Defenses in Warranty Action Flashcards
Notice
in all warranty actions, a buyer loses all UCC rights if there is a failure to give the seller notice of the breach within a reasonable period of time after the breach should have been discovered.
A party is justified in relying on a representation of fact when an investigation would be required to prove the representation false
How to Determine?
The time notification is to be determined by applying commercial standards to a merchant buyer
“A reasonable time” for notification from a retail customer is to be judged by different standards so that in his case it will be extended, for the rule of requiring notification is designed to defeat commercial bad faith, not to deprive a good faith consumer of his remedy
The purpose of this notice requirement are to give the seller an opportunity to:
Cure any breach by making adjustments or replacements in order to minimize the buyer’s damages and the seller’s liability
Learn the facts in order to prepare for negotiation and litigation, and
Protect himself from old claims that are asserted after it is too late for the seller to investigate them
Privity
Because suits on warranties are contract actions, the buyer must establish that there was in fact and in law a contract between the two parties.
Vertical Privity
how far back up the distribution chain the buyer can go
Ex. Manufacturer –> wholesaler –> retailer –> buyer
Horizontal Privity
identifying to whom the retail seller is liable other than the immediate purchaser
In privity, a seller’s warranty applies not only to the buyer, but also to:
Any natural person who is in the buyer’s family or household or
Who is a guest in the buyer’s home if it is reasonable to expect that the person may use, consume, or be affected by the goods and whose person is injured by a break of the warranty
Strict Products Liability
SPL permits recovery by an injured consumer in a suit against the manufacturer as long as the consumer can prove that the manufacturer distributed into commerce a product that contained a dangerous defect
There is no necessity to proving either negligence or privity
§402A Special Liability of Seller of Product for Physical Harm to User or Consumer
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
—(a) the seller is engaged in the business of selling such a product, and
—(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
—(a) the seller has exercised all possible care in the preparation and sale of his product, and
—(b) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
Economic Loss Doctrine
Under the economic loss doctrine, a plaintiff may not recover in tort for a purely economic loss
Economic Loss Doctrine in Strict Products Liability Case
In a SPL case a pure economic loss is a reduction in the products value, because the product does not work for the purposes for which it was manufactured and sold
That economic loss may either be a direct loss measured by a defective product’s cost of repair or replacement, or a consequential loss resulting from the inability to use a defective product
ELD- Majority Rule
Recovery is always precluded when a defective product only damages itself without causing personal injury or damage to other property
ELD - Minority Approach
Allows recovery for economic loss despite a lack of personal injury or damage to other property, because such damage is still caused by the defendants conduct
ELD - Intermediate Approach
Allows tort recovery for damages to a defective product if the damages are the result of a sudden, calamitous event, rather than a reduction in value from a defective product that simply does not function properly
Difference between SPL and Breach of Implied Warranty of Merchantability
SPL cause of action does not require notice; a UCC cause of action does
SPL damages are limited to those for physical injury; the damages in a UCC cause of action are not
SPL has the statute of limitations imposed by state law for tort actions; the UCC action is governed by §2-725. The time periods may differ significantly
SPL is not affected by disclaimers or remedy limitations; a UCC action may be so limited.
Privity is not an issue in SPL suits; privity may be an issue in UCC suits
SPL requires that the product contain a “defect,” but a UCC warranty may be breached even if the product is not defective
—For example, a perfectly good product may neither fulfill the express warranty nor be fit for the particular purpose for which the buyer needs the goods
