Reference no: EM133200844

The Case of the Faulty Air-Conditioning System

The Grove Theater purchased a large air-conditioning system from Acme Manufacturing Co. for its 1,000 seat facility. The system was purchased and installed in April, prior to the start of the summer season. The sales contract contained a statement that the system would provide sufficient cooling for 1,500 people to a maximum temperature of 72 degrees. The statement further said, "The seller makes no express warranties for this product." At the beginning of June, it became apparent to Grove that the system did not work property; it provided cool air, but not enough to enable patrons to be fully comfortable. Grove complained in writing to Acme about the air-conditioning system and withheld payment but continued to use the machine during the summer months because there was not enough time to order another system; without any air conditioning at all, the theater would have had to close down. All three efforts by Acme to repair the system failed, and at the end of the summer, Grove demanded that Acme take the machine back. Acme refused to accept the machine and brought suit against Grove for the purchase price.

The Trial

Grove testified that the temperatures during the summer in the area where the theater was located were extremely warm and that air conditioning was absolutely essential to enable patrons to feel comfortable during the showing of movies. The theater stated that it relied on the wording in the sales contract that the system would produce sufficient cooling. It further stated that it could not return the air-conditioning system immediately after delivery because the theater would have had to close down and lose its customers for the entire summer. The theater also stated that returning a large system involved a great deal of effort and expense and that it did not want to return the system until it had obtained significant use from it.

The Arguments at Trial

Acme's attorney argued that the specific wording in the sales contract disclaiming any express warranties prevented Grove from claiming that the system was defective. They further argued that the theater should have returned the system immediately when it discovered that the system was faulty. They also argued that when the theater used the system for three months, and received many benefits from it, it automatically gave up its right to rescind the contract and return the system.

Grove's attorneys argued that because of the size and weight of the system and the costs involved in returning it, Grove had a legal right to use the system for a reasonable amount of time and then return it. They further argued that the statement in the sales contract that the system would produce sufficient cooling outweighed the importance of the statement that there were no express warranties. The theater also argued that by keeping the machine and getting some benefit from it, it was able to mitigate its damages. Otherwise, the theater could have held the manufacturer responsible for the loss of profits.

Question 1: Who has the stronger arguments, Grove or Acme? Why?

Question 2: You are the jury hearing the case, for whom would you decide on the question of the alleged warranty? Why?

Question 3: You are the jury hearing the case, for whom would you decide on the question of the right to rescind the contract? Why?

Question 4: What do you think the law should be with regard to a problem of this nature involving something that is not easily returnable?