Question

After their home burned, Dan and Karen Bennett thought about buying a mobile home from CMH Homes, Inc. They were concerned about the mobile home’s quality, but the sales agent assured them that it would be “more durable and of a higher quality than a conventionally built home.” They purchased the mobile home, and it was installed by CMH in accor- dance with the sales agreement, which warranted that the installation would be done according to applicable governmental requirements. At least one member of the installation crew was not appropriately licensed for the work. Before they closed their purchase, the Bennetts noticed various defects in the home. CMH assured them it would fix the problems, and the Bennetts closed based on that promise. A month after closing, the Bennetts provided CMH with a list of 35 problems, including damaged decks, doors that did not properly close, foundation cracks, and gutters that were not level. The Bennetts thought the problems had occurred because the house was not level, which a state inspector subsequently confirmed. Over the next two years, the Bennetts spoke with CMH representatives and the representatives made visits to the home, but the leveling issue was never fixed. The Bennetts eventually filed suit, alleging intentional misrepresentation, breach of contract, breach of war- ranty, and unconscionability.

1. Do the statements by the sales agent constitute inten- tional misrepresentation?

2. Did CMH breach the contract and its warranty?

3.The contract included a damages-lim- itation provision providing that CMH would not be required to pay any incidental or consequential damages. Is such a clause unconscionable?

Answer 1

1. Yes, the sales agent’s statement constitute intentional misrepresentation. The sales agent’s statement that their mobile home is “more durable and of a higher quality than a conventionally built home” is an intentional misrepresentation because in reality the mobile home was of very poor quality and does not meet the standards as mentioned by the sales agent.

2. Yes, CMH breach the contract and its warranty. CMH told their customers Dan and Karen Bennett that the house would be installed by CMH in accordance with the sales agreement, and also warranted that the installation would be done according to applicable governmental requirements. In fact, the state inspector confirmed that the house was not level which created problems such as foundation cracks and gutters that were not level. Additionally, at least one member of the installation crew was not appropriately licensed for the work which is against the government rules.

3. The contract that included a damages limitation provision providing that CMH would not be required to pay any incidental or consequential damages is unconscionable because the breach is done by CMH and not the customers. CMH owes the costs for incidental and consequential damages and are liable for the customers. Such limitations is not required for CMH because they themselves breach the contract and warranty.