Source: https://h2o.law.harvard.edu/cases/1676
Timestamp: 2019-04-25 14:30:17+00:00

Document:
Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc.
Intervener-Respondent. No. 364. Supreme Court of Wisconsin. April 20, 1973.
Rehearing Denied June 29, 1973.
Foley & .lardner, David E. Beckwith, Maurice J. McSweeney, John R. Dawson, Milwaukee, for defendant-appellant.
Quarles, Harriott, Clemons, Teschner & Noelke, L. C. Hammond, Jr., Ross R. Kinney, Milwaukee, for respondents.
4. Under Pennsylvania law, is the tort doctrine of strict liability applicable to either economic losses caused by unreasonably defective products or products which are unreasonably dangerous to themselves which in fact injure themselves and cause economic losses?
As an affirmative defense pleaded in its answer, Fairbanks set up Pennsylvania's four-year statute of limitations governing breaches of contract. The conflict arises because Wisconsin's statute of limitations in contract actions is six years. All parties agree that the remaining three issues must be resolved under Pennsylvania law.
In sustaining the demurrers of Air Products and Hartford to the statute of limitations affirmative defense of Fairbanks, the trial court concluded that each state must determine for itself the period of time in which a suit for a particular claim can be brought; and that the 'center of gravity' approach to conflicts questions which was originally adopted by this court in Wilcox v. Wilcox (1964), 26 Wis.2d 617, 133 N.W.2d [58 Wis.2d 202] 408 is too unpredictable to be used when the fundamental question of the appropriate statute of limitations is at issue. We agree with the trial court's ruling on the statute of limitations issue. However, we think the choice of law is a matter to be decided on the basis of the existing conflicts rules of this court.
In the case of Wilcox v. Wilcox, supra, this court broke new ground in the choice of law area by abandoning the very mechanical lex loci rule in matters involving the appropriate torts law to be applied when that of Wisconsin's is in conflict with one or more other interested jurisdictions. Following Wilcox, in the case of Heath v. Zellmer (1967), 35 Wis.2d 578, 151 N.W.2d 664, the rationale of Wilcox was refined such that when '. . . faced with a choice-of-law decision, this court should base its conclusions upon the following choice-influencing considerations . . .
'Application of the better rule of law.' Heath, supra, 35 Wis.2d at page 596, 151 N.W.2d at page 672.
approach in Haines v. Mid[58 Wis.2d 203] -Century Ins. Co. (1970), 47 Wis.2d 442, 177 N.W.2d 328, another contracts case.
In the very recent case of Hunker v. Royal Indemnity Co. (1973), Wis., 204 N.W.2d 897, this court set forth with clarity the appraoch which we will follow in choice of law questions relating to tort and we reaffirm that approach in the case at bar.
Although the five choice considerations stated above should all be given due consideration in the ultimate outsome of any choice of law question, this court should not engage in a mere 'counting of these considerations' but rather look to the 'relevancy' of the particular consideration in terms of the policies which the forum deems important, vis-a-vis, other contact states. Wilcox, supra, 26 Wis.2d at page 633, 133 N.W.2d 408.
There can be no question but that the underlying purpose in the enactment of a statute of limitations is to protect defendants and the courts from '. . . stale claims springing up at great distances of time and surprising the parties . . .' when all the evidence, once vivid, has since become obscure. Bowe v. La Buy (1934), 215 Wis. 1, 3, 253 N.W. 791, 792. The same essential policy considerations have guided the Pennsylvania courts as well. Schmucker v. Naugle (1967), 426 Pa. 203, 231 A.2d 121.
A determination that Wisconsin's six-year statute controls would in no way affect any legitimate interest of Pennsylvania since their statute, like ours, is designed to protect defendants and in this case, Air Products, [58 Wis.2d 204] the Pennsylvania resident, is the plaintiff--not the defendant. Likewise, Pennsylvania is in no position to in anyway influence what Wisconsin feels to be an appropriate period of protection for both itself and defendants from stale lawsuits. Wilcox v. Wilcox, supra, 26 Wis.2d at page 634, 133 N.W.2d 408.
Moreover, by the decision of the legislature to permit aggrieved parties six instead of four years to prosecute their claims, a decision contrary to the recommended period by drafters of the Uniform Commercial Code which was ultimately adopted in Pennsylvania, the legislature determined that the interests of Wisconsin are best advanced by a longer period. We affirm the order sustained demurrers to defendants' affirmative defenses based on the statute of limitations.
'Seller recognizes that failure to make delivery of drawings and other data of equipment conforming to the requirements of this purchase order in accordance with the delivery schedule contained in this purchase order will subject buyer to substantial damages due to delay and disruption of work schedules, inefficient use of manpower and other reasons, and that the amount of such damages will be difficult or impossible to ascertain with certainty. Seller, therefore, agrees that such damages shall be assessed and payable, as agreed and liquidated damages, and not as a penalty, in accordance with the schedule set forth at the end of this clause.
deemed delivered unless the same conforms to the requirements of the order and, (a) in the case of drawings and other data, is mailed or otherwise delivered [58 Wis.2d 205] to buyer's offices at Allentown, Pennsylvania (and any other specified receivers) on or before the date specified, and, (b) in the case of equipment, is placed in the hands of a carrier for delivery VIA the most direct route to the destination indicated on the purchase order, on or before the date specified. In any case of partial delivery of an item, if permitted hereunder, the items shall not be deemed as received for purposes of this provision, until delivery of the last item required for its use, or installation, and operation. Unless otherwise provided, all time shall be computed on the basis of calender days elapsing after the delivery date specified. Liquidated damages shall be computed for each item listed on the schedule separately.
'Buyers right to liqudiated damages provided for herein shall be in addition to any and all other remedies of buyer, including, without limitation, its rights under paragraph 9 of the terms and conditions of this purchase order for default. In the event of any termination for default, liquidated damages for delay shall be computed, up to the maximums provided herein, to the date buyer places a new purchase order for the items covered by this order.
The trial court was evidently relying on the rule of law that '(w)hen the language of a contract, considered as a whole, is reasonably or fairly susceptible to different constructions, it is therefore ambiguous, and such being the situation, the sense in which the words are therein used is a question of fact.' Lemke v. Larsen Co. (1967), 35 Wis.2d 427, 432, 151 N.W.2d 17, 19.
We agree with the trial court's conclusion that the separate provisions relating to liquidated damages are inconsistent and ambiguous. We affirm the order overruling this demurrer.
'WE THANK YOU FOR YOUR ORDER AS COPIED HEREON, WHICH WILL RECEIVE PROMPT ATTENTION AND SHALL BE GOVERNED BY THE PROVISIONS ON THE REVERSE SIDE HEREOF UNLESS YOU NOTIFY US TO THE CONTRARY WITHIN 10 DAYS OR BEFORE SHIPMENT WHICHEVER IS EARLIER. BEFORE ACCEPTING GOODS FROM TRANSPORTATION COMPANY SEE THAT EACH ARTICLE [58 Wis.2d 207] IS IN GOOD CONDITION. IF SHORTAGE OR DAMAGE IS APPARENT REFUSE SHIPMENT UNLESS AGENT NOTES DEFECT ON TRANSPORTATION BILL. ACCEPTANCE OF SHIPMENT WITHOUT COMPLYING WITH SUCH CONDITIONS IS AT YOUR OWN RISK.
'THIS IS NOT AN INVOICE. AN INVOICE FOR THIS MATERIAL WILL BE SENT YOU WITHIN A FEW DAYS.
Fairbanks contends that provision #6 contained on the reverse side of their 'acknowledgment of order' became part of the contract between it and Air Products while Air Products contends that its right to rely on the implied warranty of merchantability (U.C.C. 2--314) fitness for particular purposes (U.C.C. 2--315) and consequential[58 Wis.2d 208] damages (U.C.C. 2--714) has in no way been limited by provision #6, since it never was assented to by it, and, therefore, never became part of the contract. Both parties are in agreement that sec. 2-- 207, of the Uniform Commercial Code (12A Pennsylvania Statutes Ann. sec. 2--207) is the appropriate standard by which their rights must be determined.
'(1) a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
a reasonable time after notice of them is received.
In reaching the above conclusion, apparently the trial court did not consider subsection (2)(b) of Sec. 2--207.
'The second situation covered by this clause concerns confirmatory memoranda which follow an agreement. 'Confirmation' connotes that the parties reached an agreement before exchange of the forms in question. The [58 Wis.2d 210] purpose of Code drafters here must have been to make clear that confirmations need not mirror each other in order to find contract. Simply stated then, under this first clause of section 2--207(1), it is reasonable to assume that the parties have a deal, then there is a contract even though terms of the writings exchanged do not match.
Since there is no express provision in the purchase orders making assent to different or additional terms conditioned upon Air Products' assent to them, the second requirement of coming under U.C.C. 2--207 is also met.
Once having satisfied the requirements of subsection (1), any additional matter must fall in subsection (2).
[58 Wis.2d 211] The major impact of sec. 2--207 is that it altered the common law rule which precluded an acceptance from creating a contract if it in any way varied any term of the offer. Subsection (1) expressly provides that there may be a legally binding contract even if the acceptance contains terms 'different from' or 'additinal to' the terms of the offer.
At this point a contract does in fact exist between the parties under (1). Subsection (2) must now be resorted to to see which of the 'variant' terms will actually become part of the contract.
'On its face, subsection (2) seems only to apply to additional and not conflicting terms, and at least one court has interpreted the language this way. However, this is an unnecessarily limited construction and, as Comment 3 to the section points out, subsection (2) should apply to both additional and different provisions.' 32 Univ.Pitt.L.Rev., supra, 211.
he has not agreed.' (Emphasis added) 154 N.W.2d at p. 12.
The implication seems clear. A party cannot be expected to have assented to a 'different' term.
We think Fairbanks was aware of the particular needs of Air Products. A reading of section 2--714 and 2--715 indicates that a potential recovery for consequential loss is implicit in the contract.
The language employed by Air Products in its 'terms and conditions' was not express enough to bring into play the provisions of either subsection 2--207(a) or (c). The ultimate question to be determined, therefore, is whether the disclaimer contained in Fairbanks' 'acknowledgment of order' materially altered the agreement between the parties pursuant to sec. 2--207(2)(b). If they materially alter what would otherwise be firmed by the acceptance of an offer, they will not become terms unless the buyer expressly agrees thereto. 'If, however, they are terms which would not so change the bargain they will be incorporated unless notice of objection to them has already been given or is given within a reasonable time.' Comment #3 to sec. 2--207.
While the comment #4 clearly indicates that a disclaimer of an implied warranty of merchantability is material, there is no good reason to hold that a disclaimer that has the effect of eliminating millions of dollars in damages should become a part of a contract by operation of law.
We conclude that the disclaimer for consequential loss was sufficiently material to require express conversation between the parties over its inclusion or exclusion in the contract. It follows that the order overruling the demurrers of Air Products and Hartford must be reversed.
'21. Realleges and incorporates as though fully set forth herein the averments of paragraphs one, two, three, four and seven.
[58 Wis.2d 215] '22. Defendant was aware when it entered into said contract with plaintiff that said motor would come into plaintiff's possession without there being any substantial change in its condition after it was shipped to plaintiff by defendant. There was no substantial change in the condition of said motor from the time when it was shipped by defendant and received by plaintiff.
'23. Subsequent to its installation plaintiff attempted to operate said motor so it would deliver 11,000 horsepower, and drive said compressor, but said motor did not operate properly because of the defects specified in paragraph 7.
'24. Because of the defects specified in paragraph 7, said motor was not reasonably fit for the ordinary purpose for which such motors are sold and used, to-wit: to operate effectively at 11,000 horsepower, without breaking down, for a reasonable period of time.
In sustaining the demurrers to the amended complaints, the trial court reasoned that before a cause of action for strict liability could be started under either Pennsylvania or Wisconsin law, it must be alleged that the defective product actually caused physical harm to property of the plaintiff, and that the property harmed must be property other than itself; to put it another way, the complaint must set forth damages for something other than pure economic loss.
Although this court has very recently extended the strict liability doctrine of Dippel v. Sciano (1967), 37 Wis.2d 443, 155 N.W.2d 55, to injured bystanders, Howes v. Hansen (1972), 56 Wis.2d 247, 201 N.W.2d [58 Wis.2d 216] 825, the parties seek only that this court apply Pennsylvania law in determining the outcome of this question and, therefore, it would seem that any further extensions of the doctrine in Wisconsin will have to await consideration until another day.
The parties have extensively briefed the question of whether the doctrine of strict liability should apply to pure 'economic loss' and they have cited this court to a host of authorities and to cases of other jurisdiction 2 both favoring 3 and disfavoring 4 its application. Since the adoption of Sec. 402A of Restatement, 2 Torts 2d, pp. 347, 348 5 by the Supreme Court of Phnnsylvania in [58 Wis.2d 217] Webb v. Zern (1966), 422 Pa. 424, 220 A.2d 853, that court has never expressly considered their rule of strict liability as it relates to the precise issue now before this court. They have, however, had occasion to make extensive comments on the subject.
In Kassab v. Central Soya (1968), 432 Pa. 217, 246 A.2d 848, the court was there confronted with the question of whether to eliminate the privity requirement in assumpsit suits by purchasers against remote manufacturers for breach of implied warranty. The plaintiffs were raisers of breed cattle and in the course of that activity, purchased quantities of cattle feed which had been manufactured by the defendant. The purchased feed contained 'stilbestrol' although the packaging did not so state, and although plaintiffs gave the feed to their animals '. . . the herd began to abort and the breed bull began behaving in a manner which tended to cast doubt upon his masculinity. He was eventually pronounced sterile.' Because of community knowledge of what the herd had eaten, the price that the stock brought was greatly diminished and the plaintiff sued for the diminution in market value.
while requiring a showing of negligence in order to recover for the same wrong against the same defendant if suit were brought in tort. To permit the result of a lawsuit to depend solely on the caption atop plaintiff's complaint is not now, and has never been, a sound resolution of identical controversies.
[58 Wis.2d 218] 'However, with Pennsylvania's adoption of Restatement 402a, the same demands of legal symmetry which once supported privity now destroy it. Under the Restatement, if an action be commenced in tort by a purchaser of a defective product against a remote manufacturer, recovery may be had without a showing of negligence, and without a showing of privity, for any damage inflicted upon the person or property of the plaintiff as a result of this defective product . . .
Fairbanks contends that the proper theory in cases concerning economic loss of the type here involved in a commercial transaction is breach of warranty under the Uniform Commercial Code and not strict liability. To this contention the Pennsylvania court in a very lengthy footnote discussed the similarities between their interpretation of remedies under both the code and the restatement, and of their overall concern to make the two co-extensive.
'The language of the Restatement, speaking as it does of injury to either the individual or his property, appears broad enough to cover practically all of the harm that could befall one due to a defective product. Thus, for example, were one to buy a defective gas range which exploded, ruining the buyer's kitchen, injuring him, and of course necessitating a replacement of the stove itself, all of these three elements of the injury should be compensable. The last, replacing the stove, has been sometimes[58 Wis.2d 219] referred to as 'economic loss,' i.e., 'the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.' Comment, 114 U.Pa.L.Rev. 539, 541 (1966). There would seem to be no reason for excluding this measure of damages in an action brought under the Restatement, since the defective product itself is as much 'property' as any other possession of the plaintiff that is damaged as a result of the manufacturing flaw. Thus, since the tort action would enable plaintiff to recover for economic loss (the physical harm necessitated by 402a would, ipso facto, be present given the defect in the product which caused the damage), so also should this form of damages be compensable in contract. Contract cases from other jurisdictions dispensing with privity have allowed recovery for all three types of injury: personal injury, Henningsen v. Bloomfield Motors, Inc., (32 N.J. 358, 161 A.2d 69) supra note 1; injury to plaintiff's property other than the defective article itself, Morrow v. Caloric Appliance Co., (372 S.W.2d 41) supra note 1; and 'economic loss,' State Farm Mut. Auto Ins. Co. v. Anderson-Weber, Inc., supra note 1.' 246 A.2d 848, at pages 854--855.
No pronouncement of the Pennsylvania Supreme Court can be found which would in any way detract from this broad policy statement.
which would be covered under sec. 402A of the Restatement in Pennsylvania was 'volunteered' by the court and also given the fact that it was made after the decisions of other jurisdictions in which strict liability was made inapplicable to pure 'economic loss' indicating that it was made in spite of those decisions, we think the amended complaints containing allegations that the machines were unreasonably dangerous to other parts of themselves have set forth a valid cause of action for strict liability under Pennsylvania law. Therefore, the order sustaining Fairbanks' demurrer to the amended complaints must be reversed.
[58 Wis.2d 220] The order sustaining plaintiff's demurrers to defendant's affirmative defenses based on the statute of limitations is affirmed. The order overruling plaintiff's demurrers to defendant's affirmative defenses based on the liquidated damages provisions of Air Products purchase orders is affirmed. The order overruling plaintiff's demurrers to defendant's affirmative defenses based on limitations of liability in Fairbanks' acknowledgment of order is reversed. The order sustaining the demurrers to plaintiff's amended complaints alleging a cause of action for strict liability is reversed. No costs to be taxed in this court.
1 Section 2--207 of the Uniform Commercial Code--New Rules for the 'Battle of the Forms' (1971), 32 U. of PITT.L.Rev. L.Rev. 209, 210.
2 E.g. Note, Manufacturer's Liability to Remote Purchasers for 'Economic Loss'--Tort or Contract (1966), 114 Univ.Pa.L.Rev. 539, Prosser, The Fall of the Citadel--Strict Liability to the Consumer (1966), 50 Minn.L.Rev. 791, Note, Economic Loss in Products Liability (1966), 66 Col.L.Rev. 917.
3 Arrow Transportation Co. v. Fruehauf Corp. (D.C.Or.1968), 289 F.Supp. 170; Santor v. A. & M. Karagheusian, Inc. (1965), 44 N.J., 52, 207 A.2d 305; Cova v. Harley Davidson Motor Company (1970), 26 Mich.App. 602, 182 N.W.2d 800.
4 Seely v. White Motor Company (1965), 63 Cal.2d 9, 45 Cal.Rptr. 17, 403 P.2d 145; Price v. Gatlin (1965), 241 Or. 315, 405 P.2d 502; Southwest Forest Industries, Inc. v. Westinghouse Electric Corp. (9th Cir. 1970), 422 F.2d 1013, cert. denied, 400 U.S. 902, 91 S.Ct. 138, 27 L.Ed.2d 138.
'Sec. 402A. Special liability of Seller of Product for Physical Harm to User or Consumer.
'(b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.

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