Sierra won in the district court because a letter (outside of the executed agreements) exchanged provide warranties.

Must contract language excluding the implied warranties of merchantability & fitness for a particular purpose be conspicuous?

Sierra argued that the disclaimers weren't sufficiently conspicuous.

Yes. Contract language excluding the implied warranties of merchantability & fitness for a particular purpose must be conspicuous.

Because there were multiple agreements (1 for hardware & another 1 for software), the court decided that there couldn't be 1 definitive merger clause; consequently, the letter could also be merged (integrated into) the contract. The aforesaid letter created an express warranty to Sierra.

The warranty disclaimers were ineffective because they contradicted the letter between the 2 parties.

The holding was in favor of Sierra.

Under the parol-evidence rule & § 2-202 of the Uniform Commercial Code, a written contract can't be contradicted by evidence of a prior or contemporaneous agreement.