Managers and the Legal Environment 7th Edition by David Madsen, Constance Bagley

Exercise 9

Factors, a company in the business of purchasing accounts receivable and lending money to other businesses, asked Unisearch to conduct a Uniform Commercial Code (UCC) search on its behalf for liens against The Benefit Group, Inc. Unisearch completed the search and sent Factors an invoice along with a search report showing no security interests. The invoice was identical to forty-seven others that Unisearch had previously sent to Factors. On receiving the report, Factors lent $100,000 to The Benefit Group, secured by its existing and future accounts receivable and other business assets. A year later, The Benefit Group defaulted, and when Factors tried to foreclose on the collateral, it discovered a prior UCC filing under the name of "The Benefits Group, Inc." Factors sued Unisearch, alleging breach of contract and negligence. Prior to trial, Unisearch brought a motion for summary judgment on damages, claiming that its liability was limited to $25 because a clause in its invoice limited liability for any action arising out of or related to the contract to that amount. The limitation of liability was printed on the front of the one-page invoice in the upper right-hand corner in a shaded box. Factors argued that the limitation of liability was unenforceable. Is the limitation of liability unenforceable? On what basis? [Puget Sound Financial, L.L.C. v. Unisearch, Inc., 47 P.3d 940 (Wash. 2002).]