This is an action for damages for economic loss resulting from the defective manufacture of a tractor. A jury found that because a new Ford tractor had failed to perform adequately the plaintiff had suffered $4,500 in damages to his business. Judgment was entered against the retail seller, but not against the wholesaler. (The manufacturer was not sued.) The purchaser appeals the judgment in favor of the wholesaler.
The only issue in this case is whether a purchaser of a defectively manufactured product, who is not in privity with the wholesaler, may recover for economic loss against a wholesaler through whose hands the product (or papers representing it) may have passed en route from the manufacturer to the retailer.
1. A purchaser, or even a stranger, who has sustained personal injuries may maintain an action for damages against a manufacturer whose defective work
This court has not yet held that a nonprivity purchaser may maintain an action against a manufacturer for economic loss, as distinguished from personal injury, caused by defective workmanship. That issue is not now before us, and we express no opinion upon the matter. This plaintiff is seeking to hold a wholesaler liable for innocently passing along a defective product. This he may not do.
The plaintiff alleges no fault or misrepresentation upon the part of the wholesaler. The plaintiff is frankly searching for a solvent defendant, in this state, whose liability is to be grounded solely upon the fact that he shares in the profits generated by the distribution of merchandise. The plaintiff argues that because the wholesaler makes a profit, even though he is free from fault, he should share in the economic burdens caused by the manufacturer's sale of a defective product.
If both privity and fault are irrelevant, the wholesaler would be liable, not for a duty he failed to perform, nor for the breach of a contract he never made, but because he happens to lie in the stream of commerce. Wholesalers in this state have had no reason to believe that they would be held liable to strangers, in unlimited amounts, when they are without fault. By whatever name it is called, this kind of liability is enterprise liability. We do not believe that the case at bar is a proper one in which to impose this new form of liability upon wholesalers.
3, 4. We hold that a purchaser may not recover against a nonprivity seller, who is not alleged to be at fault in connection with the loss, for economic losses caused by a third party's defective workmanship.
HOLMAN, J., specially concurring.
Causes of action brought by the consumer on the basis of the strict liability of manufacturers and wholesalers for damages resulting from the sale of goods of unmerchantable quality should be limited to those situations where the use of the defective product results in physical harm to persons or property. See the discussion in Seely v. White Motor Co., 45 Cal.Rptr. 17, 403 P.2d 145 (1965). In the past, the attaching of liability where there is no privity has been primarily for the benefit of persons physically injured by the defect. This is so whether responsibility was attached on the theory of enterprise liability, implied negligence through the doctrine of res ipsa loquitur, or implied warranty. Seldom has it been for solely economic loss.
What is the basis for distinguishing between the two? At first there seems to be no logical basis to distinguish them when they have resulted from the
For the reason stated above, I concur in the result of Justice GOODWIN'S opinion.
O'CONNELL, J., dissenting.
Plaintiff introduced evidence from which the jury could infer that when the tractor was delivered by Columbia to Gatlin it was not fit for the general purpose for which it was manufactured and sold. This would be sufficient to establish Gatlin's liability based upon an implied warranty of merchantable quality. The question is whether Columbia is also liable upon such a warranty.
I would distinguish between (1) cases in which the defect causes an accident resulting in personal injury or property damage, and (2) cases in which the defect causes a pecuniary loss not arising out of an accident. In the first group of cases, applying the traditional tests of tort liability, defendant's duty may be expressed in terms of his obligation to refrain from intentional, negligent or abnormally dangerous conduct creating a risk of physical harm to persons or property.
Under (1) above a seller, whether or not he is in privity with the plaintiff, is liable just as any one else is liable for intentional, negligent or abnormally
Strict liability in tort for an innocent misrepresentation of fact has been recognized in certain types of transactions.
What is the policy which calls for the imposition of strict liability upon the seller of goods? Certainly, liability should not be imposed simply because the seller is more capable of distributing the loss. As we noted in Wights v. Staff Jennings, supra, the application of that principle would result in imposing strict liability upon the seller for all of his commercial activities resulting in a loss to a third person. However, there are other grounds for imposing strict liability upon one who in the course of marketing goods causes intangible economic harm (as distinguished from personal injuries or property damage arising out of an accident). I am not concerned here with the isolated sale of a chattel by one neighbor to another. I am speaking of the liability which arises out of the sale of goods by one who is engaged in the business of selling goods of the kind involved in this transaction, whether he is a manufacturer, distributor or retailer.
The gist of the tort is a representation by the dealer justifiably relied upon by the purchaser. The representation giving rise to liability is, in effect, the same as that found in the implied warranty of merchantable quality, i.e., that the goods sold conform to the standard of quality generally attributable to goods of that description, and that they are reasonably
The idea that strict liability for purely pecuniary losses may be predicated upon a theory of actionable
When it is said that the seller misrepresents his product in spite of a disclaimer of liability for defects (except those included within an express warranty) and that a purchaser justifiably relies upon the representation in spite of his knowledge of the disclaimer, perhaps it is a distortion of language to speak of this as a tort based upon misrepresentation. If it is, then I would describe the tort simply in terms of a policy prohibiting the imposition of an unfair "bargain" upon members of the public who are forced to buy a needed product.
Columbia contends that even if the privity requirement is dispensed with in an action against the manufacturer of a product, it should be retained to protect a wholesaler or distributor from actions by remote purchasers. A few cases have allowed recovery against the wholesaler for personal injuries resulting from a
Accepting this view, the wholesaler who participates in the representations of quality and shares in the profits from marketing tractors should be made to respond in damages if the buyer's reasonable expectations are not realized.
In the present case the evidence establishes that Columbia attempted to promote the sale of Ford tractors by advertising. Thus the representation to prospective purchasers was made directly by the distributor. I believe that liability should be imposed under these circumstances. It is not necessary to decide whether the distributor would be liable if he did not advertise his product. The lower court's instructions to the jury were based upon the theory that Columbia could be held liable only if it were an agent for the
Columbia argues that plaintiff invited the error because the case was tried solely on the theory that Columbia was an agent for the manufacturer, Ford Motor Co., or the retailer Gatlin. I do not agree. Plaintiff's complaint and the evidence were sufficient to embrace the theory of non-privity liability based upon implied warranty (which we have translated into the theory of strict liability). Plaintiff's exceptions to the instructions in question clearly brought to the trial court's attention plaintiff's contention that Columbia was liable in spite of the absence of privity between it and plaintiff.
Plaintiff sought damages for (1) the amount that he had paid for the tractor ($2,395.40) and (2) for the loss of profits resulting from the loss of use of the tractor ($8,000). Damages for the amount paid for the tractor were based upon the theory that the tractor was so defective that "the said machine has no value." Whether the action is conceived of as one in contract, with privity, or one in tort, without privity, plaintiff should be entitled to recover the difference between the value of the chattel he received and the amount that he paid for it.
Treating the action as one for an innocent misrepresentation of fact, the measure of damages would be in tort. Had plaintiff brought a suit in equity for rescission he would have been entitled to be placed in status quo ante, which, in this case, would be the price paid for the tractor if plaintiff's contention that it was of no value is accepted.
Where recovery is sought in an action at law for the difference between the price paid and the value received, the action is, as pointed out by Seavey,
Plaintiff should be entitled to recover in an action at law the difference between the price he paid for the tractor and the value of the tractor he received. But what of plaintiff's claim for damages resulting from the loss of use of the tractor, i.e., for loss of profits? In an action based upon the theory of an implied warranty this court has held that the plaintiff may recover for loss of profits if (a) they could be regarded as having been within the contemplation of the parties, and (b) the loss could not reasonably have been prevented by the plaintiff.
The judgment should be reversed and the cause remanded for a new trial.
SLOAN and DENECKE, JJ., join in this dissent.
It has been suggested that the "bargain" imposed upon consumers is unfair in another respect. "The seller's statements about the goods usually defines the sale, not only because they indicate his intention but because from such statements the expectations of the buyer may be inferred. If a disclaimer contradicts the expectations arising from statements or affirmations of the seller, the disclaimer should fail. The seller may not give with one hand and snatch away with the other." Note, Limitations on Freedom to Modify Contract Remedies, 72 Yale L J 723, 738 (1963). See also Boshkoff, Some Thoughts About Physical Harm, Disclaimers and Warranties, 4 Boston College Industrial and Commercial L Rev 285, 305-307 (1963); Henningsen v. Bloomfield Motors Inc., 32 N.J. 358, 400, 161 A.2d 69, 93, 75 ALR2d 1 (1960).
Jaeger, Products Liability: The Constructive Warranty, 39 Notre Dame Lawyer 501, 555 (1964) states: "In a rapidly expanding industrial and mechanical economy * * * it is high time that public policy looked out for the consumer since he is no longer able to look out for himself." Jaeger suggests that we recognize "a separate and distinct action of breach of warranty which will depend neither upon contractual requirements nor tort considerations." This tort he would call "the constructive warranty." I believe that it is preferable to recognize two separate torts, one arising out of a risk of physical harm and property damage and the other out of a form of misrepresentation.