Charles H. Brown III, Cincinnati, and James E. Wynee, for appellant. Stephen V. Freeze, Dayton, for appellee Gateway Supply Company. Terence L. Fague and David P. Pierce, Dayton, for appellee Dayco Products, Inc.

{1} Plaintiff-appellant, Norcold, Inc. ("Norcold"), appeals separate Shelby County Common Pleas Court decisions granting summary judgment in favor of defendants-appellants, Gateway Supply Company, Inc. ("Gateway") and Dayco Products, Inc. ("Dayco"). Because claims for breach of an express written warranty do not require reliance on the part of the buyer, we must reverse the trial court's dismissal of Norcold's express-warranty claims against Gateway. With regard to Norcold's claims for breach of the implied warranties of merchantability and fitness for a particular purpose, no warranty of merchantability exists because the part in question was a newly constructed component and no average or usual standards for determining ordinary performance or quality could be determined; however, questions of material fact do remain as to whether Norcold relied on Gateway to supply parts fit for Norcold's particular purpose. Additionally, because a commercial purchaser of a defective product cannot maintain a claim for purely economic loss under common-law tort theories of recovery and because Norcold failed to plead a contract cause of action, its claims against Dayco are barred as a matter of law.

{2} Norcold engages in the production and sale of refrigerators to manufacturers of recreational vehicles and camping trailers. For several years, Gateway has acted as a distributor of pipes, fittings, and valves to Norcold for use in refrigerator assembly. In 1992, Norcold representatives approached Gateway to discuss combining two pre-existing parts used to power Norcold's refrigerators. This combined unit would become known as a tap tee, which is used to carry flammable gas. Thereafter, Gateway consulted with Dayco to manufacture the part.

{3} Subsequently, Dayco delivered the parts to Gateway, which then distributed them to Norcold, pursuant to Norcold's purchase orders. The purchase orders afforded Norcold the ability to test each tap tee prior to final assembly, and each part was tested twice before being integrated into the refrigerators. In summer 1999, Norcold found that the tap tees were subject to stress corrosion cracking and thus potentially hazardous. Accordingly, Norcold began a recall campaign of its mobile refrigerator units and allegedly suffered damages in excess of $25,000.

{4} As a result, Norcold brought suit against Gateway, alleging breach of contract and breach of express and implied warranties. Gateway then filed a third-party complaint against Dayco, claiming that it was entitled to indemnification and damages for breach of contract and express and implied warranties. Thereafter, Norcold amended its complaint to include Dayco as a defendant, asserting breach of express and implied warranties. In response to the amended complaint, Gateway counterclaimed against Norcold for breach of contract, payment of an existing account, and unjust enrichment. Gateway also filed a cross-claim against Dayco, alleging breach of contract and unjust enrichment. Dayco responded to the amended complaint and cross-claim, maintaining that it was entitled to indemnification or contribution in the event it was liable to either Norcold or Gateway.

{5} After completing extensive discovery, Gateway moved for summary judgment against Norcold and Dayco, and Dayco moved for summary judgment against Norcold and Gateway. In a May 20, 2002 judgment entry, the trial court granted Gateway's motion for summary judgment in full, thus dismissing all claims of both Norcold and Dayco. In a separate judgment entry filed the same day, the trial court denied Dayco's motion for summary judgment against Norcold.

{6} Prior to the court's decisions on the summary judgment motions, Norcold moved for leave to file a second amended complaint, stating that it wanted to separate the claims against Gateway, "which are contractual in nature, from those against Dayco ***, which are based in tort." The motion was initially denied; however, upon Norcold's motion to reconsider and after the claims against Gateway were dismissed, the trial court granted Norcold leave to amend its complaint for a second time. Therein, Norcold realleged claims against both Gateway and Dayco. Gateway and Dayco both responded with the same claims as argued in response to Norcold's first amended complaint.

{7} On September 4, 2002, pursuant to an agreed judgment entry, all claims asserted by Norcold against Gateway in the second amended complaint were dismissed in accordance with the trial court's prior grant of summary judgment. Thereafter, Dayco again moved for summary judgment against Norcold. The trial court granted the motion on December 13, 2002, finding that absent privity of contract, Ohio law does not provide a common-law remedy in tort to a commercial purchaser of a defective product for purely economic loss. Following the court's entry, Norcold filed a motion for modification or reconsideration of the court's grant of summary judgment, which was denied.

{8} From the trial court's May 20, 2002 grant of summary judgment to Gateway and December 13, 2002 grant of summary judgment to Dayco, Norcold appeals, asserting six assignments of error for our review. For purposes of brevity and clarity, we will combine our discussion of Norcold's third and fourth assignments of error. Because this appeal arises from summary judgment determinations, we will begin by setting forth our standard of review.

Standard of Review

{9} Under Ohio law, a court may not grant a motion for summary judgment unless the record demonstrates (1) that no genuine issue of material fact remains to be litigated, (2) that the moving party is entitled to judgment as a matter of law, and (3) that after considering the evidence most strongly in the nonmovant's favor, reasonable minds can come but to one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made.¹ In ruling on a summary judgment motion, the trial court is not permitted to weigh evidence or choose among reasonable inferences; rather, the court must evaluate evidence, taking all permissible inferences and resolving questions of credibility in favor of the nonmovant.² Even the inferences to be drawn from the underlying facts contained in the evidentiary materials, such as affidavits and depositions, must be construed in a light most favorable to the adverse party.³ Appellate review of summary judgment determinations is conducted on a de novo basis;⁴ therefore, this court considers the motion independently and without deference to the trial court's findings.⁵

Norcold's Claims Against Gateway

Assignment of Error I

"The trial court erred in granting Appellee Gateway's Motion for Summary Judgment as to Count I of Appellant Norcold's first amended complaint by finding that no genuine issue of material fact exists for resolution by a jury regarding Norcold's reliance on express warranties as a basis of its bargain with Gateway."

{10} In its first assignment of error, Norcold contends that the trial court made impermissible credibility determinations as to whether Norcold relied upon Gateway's express warranties concerning the tap tee. Neither party disputes that affirmations of fact or promise were made by Gateway to Norcold within the purchase orders for the tap tees; therefore, the only issue to be decided by this court is whether the trial court erred in finding that the language therein was not part of the basis of the bargain between the parties.

{11} In purchasing the tap tees from Gateway, Norcold furnished purchase orders containing the following applicable language:

"1.ACCEPTANCE AGREEMENT. Seller's commencement of work on the goods subject to this purchase order or shipment of such goods, whichever occurs first, shall be deemed an effective mode of acceptance of this purchase order. Any acceptance of this purchase order is limited to acceptance of the express terms contained on the front and back hereof.

"***

"5.WARRANTY. Seller expressly warrants that all goods or services furnished under this agreement shall conform to all specifications and appropriate standards, will be new, and will be free from defects in material or workmanship. *** Seller warrants that all goods or services furnished hereunder will be merchantable, and will be safe and appropriate for the purpose for which goods or services of that kind are normally used. If seller knows or has reason to know the particular purpose for which purchaser intends to use the goods or services, seller warrants that such goods or services will fit for such particular purpose. Seller warrants that goods or services furnished will conform in all respects to samples, inspection, test, acceptance or use of the goods or services furnished hereunder. Such warranties shall survive inspections, tests, acceptance and use. Seller's warranty shall run to purchaser, its successors, assigns and customers, and users of products sold by purchaser. Seller agrees to replace or correct defects of any goods or services not conforming to the foregoing warranty promptly, without expense to purchaser, when notified of such nonconformity by purchaser, provided purchaser elects to provide seller with the opportunity to do so. In the event of failure of seller to correct defects in or replace nonconforming goods or services promptly, purchaser, after reasonable notice to seller, may make such corrections or replace such goods and services and charge seller for the cost by purchaser in doing so.

"***

"17.ENTIRE AGREEMENT. This purchase order, and any documents referred to on the face hereof, constitute the entire agreement between the parties."

{12} With respect to express warranties, R.C. 1302.26 (UCC 2-313) provides:

"(A)Express warranties by the seller are made as follows:

"(1)Any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain made an express warranty that the goods shall conform to the affirmation or promise.

"***

"(B)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 made a warranty."

{13} The trial court herein determined that the written warranties by Gateway did not become part of the basis of the bargain between the parties because Norcold did not actually rely on Gateway's representations. In doing so, the trial court relied upon Price Bros. Co. v. Philadelphia Gear Corp., which stated:

"In order to determine whether the pre-contract statements *** were in fact a basis of the bargain and thus an express warranty, or whether they were merely a seller's 'puffing,' the court should consider the circumstances surrounding the transaction, the reasonableness of the buyer in believing the seller, and the reliance placed on the seller's statements by the buyer." 6

{14} The trial court's reliance thereon, however, is misplaced. Price Bros. is distinguishable from the case at bar particularly because therein the court was determining whether precontract statements made by the seller, sales literature, and a journal article referring to the goods sold constituted affirmations of fact or promise. In other words, the court was merely "differentiating affirmations of fact from statements of opinion."⁷ In contrast, the statements in this case were not precontractual representations but were integrated terms within the parties' written agreement. The parties do not dispute whether the affirmations within the purchase orders constitute statements of fact or promise; their arguments entail whether the statements or affirmations were part of the basis of the bargain.

{15} Because "basis of the bargain" is not a defined term, the language has caused significant legal confusion with regard to whether a buyer's reliance upon express warranty language is a necessary part of determining the enforcement thereof. Prior to the adoption of the Uniform Commercial Code ("UCC") in Ohio, reliance was a key inquiry as to the enforceability of an express warranty: "An express warranty is an affirmation of fact by the seller as to a product or commodity to induce the purchase thereof, on which affirmation the buyer relies in making the purchase."⁸ Notably, some Ohio appellate courts have continued to evaluate the enforceability of express warranties by requiring the buyer's reliance thereon, despite the absence of such language in R.C. 1302.26.⁹ However, these cases deal with affirmations of fact or promise during contract negotiation and not those contained in a written agreement. The parties cite no Ohio cases, nor has this court uncovered any, in which Ohio courts have grappled with the question of reliance in the context of an express written warranty.

{16} In order for this court to shed light on the meaning of "basis of the bargain" in the context of written affirmations of fact or promise in a valid contract, and any concomitant reliance requirement, we must turn to the Official Comments of the UCC for guidance. Although a review of UCC 2-313's comments does not definitively answer whether reliance remains a necessary element for enforcement of an express warranty, the comments do seem to indicate that reliance is not required in the context of this case. Comment 3 states:

"The present section deals with affirmations of fact by the seller, descriptions of the goods or exhibitions of samples, exactly as any other part of a negotiation which ends in a contract is dealt with. No specific intention to make a warranty is necessary if any of these factors is made part of the basis of the bargain. In actual practice affirmations of fact made by the seller about the goods during a bargain are regarded as part of the description of those goods; hence no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement. Rather, any fact which is to take such affirmations, once made, out of the agreement requires clear affirmative proof. The issue normally is one of fact."10 (Emphasis added.)

{17} Thus, Comment 3 indicates that UCC 2-313 is relevant to the question of whether an express warranty has been made, and the basis-of-the-bargain rule is not applicable to situations where written warranties are clear and express. A decisive majority of courts that have considered this issue have reached the similar conclusion that reliance is not an element in a claim for breach of an express written warranty.¹¹

{18} Express warranties are "as much a part of the contract as any other part, and the right to damages on the breach depends on nothing more than the breach of warranty."¹² In other words,

"[a] warranty is an assurance by one party to a contract of the existence of a fact upon which the other party may rely. It is intended precisely to relieve the promisee of any duty to ascertain the fact for himself; it amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue, for obviously the promisor cannot control what is already in the past."¹³

{19} Accordingly, because the warranties in this case were part of a written contract, we find that enforcement thereof is not dependant upon any reliance by Norcold. Therefore, we must sustain Norcold's first assignment of error.

1. Stare decisis is at the central core of the authority of the judicial branch. How does this case involve the use of precedent? Explain.

2. What is an express warranty? What is its purpose? DS Explain.

3. What authority was used by the trial court to determine whether Gateway had made a war- ranty in its dealings with Norcold? Explain.

4. What did the court of appeals do with the trial court's interpretation of the contract between Norcold and Gateway? Explain.

5. Has the court of appeals in this case used textual- ism or pragmatism in its interpretation of the phrase the "basis of the bargain"? Explain.

6. Does the warranty included in the contract between Norcold and Gateway have to be "relied upon" to be included in the agreement? Explain.

7. Why does the court return to the comments sec- tion of the UCC to determine what warranties must be relied upon? Explain.

Answer rating: 100% (QA)

This case involves the use of precedent through stare decisis which means to stand by things decided Stare decisis is a principle that obligates courts to follow the precedents established in previous ... View the full answer