Thursday, May 26, 2011

Drilling Down: Breach of Express Warranty

Okay, let's get this warranty party started.  A South Carolina products liability action can be brought pursuant to various different theories, including strict liability, negligence, and breach of warranty.  (For further explanation on this, I encourage you to see "The Basics" generally, and specifically this post).  If your theory of choice is "breach of warranty," then it is important to understand that there are different types of warranties, as provided by statute and common law.  One is breach of "express warranty," which is the subject of today's post. 

An express warranty is probably what a non-practioner/layperson thinks of when they hear "breach of warranty."  A warranty generally conjures up images of that long, boilerplate document you received when you last purchased GLH Spray-On Hair, a Super Bass-o-Matic, Flowbee, or other product.  (If you have a favorite product infomercial or SNL parody that I can link, shoot me a comment...I love them).  It usually lays out a ton of different terms and conditions, and many times it requires the purchaser to mail in some sort of postcard so as to register the purchase of the product and make the warranty effective. 

Although this is an example of an express warranty, South Carolina law does not limit an express warranty to the terms contained in a document entitled "Warranty."  Instead, South Carolina has codified what constitutes an express warranty at S.C. Code Ann. § 36-2-313.  This statute sets forth the following:
SECTION 36-2-313. Express warranties by affirmation, promise, description, sample.
(1) Express warranties by the seller are created as follows:
(a) Any affirmation of fact or promise, including those on containers or labels, made by the seller to the buyer, whether directly or indirectly, which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as "warrant" or "guarantee" or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller's opinion or commendation of the goods does not create a warranty.
There is South Carolina case law interpreting this statute that is helpful.  See, e.g., Triple E, Inc. v. Hendrix and Dail, Inc., 344 S.C. 186, 543 S.E.2d 245 (Ct. App. 2001); First State Sav. and Loan v. Phelps, 299 S.C. 441, 385 S.E.2d 821 (1989). 

However, the most helpful resource I found was to go to the statute itself and read the Official and South Carolina Reporter's Comments.  Some bullet points from these comments are as follows:
  • Express warranties rest on "dickered" aspects of the individual bargain and are the essence of the bargain.  (I had to look up "dickered" means the "process of bargaining" or something to that effect).  Official Cmt. 1.
  • The statute deals with affirmations of fact, descriptions of the goods, exhibition or samples, or other parts of the negotiation the result in a contract.  Intent to create a warranty is not required.  Affirmations of fact by the seller include descriptions of the goods, and a buyer does not have to show reliance.  Official Cmt. 3.
  • Express warranties deal with what a seller has agreed to sell as described.  Therefore, a clause generally disclaiming "all warranties, express or implied" cannot reduce the seller's obligations with regard to the description and cannot be given literal effect.  This does not mean people cannot make their own bargain, but good faith is a factor for determining what was agreed to by the parties, and the probability is small that the buyer did not pay for what was described.  Official Cmt. 4.
  • A description does not have to be words.  Technical specifications, blueprints, samples, illustrations, etc. may be an affirmation of fact if part of the basis of the bargain.  Official Cmt. 5.
  • When the affirmation of fact occurs is immaterial.  The question is whether it was a to be regarded as part of the contract.  Official Cmt. 7.  (Although immaterial, it sounds like it has to come before the sale, though, to be part of the bargain...that is just my opinion).
  • Typical statements held to be an express warranty under South Carolina law include representing that a carpet is of first quality, colorfast, will not fade, and is suitable for the hotel needs of a buyer.  S.C. Reporter Cmt. (citing Spartanburg Hotel Corp. v. Alexander Smith, 231 S.C. 1, 97 S.E.2d 199 (1957)).  Another example is "fertilizer compounded of the purest materials and of the highest standard."  Id. (citing Robson v. Miller, 12 S.C. 586 (1879)).  Another example is a case where insecticide was represented to be "not harmful to pigs and would not damage buyer's pigs."  Id. (citing Herndon v. Southern Pest Control Co., 307 F.2d 753 (4th Cir. 1962)).
  • A seller does not have to use the word "warrant" or even intend to create a warranty.  S.C. Reporter Cmt.
I will take a closer look at some of these cases and include them in future Case Briefs.  Have a great Memorial Day weekend.

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Tuesday, May 17, 2011

Upcoming Focus on Breach of Warranty Theory

I have a great tool for this blog called "Google Analytics," and I check it fairly frequently to determine how many people come to the site and other useful information.  If you blog, I would highly recommend checking it out and incorporating it into your site.  (Not to worry, privacy does not tell me who you are or any identifying information).  However, the tool provides me with what key word searches lead people to the site, as well as a listing of the pages on the site that are most frequently reviewed by site visitors.   

Surprisingly, many, many people come to this blog as a result of key word searches relating to "breach of warranty" or some variation of that search term.  It is a recurring, daily key word search that brings people to the site, and this is somewhat surprising to me.  When I think of products liability law, I think of strict liability, negligent design, warnings, etc.  Although breach of warranty is an additional theory in this body of law, I find in my own practice that there is not as great of a focus on it and how it relates to defect.  Although it is frequently asserted as a theory of recovery, I generally find that practitioners focus more on negligence and strict liability, and breach of warranty is kind of thrown in purely to cover all the bases.

Well . . . "the people have spoken."  There is clearly an interest in breach of warranty law, as indicated by my google analytics data.  Therefore, I am going to try and start posting more in the future about it.  I am hesitant to say that this is the beginning of a "series" per se, but we will see what happens.  (Usually, when I do a "series" on this blog, it is because I have already conducted a substantial amount of research in the subject matter of the series, i.e., as part of an article for publication.  That is not the case here).  So look for more warranty case briefs and posts in the future.  I am going to try and make it a focus since I have not devoted many posts to this subject area in the past.

Monday, May 16, 2011

Case Brief: Rhodes v. McDonald

Rhodes v. McDonald, 345 S.C. 500, 548 S.E.2d 220 (Ct. App. 2001), involves the installation of vinyl siding.  It stands for the principle that a plaintiff cannot recover punitive damages in a breach of warranty action.

FACTUAL BACKGROUND: Defendant Bill Gillespie ("Gillespie") owned and operated an insulation company, Defendant Southern Insulation ("SI").  345 S.C. at 502, 548 S.E.2d at 221.  Plaintiffs contracted with SI to install vinyl siding on their mobile home and extend the room over their kitchen.  Id.  After installation, plaintiffs complained that the siding was "wavy looking."  Id.  Despite assurances that it would "settle down," it became worse and began pulling apart.  Id.  It also led to the roof "bowing up."  Id.

PROCEDURE: Plaintiffs brought an action against defendants for breach of contract and breach of certain implied warranties.  345 S.C. at 501, 548 S.E.2d at 221.  A jury awarded plaintiffs $11,464.50 in actual damages and $27,500 in punitive damages.  Id. at 503, 548 S.E.2d at 221.  Defendants appealed. 

ISSUE: Whether the trial court erred in failing to grant defendants' motions for directed verdict (1) as to Gillespie's individual liability and (2) as to the availability of punitive damages in the breach of contract and breach of implied warranty causes of action.  345 S.C. at 501, 548 S.E.2d at 221.  Defendants also contended that the trial court erred in submitting an improper special verdict form to the jury.  Id.

DISPOSITION: Affirmed with regard to individual liability of Gillespie.  Reversed with regard to award of punitive damages.    The special interrogatories question was not preserved for appeal (and moot in light of the punitive damages reversal).

OPINION: With regard to the availability of punitive damages, the court agreed that the trial court should not have submitted this issue to the jury.  345 S.C. at 503-05, 548 S.E.2d at 221-23.  The measure of damages that a buyer may recover under the Uniform Commercial Code ("UCC") is set forth at S.C. Code sections 36-2-714 and 715.  Id. at 503, 548 S.E.2d at 222.  The court reviewed the wording of both statutes and concluded that the plain language of the statutes indicated intent by the legislature to limit damages recoverable for breach of warranty to actual, incidental, and consequential damages.  Id. at 503-04, 548 S.E.2d at 221-22.  There was no provision for punitive damages in either statute.  Id.  This is further supported by S.C. Code section 36-1-106(1), which provides, in part, that "neither consequential or special nor penal damages may be had except as specifically provided in the act or by other rule of law."  Id. at 505, 548 S.E.2d at 222.  Again, the court pointed out that the UCC does not include such a provision.  Id.  Although punitive damages are allowed in South Carolina in a breach of contract action where the breach is accompanied by a fraudulent act, there was no such evidence in the case.  Id. at 505, 548 S.E.2d at 222-23.

With regard to the trial court's failure to direct a verdict for Gillespie as to his individual liability, the court disagreed.  Id. at 505, 548 S.E.2d at 223.  SI was not incorporated at the time of the contract, and the general rule is that owners of unincorporated companies are not entitled to the same protection as owners of incorporated entities.  Id.

Finally, the court held that defendants had not adequately preserved their argument relating to the trial court's submission of special interrogatories to the jury.  Id. at 506, 548 S.E.2d at 223.  Therefore, the court did not address this issue, but also pointed out that it was moot in light of the reversal of the punitive damages award.

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Wednesday, May 4, 2011

South Carolina Bar CLE Presentation on Warnings Goes "Live"

You probably recall from a previous post that I recently participated in the South Carolina Bar's "Distance Learning" program by taping a one-hour presentation on South Carolina warnings law.  I received an email today that my presentation has gone "live" on the website. 

So...if you want to watch my ugly mug and some slides for an hour-long, fun-filled warnings extravaganza, check out this link.

Tuesday, May 3, 2011

Case Brief: Holst v. KCI Konecranes Int'l Corp., 390 S.C. 29, 699 S.E.2d 715 (Ct. App. 2010)

It has been awhile since I posted a Case Brief, so I thought I would provide one for Holst v. KCI Konecranes Int'l Corp, 390 S.C. 29, 699 S.E.2d 715 (Ct. App. 2010).  I originally blogged about this case when it came out, and its opinion has now been published.  This is a crane accident case involving a "KCI rubber-tired gantry crane" at a terminal of the South Carolina State Ports Authority in Charleston, South Carolina.  I was not familiar with a "gantry crane" and how it differed from a regular crane, so I did the trusty google image search to see what came up.  I am glad that I did.  As you can see from one of the the pictures (below), it is different than your typical idea of a "crane."  (This picture is only intended to give you an idea of a "rubber-tired gantry crane" generally.  I have no idea if it is the make or model of the crane at issue).

The case has some good discussion about the necessity of alternative design in a design defect case.  There is also discussion of what the court looks at in terms of other manufacturers and industry standards when evaluating design, warnings, etc. 

FACTUAL BACKGROUND: Decedent was a checker at a terminal at the port in Charleston, South Carolina.  390 S.C. at 33, 699 S.E.2d at 718.  He was responsible for identifying containers needed for transport between the container yard and ships.  Id.  He would instruct crane operators to move and load the containers in the proper sequence.  Id. at 33-34, 699 S.E.2d at 718.  Decedent was killed when a crane operator lowered containers in an area where he was standing, crushing him.  Id. at 34, 699 S.E.2d at 718.

PROCEDURE: Plaintiff (decedent’s wife) filed suit alleging negligence, breach of warranty, and strict liability for defective design against the crane manufacturer.  390 S.C. at 34, 699 S.E.2d at 718.  The crane manufacturer moved for summary judgment, which was granted by the lower court.  Id. at 34-35, 699 S.E.2d at 718.  Plaintiff appealed.  Id.

ISSUE: Whether the circuit (trial) court erred in granting KCI's motion for summary judgment.

DISPOSITION: The South Carolina Court of Appeals affirmed the grant of summary judgment.  390 S.C. at 44, 699 S.E.2d at 723.

OPINION: Plaintiff’s first argument was that the lower court improperly weighed conflicting testimony concerning product defect, compliance with industry standards, and comparisons of the crane to others on the market.  390 S.C. at 35-36, 699 S.E.2d at 719.  Plaintiff cited to the testimony of two experts (Dr. George Pearsall and Richard Leonard) to support that the crane operator did not have obstruction-free visibility and that the crane should have been equipped with a camera.  Id. at 36, 699 S.E.2d at 719.  Even so, both experts for plaintiff conceded that a camera would not eliminate a blind spot, they did not know of other manufacturers who utilized a camera, and the crane met industry standards/regulations.  IdMr. Leonard testified that he had never seen a comparable model crane with greater visibility than the one at issue.  IdBecause of a lack of evidence of alternative design or that a risk-utility test was conducted with regard to the crane by plaintiff’s experts, the court held that plaintiff could not establish the crane was defective and unreasonably dangerous as a matter of law.  Id. at 37, 699 S.E.2d at 719-20. 

With regard to compliance with industry standards, the court reviewed American Society of Mechanical Engineers standard B30.2-1.5.1(b) and International Organization for Standardization section 8566-1.  Id. at 37-38, 699 S.E.2d at 720.  The court affirmed that the manufacturer complied with these standards from the evidence and that the operator’s access to a telephone, intercom with a loudspeaker, and two-way radio also aided in his “view” of the load block so as to bring the crane into compliance with applicable standards.  Id Finally, the court affirmed that plaintiff’s experts failed to provide evidence that another crane was similar enough to the one at issue so as to provide proof that other cranes on the market had better visibility.  Id. at 38-39, 699 S.E.2d at 720. 
Plaintiffs also argued that the lower court applied an improper legal standard by basing its grant of summary judgment on the crane’s conformity with industry custom.  Id. at 39, 699 S.E.2d at 721.  The appellate court did not agree and noted that conformity with industry standards was only one factor considered by the trial court.  Id.

Plaintiff also argued that the lower court erred in applying inapplicable legal standards from certain Fourth Circuit Court of Appeals and South Carolina state court cases (i.e., Sexton By & Through Sexton v. Bell Helmets, Inc., 926 F.2d 331 (4th Cir. 1991), Marchant v. Mitchell Distributing Co., 270 S.C. 29, 240 S.E.2d 511 (1977), and Bragg v. Hi-Ranger, Inc., 319 S.C. 531 462 S.E.2d 321 (Ct. App. 1995)). Id. at 40-42, 699 S.E.2d at 721-22.  The court distinguished each cited case on legal or factual grounds and ruled that the lower court did not err in relying on them.  Id.

Finally, the court addressed summary judgment on each of plaintiff’s claims (strict liability, negligence – defective design, and negligence – failure to warn).  Id. at 42-44, 699 S.E.2d at 722-23.  The court cited to its prior discussion as also applying to support dismissal of the strict liability claim.  Id. at 42, 699 S.E.2d at 722.  On the negligent design claim, the court focused on the superiority of the design of the crane in comparison to others, its compliance with applicable standards, and the fact that the blind spot could not be eliminated to support its holding that there was no material issue of fact.  Id. at 42-43, 699 S.E.2d at 722-23.  The court also found that the crane included proper warnings both in the Operator’s Manual and on the crane itself so as to support summary judgment on plaintiff’s negligent failure to warn claim.  Id. at 43-44, 699 S.E.2d at 723.  Affirmed.

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