Risk of Loss
Warranties V--More on Implied Warranties
Denny. The Denny case (p. 280) is an important but difficult case which tries to grapple with whether a cause of action for IWM is coextensive with a claim for strict products liability. The facts of the case are straightforward: Nancy Denny was severely injured when the Ford Bronco II that she was driving flipped over when she attempted to avoid a deer. She brought claims for both causes of action and was awarded damages of more than $1 million for IWM violation but nothing for products liability violation. On appeal, Ford argued that the two causes of action either overlapped completely or that products liability, being the more recent cause of action, was the broader cause of action. Hence, if there was no award for products liability, there would be no award for IWM violation.
The New York Court of Appeals rejected this logic by pointing to two factors: the difference in tests used to establish violations of the respective causes of action and the continuing statutory presence of the state equivalent of 2-314. Under the former, the court said that products liability law is based on a risk/utility balancing (p. 282), and that it provides protection to sellers and manufacturers for products that are "reasonably safe," while the latter is based on the consumer expectation that the product would be "fit...for ordinary use." The court concluded that these two tests were not identical; indeed the latter almost sounded in strict liability. Under the latter factor, the court concluded that since 2-314 continued as a source of law in New York State, there must be some substantive difference between it and the common law (and statutory) cause of action for strict products liability. Not to be overlooked in the court's determination, in my judgment, were the representations Ford made about the fitness of the Bronco II for typical suburban driving. The majority of states which have decided the question would agree with the New York court.
Implied Warranty of Fitness for Particular Purpose ("IWF"). The IWF (2-315) differs from the IWM in two respects. First, in order to prevail in a cause of action for IWF plaintiff must show that the seller was cognizant of the particular needs of the buyer of the product. How does one show this? Naturally it is a fact-intensive inquiry but it would be captured in statements such as, "I told the salesperson I would be using the footgear for mountain climbing" or "I mentioned that I needed a printer which would print at least 500 copies per hour." Second, the buyer must rely on the seller's skill or judgment to select the suitable goods. Comment 2 summarizes the purpose of this warranty well: "A 'particular purpose' differs from the ordinary purpose for which the goods are used in that it envisages a specific use by the buyer which is peculiar to the nature of his business whereas the ordinary purposes for which goods are used are those envisaged in the concept of merchantability and go to uses which are customarily made of the goods in question."
The two cases we examined in class show fairly straightforward applications of these principles. The Leavitt case (p. 295) dealt with representations made to a seller about buyer's need for a coach that would perform well in mountainous areas. Note the evidence that seemed persuasive to the court: "[T]he evidence that plaintiff communicated his wish to traverse mountain roads while keeping up with commercial buses was sufficiently specific to support a finding that plaintiff articulated to defendant his particular need for engine power (p. 297)." (Emphasis supplied)
Likewise, the court in the Tyson case (p. 297) found an IWF violation. Important from the Tyson case is the mode of reasoning that the court used: first go through whether there is an express warranty, then implied warranties and then decide which, if any, was breached. However, notice in Ambassador Steel (p. 265) that no IWF was recognized since the contract between the parties called for "commercial quality" steel, a term that the court construed to be an "ordinary use" term.
Finally, you ought to note the last sentence in Comment 2 to 2-315, especially the part that provides that when there is a question of fact as to which warranty applies, it "must be resolved in favor of the IWF as against all other warranties..."