Chicago Title is seeking to reverse a $48 million dollar jury verdict for damages arising from a improperly prepared letter report. Chicago Title relies on a disclaimer limiting damages to $800.00 that accompanied its invoice for its flawed services.
Abengoa asks a simple question. In a service contract, entered into on the basis of anterior warranties, is an attempt to disclaim effective? We know the answer is “No” in contracts for the sale of goods:
Where, as in the case at bar, sales transactions are entered into on the basis of anterior warranties, it is universally held that an attempt to disclaim the binding effect of such warranties upon or after delivery of the goods, by means of language on an invoice, receipt or similar notice, is ineffectual unless the buyer assents or he is charged with knowledge of nonwarranty as to the transactions. (Keller v. Flynn, 346 Ill. App. 499 [105 N.E.2d 532, 535]; Diepeveen v. Larry Vogt, Inc., supra; Manglesdorf Seed Co. v. Busby, 118 Okla. 255 [247 P. 410, 411]; Moorhead v. Minneapolis Seed Co., 139 Minn. 117 [165 N.W. 484, 485, Ann.Cas. 1918E 481, L.R.A. 1918C 391]; Ward v. Valker, 44 N.D. 598 [176 N.W. 129, 131]; Longino v. Thompson, (Tex.Civ.App.) 209 S.W. 202, 205; Ingraham v. Associated Oil Co., 166 Wash. 305 [6 P.2d 645]; Edgar v. Joseph Breck & Sons Corp., 172 Mass. 581 [52 N.E. 1083]; Reliance Varnish Co. v. Mullins Lbr. Co., 213 S.C. 84 [48 S.E.2d 653, 659]; Gray v. Gurney Seed & Nursery Co., 62 S.D. 97 [252 N.W. 3, 6]; Davis v. Ferguson Seed Farms, (Tex.Civ.App.) 255 S.W. 655, 662.) In each of the last cited cases the courts were confronted 609*609 with the question of whether the existence of an alleged warranty was extinguished by nonwarranty statements or disclaimers of warranty printed on letters, invoices, or other literature sent with or after the shipment of goods. In each case it was held that where goods are sold subject to a warranty, the purchaser is entitled to rely upon this warranty despite the printed statements on the seller's invoices, at least until he has actual knowledge of the disclaimer, or because of the facts and circumstances surrounding the transaction he should be charged with such knowledge. The following language from Ward v. Valker, 44 N.D. 598 [176 N.W. 129, 131], epitomizes the prevailing view: "If the circumstances anterior to the invoices indicated the existence of a warranty, we cannot say the printed statement (of disclaimer) on the invoice operated to extinguish it as a matter of law." The rule is also succinctly expressed in Gray v. Gurney Seed & Nursery Co., supra, that "when the seller expressly warrants the goods, the purchaser is entitled to rely upon this warranty at least until he has actual knowledge of the disclaimer or because of the facts and circumstances surrounding the transaction should be charged with such knowledge." The evidence fully demonstrates that the sales were made pursuant to express warranties and that United had no knowledge of the disclaimer and limitation statements.
India Paint and Lacquer Co. v. United Steel Prod. Corp., 267 P. 2d 408 - Cal: Court of Appeal, 2nd Appellate Dist., 2nd Div. 1954
Why should the result be any different in a contract for the sale of services?
Missouri seems to have already ruled against Chicago Title. The case, Belt Seed Co. v. Mitchelhill Seed, Co., 153 S.W.2d 106 (Mo. App. 1941), discusses the Moorhead case from Minnesota but is not mentioned by any of parties, leaving the heavy lifting in this case to the clerks for the court of appeals.
In Missouri, all service providers, including every agent, make several express warranties, implied from facts and circumstances, including an express implied in fact warranty to perform the service in a workmanlike manner. "The performer of services has a duty to perform in a workmanlike manner and to exercise reasonable skill." See generally (1956) "Extension of Warranty Concept to Service-Sales Contracts,"Indiana Law Journal: Vol. 31: Iss. 3, Article 3.Available at: http://www.repository.law.indiana.edu/ilj/vol31/iss3/3; Timothy Davis, The Elusive Warranty of Workmanlike Performance, 72 Neb. L. Rev. 981 (1993). (good collection of cases and authorities) (Davis mistakenly views the warranty as a "gap filler," failing to consider the stricter duties arising from facts and circumstances, such as the warranties for a specific result in found in the Missouri cases of McCallum and Bowling, discussed below).
Further, a service provider has a duty to exercise reasonable care. As to the distinction between reasonable skill and reasonable care see Prosser, Torts § 32, at 161 n. 31 (4th ed. 1971).
A part of this duty includes the "duty of the affirmative action which would be taken by a reasonable man in their position" to discover information, a duty to find out. Prosser, Torts § 32, at 160 (4th ed. 1971).
Express warranties implied in fact from the facts and circumstances of the sale. These warranties are implied in fact warranties. Cases and commentators frequently confuse implied in fact and implied in law warranties. Disregard this confusion. The warranty to preform a service in a workmanlike manner with reasonable skill and care, for example, is an implied in fact warranty arising from the facts and circumstances of the hiring and is a positive warranty. A warranty is positive affirmation of fact by the seller made to induce a buyer to make a purchase and constitutes an express warranty. Charles F. Curry & Co. v. Hedrick, 378 S.W.2d 522 (Mo.1964); Turner v. Central Hardware Co., 353 Mo. 1182, 186 S.W.2d 603 (1945). Positive affirmations arise from conduct. Banks, for example, warrant and represent they are solvent by accepting deposits.
Because the warranty is implied from facts, it can be changed or modified by express agreement, in either of two ways.
First, an additional express implied in fact warranty of a specific result arises "when a specific result can reasonably be expected and is a basis of the bargain." (1956) "Extension of Warranty Concept to Service-Sales Contracts,"Indiana Law Journal: Vol. 31: Iss. 3, Article 3.Available at: http://www.repository.law.indiana.edu/ilj/vol31/iss3/3
Thus, in McCallum v. Executive Aircraft Co., 291 S.W.2d 650, 657 (Mo.App. 1956) , the express implied warranty to repair a propellar for private aircraft in a workmanlike manner was modified by the facts and circumstances to be an express implied in fact "warranty that the propeller was safe and airworthy."
Or, if a dentist contracts to fabricate a denture for a patient, a denture is contemplated which fits the patient's mouth and serves the normal purposes of eating and talking. Samuels v. Davis,  1 K.B. 526 discussed here.
A good further discussion of the English cases can be found here. The English view is that there is a "stricter duty" … "implied as matter of fact based on the actual intention of the parties as distinct from being implied by law based on the presumed intention of the parties."
Missouri has long held this view. Kennedy v. Bowling, 319 Mo. 401, 4 S.W.2d 438 (banc 1928) (holding that a design-builder of a warehouse impliedly warranted that the warehouse was sufficiently suited for the purposes intended).
Second, if there is an express warranty as to the duty of skill and care, it trumps the implied in fact express warranty. Korte Constr. Co. v. Deaconess Manor Ass'n, 927 S.W.2d 395, 405 (Mo.App. E.D.1996) (stating that "where the contract contains an express provision governing the degree of skill and competence with which the work will be performed" such express provision controls).
Parol Evidence and disclaimer of warranties. The parole evidence rule and the disclaimer of warranties is discussed in Parole Evidence Rule In Warranties of Sales of Goods- Contractual Disclaimers , 7 Fordham L. Rev. 238 (1938), http://ir.lawnet.fordham.edu/flr/vol7/iss2/6
Update: The Court of Appeals, Eastern District, has affirmed without opinion.