Seely v. White Motor Co.

Supreme Court of California · 1965 · Torts

TortsProducts liabilityWarrantyEconomic lossstrict liabilityexpress warrantyeconomic losscommercial loss

Facts

Plaintiff bought a White Motor truck from Southern Truck Sales for use in his heavy-duty hauling business. From the time he took possession, the truck bounced violently or 'galloped,' and for 11 months Southern, guided by White's representatives, made many unsuccessful efforts to repair it. Plaintiff later had an accident when the brakes did not work, but the trial court found he failed to prove the defect causing the truck's poor performance caused that accident. After paying part of the purchase price, plaintiff stopped payment, the truck was repossessed and resold, and plaintiff sought recovery of his payments and lost profits from White.

Issue

May a buyer recover commercial losses such as lost profits and amounts paid on the purchase price from a manufacturer on an express warranty theory, and does strict liability in tort extend to such purely economic loss? Also, may strict liability cover physical injury to property when causation is proved?

Rule

A manufacturer is liable for a buyer's commercial losses when it makes an express warranty, the buyer relies on that warranty, and the manufacturer fails to repair the defect as promised after ample opportunity. Strict liability in tort was developed to govern physical injuries and extends to physical injury to property as well as personal injury, but it does not permit recovery for purely economic loss such as lost profits or disappointed commercial expectations; those losses are governed by warranty law.

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Nadia Flores bought a commercial refrigeration unit in Phoenix from Desert Peak Equipment, a dealer for Mesa Forge Systems. The purchase order stated that each new unit was "free from defects in material and workmanship under normal use and service" and that Mesa Forge would repair defective parts; after eight months of failed repair attempts directed by Mesa Forge technicians, Nadia lost catering contracts but no one was injured and no other property was damaged.

If Nadia sues Mesa Forge, which theory best supports recovery of her lost profits?

Explanation. The majority allows recovery of commercial losses when the manufacturer made an express warranty, the buyer relied on it, and the manufacturer repeatedly failed to correct the defect as promised after ample opportunity. Strict liability does not extend to purely economic loss such as lost profits. (Derived from Seely v. White Motor Co. (n.d.).)