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I.

STANDING as a consumer
Proper Standing as a consumer under the Act:
1) meet the definition of consumer- one who seeks or acquires, goods or services, by
purchase or lease
2) Defendant violated 17.50 (1-4)
i.
laundry list of prohibited actions
ii.
unconscionable actions
iii.
any breach of warranty
iv.
violation of Insurance Code 21.21
3) Defendants actions caused the consumers damages

A. WHO IS A CONSUMER?
1. Seeks/Acquires, By purchase/lease, goods or services
- was there good faith initiation
a. subjective intent to purchase
b. capacity to make the purchase
-

intended beneficiaries can be consumers

2. The goods/service must form the Basis of the complaint


3. Defenses denying consumer status

What is a consumer? 17.45


One who seeks or acquires (2 prong test) if no money has exchanged hands, then apply the
Good faith initiation Test: (use facts to support both of these prongs)
1) Subjective intent to purchase
2) Capacity to make the purchase (age, mental status, & fin. ability)

By purchase or lease
1) Privity is not necessary to be a consumer, consideration is not necessary
2) Incidental user are consumer if the purchase was done on their behalf (must address if
consumer harmed was not purchaser)
3) Gifts are not normally under the Act. Gratuitous services do not qualify as
seeking/acquiring (service station that changes oil for free case/ Lotto case): P will
argue that the gratuitous service was included in the price of the entire service, whereas,
the D will argue that the service was not paid for by the consumer.

Goods or services:
1) Exception: plaintiff must be either:
a) an individual consumer
b) a business consumer- a company or subsidiary with assets of $25 million or less.
(Assets are defined based on Gross assets) that purchases for biz, not
personal use
2) What are goods? Goods are tangibles, chattels, or real property &
Service is work, labor, or service

Hughes - CR

Securities are not goods or services. When specific statutory construction exists,
it supercedes the more general statute. Due Diligence defense exist to protect
advice givers.
Lotto tickets are not goods: they are only a purchase of the right to participate in
the drawing
Money & bank loans are not service/goods- (Riverside Bank v. Lewis)
Bank services (PMSIs, fin. counseling, cost of processing a loan, paying
customers monthly bills) are services. (Riverside Bank v. Lewis)
In bank cases, a P is a consumer if the basis of their complain is a good or
service (a house/auto), not the loaning of money itself.
In real estate cases, land is a tangible good (Cameron v. Terrell)

B. BASIS OF THE TRANSACTION TEST


Source of the complaint test: An action is not proper against a defendant unless the
source of the complaint is the basis of the transaction. No privity is required, but a
proper basis is. (Cameron v. Terrell & Garrett). The basis of the claim test came from
(Riverside v. Lewis)
C. DEFENSES against consumer status
1. THE BUSINESS CONSUMER EXCEPTION
a. Cant have more than $25 mil. in assets
b. The goods in question must be for business purposes
17.45 (10) precludes any business consumer from the Act if their assets exceed
$25 million. Due to judicial economy, the burden of proving assets greater than
the exception falls on the Defendant (it would be too expensive to require every P
to prove qualification). But Plaintiff has duty to provide info under discovery, &
status will be based on Gross Assets.
II. IS THE DEFENDANT PROPER (WHOM MAY BE SUED?)
Def.s conduct must be in connection to the transaction. (Amstadt)
Def.s conduct must be the producing cause of consumers damages
Statutory Exemptions & its Exceptions
A. In Connection Test

In-connection test: The defendant must have direct involvement in the transaction to form the
basis of the complaint. (Amstadt v. US Brass Corp); sufficient connection to the transaction
(i.e. dealt with consumer directly/ upstream manufacturers representations reaching the
consumer via brochures, samples, sales reps direct quotes about the goods.
-

Hughes - CR

the In-connection test is not whether the D is connected to the goods/service


purchased; rather there must be a showing that the D is connected to the transaction.
2

Amstadt Test- did the upstream manufacturer put its goods/service directly into the
stream of commerce via samples, sales rep assertions, models, etc.
P- argues samples/representations created inducement vs. D- argues there was not
enough conduct by D to create an upstream connection

B. Ds behavior is the Producing Cause of the Consumers damages

A producing cause is a substantial factor which brings the injury & without which the
injury would not have occurred.
17.50 (a) Ds conduct was a producing cause of economic damages or damages for
mental anguish.
The defendant does not have to knowing (with intent) violate the Act, instead they only have to
violate it (whether by accident, mistake, or negligence). (Miller v. Keyser)
Policy behind this: Act designed to offer consumers recourse that would
not be available because of the high costs to bring an action

C. DEFENSES that prevent proper D (Statutory exemptions)


17.49 provides for statutory exemptions to the Act:
1) MEDIA EXEMPTIONS: 17.49 (a) - newspaper, magazine, telephone directory, radio
and TV, or billboard ads where
1. they run ads that they do not know are deceptive/misleading, etc.
2. they had no fin. interest in running a deceptive ad
2) ADVICE GIVERS: (c) professional advice givers (attorneys, doctors, brokers, accts)
are protected provided they do not :
1.
express a misrepresentation of a material fact
2.
fail to disclose info (like a lack of expertise in a field to offer advice)
3.
an unconscionable act
4.
breach of an express warranty
In professional advice giver cases: look at the essence of what the service is they are
giving. Example:
Mechanic

Repairing my car
(not opinion-not covered)

Offers advice on the value of my


car (Opinion + covered)

3) (d) professional advice where another is guilty of vicarious liability


4) (e) no claims for personal injury, death, or mental anguish except where fraud or
malice is shown
5)
(h)- no exemption where the Ds conduct proven to be fraudulent or with malice.
ASSIGNEE LIABILITY (another defense)

Hughes - CR

GR- HDC takes a note free of claims against the assignor. Once assignment created, DTPA
claims are cut-off. When a party assigns a note to another party, the assignee becomes a HDC
provided (good faith, for value, etc.), and shielded from liability.
HDC- not subject to personal defenses (Breach of warranty), only real defenses
(Int. Harvester. V. Knight) But Texas Courts have extended liability to assignee if consumer can
prove assignees knowledge of assignor misrepresentation subject to a limit of the contracts
value. If:
1) must be inextricably interwined
2) assignee is party of the original transaction
Problem 10 /P. 129 -

See for how to address damages (before exam)

Checklist:
1) Do you have a consumer?
2) Proper Defendant?
a) Is the defendant released by any of the statutory exemptions or the business consumer
exemption?
b) basis of the transaction test/ producing cause of damages
c) in-connection test
d) assignee exemption unless: intertwining & party to original transaction
3) Was the conduct a violation of the Act? (conduct under 17.50)

III. DTPA VIOLATION


Conduct by a Defendant that violates the Act: 17.50
i. laundry list of prohibited actions 17.46
ii. unconscionable actions
iii. any breach of warranty
iv. violation of Insurance Code 21.21
A. THE LAUNDRY LIST 17.50 (1)
Laundry Lists 2 prong test:
1) Misrepresentation by D (Pennington v. Singleton)
2) reliance by consumer (First Title Co Waco v. Garrett)
Defendant must have violated 17.46
Violation does not have to be expressed, it could be implied
The Act does apply to non-sellers (Pennington v. Singleton)
An affirmative misrepresentation violates the laundry list (suggesting a certain condition
{17.46 (b) (5)}, quality, or characteristic {17.46 (b) (7)}). Mere puffing is not a
violation, but a material misrepresentation is. (Pennington v. Singleton)

Hughes - CR

17.50 (a) (1) was amended to require reliance by the consumer as a prong to the
laundry list. (First Title Co. of Waco v. Garrett). There is a duty of truth imposes anything
a seller makes an affirmative representation.
SPECIFIC LAUNDRY LIST VIOLATIONS:
(5) sellers representations suggest certain condition or characteristics, quantities, uses,
benefits.
(7) sellers representations suggest certain qualities, grades, standards, style, and
model.
- does not require express or explicit representations
(4) Sales man makes sales without authority
(12) certain rights, obligations, remedies are promised but are not really available
-(Example): Landlord promises to tow non residents from assigned parking
spaces & yet no such right exists)
-illegal repossessions or foreclosures violate (12)
-when seller breaches the peace, there is a violation of (12)
-any wrongful conduct by seller will violate (12)
(19) certain guarantees or rights suggested that do not exist
-failed seed hypo
-if P tries under a Comm. Law warranty (UCC)= can only recover actual damages vs. a
DTPA claim can bring treble damages
-thus, plead DTPA claim in the alternative
-a seller can not deny or waive a warranty if it actually exists (seller tells consumer no
warranty is attached to the good, when one automatically attaches under law)
(24) deceptive silence failure to disclose when disclose would resulted in a No sale.
(Must be facts known, not facts found later)
-(Example): auto dealer knows car needs repairs but sells car to consumer without
disclosure. The Act says the consumer has reliance the consumer would not
have bought the car if he knew about any potential repairs.
-As is sales are actionable if the seller had knowledge
-fiduciary relationship is not required
B. UNCONSCIONABILITY 17.50 (2)
17.45 (5) definition of Unconscionability: an act or practice which, to the
consumers detriment, takes advantage of the lack of knowledge, ability,
experience, or capacity of the consumer to a grossly unfair degree

Hughes - CR

Amended DTPA does not require knowledge or intent for violation to exist.
(Chastain v. Koonce agent intentionally sells land without disclosing deed
restrictions defines what is gross disparity)

Intent is not required like under takes advantage prong but the degree by
which the misrepresentation is unfair (subjective test) (Latham v. Castillo
couple suing attorney for legal malpractice after their medical malpractice did
not go well).
But if the conduct is not grossly disparity, then no damages will be rewarded.
(Latham v. Castillo).

WHAT IS UNCONSCIONABILITY? (Test) Resulting unfairness


was: 1. glaringly noticeable,
2. flagrant,
3. complete and unmitigated.

The privity rule only protects an attorney in legal malpractice cases, but not for
negligent misrepresentation actions. (McCamish, Martin v. FE Appling). Under
Texas Tort law, privity does not have to exist for attorney to be held liable. If
attorney misrepresents something, they are subject to liability

C. EXPRESS WARRANTY VIOLATION


Breach of warranty under DTPA:
1. consumer prove warranty exists
2. warranty applies to consumer
3. warranty was breached

DTPA does not create warranties only the vehicle for actions. A breach of
Contract is not the same as breach of warranty (La Sara Grain v. First Nat Bank)
accountant embezzles $$$$ from co checking account because bank let him alter
signature card. Court ruled no warranty breach, only the breach of contract {terms of the
contract}).

Warranties may be created by statute or common law


UCC warranties: express warranty, implied warranty of merchantability,
implied warranty of fitness for a particular purpose, warranty of title

1. UCC WARRANTIES
Express Warranty
IW of Merchantability
IW of Fitness for particular purpose
UCC- NA to real estate or professional services
Disclaimers & As Is Clauses can waive some of these warranties
Hughes - CR

Warranty claims under DTPA (treble damages- if intentional & with knowledge) vs. UCC claim
(actual damages only)

A. Express warranty- sellers affirmation of fact or promise by description or by


model or sample (Examples are oral, written, model/samples-by themselves create EW)

Must be more than MERE puffing. Puffing is when


salesman asserts a fact of which buyer is ignorant, or when seller declares an
opinion as to the goods beyond what he really knows
Can not be disclaimed
Descriptions on order forms can constitute an express
warranty
Privity is not required btw seller & buyer (Indust-RiChem Lab v. Par-Pak). Manufacturers are liable if they know their samples would
be used to induce purchasing. Middle Men do not cut-off liability

* Compare Amstadt case( good was not in-connection) vs. Par


Pak case (samples from mfg were in direct connection).
Park Pak: 1. mfg put goods in the stream of commerce +
2. Mfg was directly involved in the process of distributing
its goods

Implied warranty of merchantability (IWM)-goods fit for

A.

B.

ordinary purposes
Seller must be a Merchant- one who holds themselves out as an expert in a
particular field or industry
No application to garage sellers or individuals
May be disclaimed with As is clauses
Remember: HYPO- AC guy selling AC units he does not normally sell or car
dealer who sells camper/truck= not a merchant

Implied warranty of fitness for particular purpose (IWFPP)1) Knows why the buyer is buying the good
2) Buyer relies on the sellers judgment
May be disclaimed by as is clause
NOTE: IWFPP (non merchants & merchants) vs. IWM (merchants only)

D. Warranty of Title- seller transfers a title that is: good, rightful, and free of
any encumbrances or liens
What if buyer buys goods and then finds out goods are subject to a security
interest? Seller violated laundry list by claiming clean title. Sellers conduct is
unconscionable- value of goods is grossly exceeded by the consideration paid.
But, best claim is for breach of warranty of title
Hughes - CR

2. CL WARRANTIES
IW of Good & Workmanlike Performance for service contracts- repairs & modifications to
pre-existing structures (Melody Homes)
IW of Good & Workmanlike Performance in construction of homes- New Homes (Humber
v. Morton)
IW of Habitability- new homes must be fit to live in
IW of Suitability- Is premise fit for commercial purpose?

Implied Warranty of Good & Workmanlike Performance & Habitability in Performance of


Service Contracts (repair services)
1.

Any contract for repair or modification of existing tangible goods gives rise to a
warranty that the service will be performed in a good & workmanlike manner.

2.

Test: quality of work performed by one who has the knowledge, training, or
experience necessary for the successful practice of a trade or occupation and
performed in a manner generally considered proficient by those capable of
judging such work

3.

This warranty can not be disclaimed.( Melody Homes)


No Implied Warranty for Professional Service
1.
NA for accounting services (Murphy v. Campbell)
2.
NA for psychiatrist services (Dennis v. Allison)

Implied Warranty of Habitability


1. Implied Warranty of Habitability (focuses on the completed structure) generally
can not be waived- but could be argued both ways, because this warranty can be
limited when defects are disclosed to consumer by seller. (Centex v. Buecher)
2. RCLA REPLACES DTPA for IW of Habitability: enacted for new home
construction. Commission will set new building codes. No more DPTA claims
possible. IW of H is now statutory, no longer only common law remedy.
Implied Warranty of Good & Workmanlike Performance in Sale of Home (The Humber
Warranty) (now Centex defines the rule)
1.
When a new home is sold, the seller gives the buyer an implied warranty that the
home was constructed in a good & workmanlike manner and is habitable.
(Humber v. Morton)

Hughes - CR

2.

And Implied Warranty of Good & Workmanlike Manner (focuses on builders


conduct) may be waived provided the parties agree on quality desired.
(Centex v. Buecher)

3.

NOTE: (Centex) case- prevents (GWL) from being overruled.


8

a.
b.

(GWL) case about IWGW construction while (Melody Homes) was


about IWGW for repairs.
Thus, Centex supports that there are two different IWGW that do not
necessarily conflict one another.

Implied Warranty of Suitability in Commercial Leaseholds


1.
All commercial leases give rise to a warranty that the property is suitable for its
intended purposes. Unless modified by contract, breach is a cause for action.
(Davidow v. Inwood North Prof. Group)
2.
Natural extension of IW of Habitability which can not be waived
3.
Factors to consider whether or not suitability has been violated?
a.
nature of defect
b.
length of time the defect was present
c.
age of structure
d.
amount of rent
e.
location
f.
if the tenant waives defects
g.
impact of defect on tenants use
3. BREACH OF CONTRACT IS NOT BREACH OF WARRANTY

Failure of a seller to provide a service does not constitute a breach of a warranty.


(Brooks v. US Fire Insurance Co.- Insurance co. insured attorneys for malpractice, when
client files suit, insurance co. simply refused to cover the litigation costs).
For an express warranty to form: the UCC requires delivery and acceptance of the
goods. Thus, failure to deliver goods does not create a warranty
A promise does not constitute a warranty
Mere breach of K is not a DTPA violation
Insurance policies are services, not covered by DTPA

WHEREAS:
If the service (Yellow Pages ad) has been delivered and accepted and do not comfort
with buyers expectations, there is a breach of warranty. (SW Bell v. FDP Corp)

IV. Damages (must prove Ds conduct caused damages)


KEY: The Defendants conduct must be the proximate cause of the Consumers damages
Actual damages
(includes soft damages)

Economic
Damages

Remember to bring down each


injury to the consumer

The Court can order alternative forms of recovery other than economic damages.
(injunctive relief, rescission, restitution, etc.)

Any DTPA
Violation =
Economic
damages
Hughes - CR

Economic damages compensatory damages for pecuniary loss. More narrow than
actual damages. Excludes mental anguish, pain & suffering. Recoverable when a violation
occurs

Consumers are allowed to recover under whichever measure of damages that give them
the greatest recovery. (Woo v. Great SW Acceptance Corp)

3 rules of measure for recovery:


1) Benefit of bargain rule- best for breach of warranty cases- what is promised
minus what was received:
Formula: value of goods as promised minus value of goods
as delivered
Note: dont let contract price be the driver for value of
goods as promised (it overlooks potential value gained pass
the contract price)
2) Out of pocket rule- Attempts to put plaintiff back where they were best for
product liability cases autos with defects cases
Formula: Price paid (value given) actual value received
Sometimes mental anguish treatment and medical treatment costs can be
argued as out of pocket expenses.
Flaw: fails to address Ps potential gain from the benefit of the
transaction
3) Cost of Repairs attempts to return plaintiff to promised position. Close to
benefit of the bargain rule.
Formula: cost of repairs to goods minus price paid for
goods
Flaw: what is the cost of repairs is greater than cost of
replacement (one unique good, etc.) (example- repair of
artwork when artist is in another country)
Does not work well in breach of warranty cases. Overlooks
the market value of a defective good

DTPA violation = economic damages (excluding soft damages & MA) + AF


DTPA violation with Knowledge(general intent to deceive) =(3 x Economic) + MA + AF
(Proof MA by using the facts given)

DTPA violation that is Intentional(specific intent to deceive) = (3 X Economic) + (3 X MA) + AF


AF:

1) Reasonable
2) Based on a dollar amount and not a percentage of the recovery
3) Defendant may recover if claim was groundless, in bad faith, or as harassment

Tie-In Statute without Knowledge = actual damages (including pain & suffering)
Tie-In Statute violation with Knowledge = 3 x actual damages

Hughes - CR

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A. Economic Damages:

P does not have to suffer actual damages to recover (Luna v. North Star Dodge Sales)
breach alone is enough for DTPA claim

When seller fails to disclose a defect, they subject themselves to treble damages (Mahan
Volkswagen v. Hall)
B. Mental Anguish damage recovery: (must be Knowingly)

Test for evidence of mental anguish (Robertson Co. v. Wymola)


1. duration & nature of the anguish
2. disruption of daily routine

Definition of Knowingly-awareness of falsity of acts or practice

Must go beyond mere disappointment (Parkway Co. v. Woodruff). Proof of high degree
of emotional damage required

In legal malpractice cases, P does not have to prove they would have won case to
recovery for mental anguish (Latham v. Castillo).

A party may recover mental anguish damages under economic damages if anguish is a
direct result of the violation vs. if mental anguish is incidental to violation then
knowledge is required. ( Douglas v. Delp).

C. Treble damages: 3 x all economic damages when defendant acted with knowledge.
Trier of fact will set damages Example: Court awards E= $1,000 (Min. $1,000 Max.
$3,000)
Can a court award treble damages if the P fails to request them:
Pre 1995- YES- it was automatic (Martin v. McKee Realtors)
Post 1995- NO- failure to request is a Waiver

D. Tie-in Statutes:

Tie-In Statute is: a state statute that incorporates the provisions of the DPTA, and
makes a violation of the statute a violation of the DPTA. DPTA actions brought
through a tie-in statute entitle the consumer to recover actual damages rather than
economic damages.
Tie In Damages:
1) if only a violation= 3 x actual damages
2) if violation with knowledge= treble damages

Examples: Health Spa Law, Wrongful Debt Collection Act, & Home Solicitation Sales
Act

E. Attorneys fees:

Hughes - CR

All AFs must be:

REASO
NABLE &
NECESSARY

Not % of
recovery

Def. Recovery of AF:


Groundless
In bad faith
Harassment
Always a question of law

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Defendant can recover AF if action is


1. groundless or
2. in bad faith or
3. as harassment (Zak v. Park)

must be reasonable and necessary and based on set dollar amount, not as percentage of
recovery (Arthur Andersen v. Perry Equipment)
Factors in determining reasonable AF:
1. Time & labor required
2. likelihood that employment in this case will preclude employment in
other cases
3. the usual fee for a similar case
4. amount involved and results obtained
5. time limitations imposed by client
6. nature of the relationship with the client
7. lawyers experience in a given legal area
8. whether the fee is fixed or contingent

Net Recovery Rule applies: prevailing consumers may recover AF (McKinley v.


Drozd) Even if claims are offset, consumer may recover AFs if prevailing party

How does the court decide reasonable AFs: (King v. Wal-mart)- Federal vs. State
approaches to calculating AFs: Use this model:
1) Work the Fed. Approach:
a. hours x reasonable hourly fee= LODESTAR
b. adjust for the 8 factors (from Andersen case)court must consider each factor individually
2) State Approach:
a. Reasonable & necessary fees X hours
b. Subject to settlement limitations

gives you AF (f)

gives you AF (s)

ANSWER: the court will split the difference btw AF (f) & AF (s)

F. Cumulative Recovery1. 2 separate actions violating 2 different laws creates 2 different injuries =
recovery under each law + exemplary damages.
- Action 1, Harm 1 = damages & penalties under both
Action 2, Harm 2
-Example: if there is a tie-In statute

Hughes - CR

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-HYPO: Best Buy sells consumer TV & lies about the quality of TV, then
charges consumer higher than normal interest rate. (2 violations + 2
recoveries)
2. 1 action violates 2 different laws = pick one of the violations to recover
under
- DTPA violation 1 (laundry list), Harm 1

= Damages + Penalties under 1

DTPA violation 2 (UCC warranty), Harm 2

3. 2 separate acts resulting in one injury= 1 recovery + exemplary damages


under both Statutes
-

DTPA violation + negligence cause = 1 recovery + exemplary


damages

Berry case- D acted knowingly (negligence cause) + DPTA violation =


only 1 harm & exemplary damages under the DTPA (knowingly)

HYPOS:
1) Insurance violation + laundry list violation= damages under 1 + penalties under both
statutes
2) Misrepresentation claim under DTPA + contract violation = 2 separate laws & 2
separate recoveries
3) Best Buy sells defective TV:
a. strict liability- only if there is damage to other property (house burns down)
b. Best Buy knew about the defect- laundry list violation
c. IWM under UCC
d. IWM DTPA
ANSWER: A) if only TV damaged = 1 harm/ 1 recovery
B) Defective TV causes fire that burns down house: opens door to strict liability
& breach of warranty = 2 harms/ 2 recoveries

VI. DEFENSES
A. Statutory Defenses - affirmative defenses
1. No reliance by consumer on Ds behavior under laundry list + IWFPP
2. Business Consumer exemption
3. SOL: based on when known or should have known (2 years) reasonable discovery rule
applies
4. Professional Services (advice givers & media ads) under 17.49
5. Rejected Settlement Limitations limits amount of damages & AF awarded
6. Waiver under 17.42- specify language & represented by attorney
Hughes - CR

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7. Producing cause exception to damages. as is clauses usually negate the producing


cause requirement. Buyer agrees to buy goods as is with all its latent & patent defects.
Without any orally implied warranties by the seller, the seller can assert a no producing
cause defense to consumers claim.
8. Other statutes giving protection: medical liability act (for medical negligence) & RCLA
9. Mediation 17.5051 may be compelled
10. Indemnification
B. Common Law Defenses:
1. Veracity of claim required? No Intent Required, only violation. CL defenses to laundry
list violations under (5) & (7):
Smith v. Baldwin- D can not use substantial performance as defense to laundry list (7)
misrepresentation claim as to the condition of the goods.
Mere breach of contract is not violation of DTPA
2. Parol Evidence Rule Inapplicable:
Weitzel v. Barnes- Oral misrepresentations by seller about house complying with
building code can not be barred by parol evidence rule when written documents prove
otherwise. Parol evidence rule applies outside the DTPA. DTPA allows admission of
oral testimony to prove claims
3. SOF may apply to bar medical liability claims
Smith v. Elliott- SOF shields D from medical liability
4. Failure to disclose [laundry list (24) violation]- silence of D may be deceptive
Prudential Insurance v. Jefferson- As is purchases are enforceable provided the
clause is not fraudently induced (or relied upon) by buyer. NOTE: Act requires proof of
Ds intent to create reliance and the Consumer would not have made purchase w/o the
failure to disclose
5. Breach of Warranty defenses (disclaimers) - sellers may use disclaimers (as is clauses
to deny warranties. As is disclaimers seriously reduce the Producing Causation link.
A. UCC warranties:
1. IW of Merchantability- disclaimers must be conspicuous, (does not have to be
in writing, but if in writing) it must have referral language to the merchantability
(magic words) As is clauses work

Hughes - CR

2.

IW for FPP- disclaimers must be in writing & conspicuous (they can be


general, no magic words required) As is clauses work

3.

Express warranties- can not be disclaimed. As is clauses do not work

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4. As is disclaimers- may be enough to disclaim implied warranties, not enough


to destroy any express warranties
NOTE: UCC rights can be disclaimed, but that does not mean a consumer has
waived their other DTPA rights.
Rinehart v. Sonitrol- K provisions can serve as limit to warranty because it is part of the
basis of bargain.
Mercedes v. Dickenson- express warranties, laundry list violations, and unconscionable
acts can not be waived.
UCC disclaimers do not mean the consumer has waived other DTPA rights, only part of
their warranty rights under the UCC
17.42 A consumer can waive their rights under the Act. GR- waiver is against public
policy, but acceptable if the transaction comports with:
1) waiver is in writing & signed
2) consumer not in a disparate bargaining position
3) consumer was represented by legal counsel
4) conspicuous
5) size 10 point- bold type
6) Identified by exact words waiver of consumer rights.
7) These exact words: I waive my rights under the DTPA-consumer Protection Act 17.41
et seq., Business & Commerce Code, a law that gives consumers special rights and
protection. After consultation with an attorney of my own selection, I voluntarily consent
to waiver.
B. CL warranties
As is can negate the consumers claim against a laundry list violation
because it negates the laundry lists reliance requirement
1. suitability- no case law , probably no waived, parties may set levels of
agreed quality
2. G & W construction- parties can set their own warranties. Waivable
3. Habitability- cant be waived
4. Service contracts- Melody Home case- cant be waived.
6. Damages limitation clauses can set limits to damages
limitation clause are enforceable in warranty cases (because the warranty is part of the
bargain/ it is a contract issue), but not in unconscionability & laundry list violations (not
necessarily part of the bargain)
Limitation clauses are effective against IWM & IWFPP, but not against express
warranties. (Mercedes v. Dickenson)
7. Earnest Money contracts: Merger rule does not apply . In land deals under DTPA, the
merger rule is invalid to prove mineral rights exist separate from contract to sale land to buyer.
Hughes - CR

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Selling the mineral rights later, is a breach of warranty, if told buyer they were included.
(Alvarado v. Bolton)
8. Texas courts will enforce Forum selection clauses
- Texas consumers may reach out of state & foreign defendants with the long arm
statute. Parties doing business in Texas can not waive applicability of the DPTA
Texas Courts will enforce forum selection clauses provided the clause is: (Effron v.
Sun Line Cruises)
1. Reasonable
2. Fair
- However, if consumer did not view the forum selection clause (via brochure, ad, etc.)
before making the purchase, the forum selection clause can be unenforceable.
(Stonbaugh v. Norwegian Cruise Line)
DTPA Defenses & claim resolution
A. Notice (demand letter)
17.505- notice must be given by P before claim is filed:
notice must include:
a) damages & expenses
b) attorneys fees
c) specific cause of action

defendant has right to inspection. Purpose: encourage settlement


Exceptions to Notice:
1. SOL- if there is a risk that requiring notice would push the claim pass the SOLs,
notice is not required.
2. Counterclaims- Court says that you are already in the middle of the action, so
notice at that point would be against judicial efficiency.

If P fails to send a demand letter- upon a defendants motion, the court will abate the
claim for 60 days. During the abatement period, the defense attorney does not have to
answer the original petition.

Motion for abatement: Once case has commenced, the defendant has 30 days to file
motion for abatement. 17.505(c)

Failure by P to give notice within the 60 day abatement period will result is dismissal.

Notice is mandatory. (Hines v. Hash)

2 things a P can ask for: Damages

Failure by a Defendant to accept both of these is a rejection 17.5052 (e)

Effect of Ps Rejection of a settlement offer can hurt you if damages awarded are not
significantly higher than settlement offer. (See 17.5052 (f))

Attorneys Fees

B. OFFERS OF SETTLEMENT

Hughes - CR

defendant may offer settlement during 60 day abatement ( 17.5052 (a))


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Contents of a Settlement offer: per 17.5052 (d) should contain:


1) damages, &
2) attorneys fees

42 defines
substantially
the same as
80% of
settlement
offer

Plaintiffs rejection of Ds settlement offer:


1. Defendant allowed to file an affidavit with the court reflecting consumers
rejection. 17.5052 (f)
2. rejection of settlement for damages: if amount offered in settlement is close
to same awarded by trier of fact, consumer can not recover in excess of the
lesser of:
a) Amount of damages tendered in the settlement offer; or
b) Amount of damages found by the trier of fact ( 17.5052 (g))
Only if G applies does H apply
3. Rejection of settlement & attorneys fees: If court finds that
defendants tender of settlement is close or substantially close to
damages found by the trier of fact, the court will base attorneys
fees based on what fees were before rejection of offer. ( 17.5052 (h))
Example: damages
Attorneys fees

settlement offer
$ 3000
$ 500

award
$2500
$15,000

If damages award is fairly close to the settlement offer, Court will


only allow recover of attorneys fees at settlement offer level. The Court will
make an assessment of what reasonable attorneys fees should be in the case.
Purpose: Encourage Ps attorney to settle if offer is reasonable.
Punishes those who are too greedy.
C. 17.5051 Mediation
Either side can file a motion to compel mediation
Cost is equal split between parties:
Exception: if amount is under $15K, party requesting must pick-up the costs.
__________________________________________________
Strict Products Liability 402 (always look for Cum. Recovery)

Mfr/ seller puts defective product in the stream of commerce


Only applies to seller & mfr, not occasional/seasonal sellers 402A (f)
Privity: not required in warranty action, but is required for 402A claim
1. Horizontal privity- applies 402 A to intended beneficiary without privity
Ford
auto buyer

Dealership

2. Vertical privity
Hughes - CR

17

Pappasitos
Soup Rus
Campells Soup

Remote mfr can not be sued under 402A (Nobility Homes v. Shivers) 402A
applies to personal injuries, not economic losses like (cost of replacement or
cost or repair).
If injury is only to the goods (itself), the cause is under IW of Merchantability,
not 402A. But if the defective product caused damages to other property then
402A would apply.
402A can not recovery for economic injury

Strict liability 402A


Personal injury
Privity required

vs.

UCC breach of warranty


economic losses
No privity required

UCC doesnt state privity is not required- 2-318 of UCC of Texas remains
neutral but CT says no privity
Express Warranty claims require privity (Texas Processed Plastics v. Gray).
This was more of a contractual relationship, so claim should be under contract
law.
Mid-Continent v. Curry- (SC decision) as is sold malfunctioning airplane
caused damage to itself alone (no damage to person or other property). Ct says
this is not strict liability issue because the only damage was the defective
product itself. To apply 402A would be extending tort law into contract law too
much. Dissenting opinion says damages are damages, whats the difference?
2. Was the As is disclaimer valid (since this was a breach of warranty under
contract case)?
- as is clause was enough to destroy the implied warranties (not express
warranties)
- As is clauses are effective to disclaim implied warranties of FPP &
Merchantability, but as is clauses can not destroy laundry list or
unconscionability violations.
- If plane caused PI to pilot or other property, strict liability would apply
because warranties can not be disclaimed under strict liability.
Vs.
- damage to the plane itself is not strict liability; instead the cause would rest
in UCC breach of warranty breach alone.

Hughes - CR

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