Robins Dry Dock & Repair Co. v. Flint

Supreme Court of the United States · 1927 · Torts

Tortseconomic lossnegligent interferencecontract relationsthird-party beneficiarycharter partyloss of usedamage to chattel

Facts

The steamship was under a time charter requiring periodic dry docking, with charter hire suspended until the vessel was again fit for service. The owners delivered the vessel to the dry dock company, and while in dock the company negligently injured the propeller, requiring replacement and causing delay from August 1 to August 15, 1917. The dry dock company appears to have had no notice of the charter when the delay began, though the charterers later formally asserted liability. The company later settled with the owners and obtained a release of all of the owners' claims.

Issue

May time charterers recover in contract or tort from a dry dock company for loss of use of a vessel when the company negligently damaged the vessel, but the charterers were not parties to the repair contract, were not intended beneficiaries, and their loss arose only from their charter contract with the owners?

Rule

A stranger to a contract may not sue for its breach unless the contract was intended for that person's direct benefit. As a general rule, a tort to the person or property of one party does not make the tortfeasor liable to another merely because the injured party was under a contract with that other person, unknown to the wrongdoer; the law does not protect such purely derivative economic loss.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Houston, Bayline Repair Yard negligently damages a refrigeration unit on a truck owned by Nora Kim while servicing it, causing the truck to be unavailable for ten days. Nora had leased the truck to Delta Grove Produce, which lost sales during the downtime under a lease that suspended rent while the truck was out of service. Bayline had no knowledge of the lease when the damage occurred.

May Delta Grove recover its lost profits from Bayline in tort?

Explanation. The majority rule is that, as a general matter, a tort to one person's property does not make the tortfeasor liable to another merely because that other person suffers contractual economic loss as a result. The wrong here was to Nora's truck. Delta Grove's claimed losses matter only because of its separate lease with Nora, so they are derivative economic losses not protected in tort.