Opinion ID: 1774192
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Heading: type of loss

Text: Pivotal to the question of disclaimer applicability is the determination of whether the product loss is recoverable under a contract theory of breach of warranty or whether it is a tort loss. Generally, disclaimers are enforced less readily in strict liability cases than in those of contract warranty. McMillen Feeds, Inc. v. Harlow, 405 S.W.2d 123 (Tex.Civ.App.Austin 1966, writ ref'd n. r. e.); Keystone Aeronautics Corp. v. R. J. Enstrom Corp., 499 F.2d 146 (3d Cir. 1974); Sterner Aero AB v. Page Airmotive, Inc., 499 F.2d 709 (10th Cir. 1974); Vandermark v. Ford Motor Company, 61 Cal.2d 256, 37 Cal.Rptr. 896, 391 P.2d 168 (1964). See Restatement, Second, Torts § 402A, comment m (1965). Therefore, the type of loss is relevant to the determination of a disclaimer's validity. [1] Moreover, a decision on a disclaimer's validity without clearly identifying the type of loss and liability involved would be contrary to the recent writing which separates contract warranties from strict liability in products cases. Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77 (Tex.1977). Strict liability in tort and contract have had an entangled relationship in the area of products liability. The entanglement is to be expected since strict liability resulted from the combination of tort and contract theories. See Shamrock Fuel & Oil Sales Company v. Tunks, 416 S.W.2d 779 (Tex. 1967); Jacob E. Decker & Sons, Inc. v. Capps, 139 Tex. 609, 164 S.W.2d 828 (1942). With the codification of the Uniform Commercial Code, Tex.Bus. & Comm.Code Ann. §§ 1.101-9.507, and the adoption of Section 402A, McKisson v. Sales Affiliates, Inc., 416 S.W.2d 787 (Tex.1967), the theoretical bases of contract and strict liability have been separated and firmly established. Nobility Homes of Texas, Inc. v. Shivers, supra . The applicability of strict liability has been defined in Texas for personal injuries resulting from unreasonably dangerous products. Bristol-Myers Company v. Gonzales, 561 S.W.2d 801 (Tex.1978); General Motors Corp. v. Hopkins, 548 S.W.2d 344 (Tex.1977); Rourke v. Garza, 530 S.W.2d 794 (Tex.1975); Crocker v. Winthrop Laboratories, Inc., 514 S.W.2d 429 (Tex.1974); Pittsburg Coca-Cola Bottling Works v. Ponder, 443 S.W.2d 546 (Tex.1969); Darryl v. Ford Motor Company, 440 S.W.2d 630 (Tex. 1969); McKisson v. Sales Affiliates, Inc., supra . Physical injuries to a consumer's other property caused by a defective product has also been held to be included under strict liability. O. M. Franklin Serum Company v. C. A. Hoover & Son, 418 S.W.2d 482 (Tex.1967). The present case involves an unreasonably dangerous product whose defect has caused harm to itself. No personal injury or injury to other property was involved. The critical question is whether, in a commercial sale, strict liability should be extended to cover loss resulting from damage to the product itself. [2] Texas has recently adopted the rule that economic loss resulting from a product with defective workmanship and materials is not recoverable in strict liability. Nobility Homes of Texas, Inc. v. Shivers, supra . That loss is merely loss of value resulting from a failure of the product to perform according to the contractual bargain and therefore is governed by the Uniform Commercial Code. Mid Continent contends that the damage to the airplane in the present case is also an economic loss under the reasoning of Nobility Homes. It argues that there is no difference between a product that is unusable because of defects and one that causes physical harm to itself because of a defect that is unreasonably dangerous. While Texas courts have not before considered this question, it has arisen in other jurisdictions. There is no concensus in the decisions. Some courts have concluded that the loss is recoverable under strict liability. Cloud v. Kit Manufacturing Company, 563 P.2d 248 (Alaska 1977); Delta Air Lines, Inc. v. McDonnell Douglas Corp., 503 F.2d 239 (5th Cir. 1974); Sterner Aero AB v. Page Airmotive, Inc., supra ; Keystone Aeronautics Corp. v. R. J. Enstrom Corp., supra ; Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc., 58 Wis.2d 193, 206 N.W.2d 414 (1973); Arrow Transportation Company v. Fruehauf Corp., 289 F.Supp. 170 (D.Or.1968). Others adopt the position that the loss is of a contractual nature and therefore covered by the Uniform Commercial Code. Long Manufacturing, Inc. v. Grady Tractor Company, 140 Ga.App. 320, 231 S.E.2d 105 (1976); Long v. Jim Letts Oldsmobile, Inc., 135 Ga.App. 293, 217 S.E.2d 602 (1975); Cf. Mike Bajalia, Inc. v. Amos Construction Company, Inc., 142 Ga. App. 225, 235 S.E.2d 664 (1977); Salmon Rivers Sportsman Camps, Inc. v. Cessna Aircraft Company, 97 Idaho 348, 544 P.2d 306 (1975); Cooley v. Salopian Industries, Ltd., 383 F.Supp. 1114 (D.S.C.1974); Hawkins Construction Company v. Matthews Company, Inc., 190 Neb. 546, 209 N.W.2d 643 (1973). The nature of the loss resulting from damage that a defective product has caused to itself has received the attention of several commentators. Dean Page Keeton writes: A distinction should be made between the type of `dangerous condition' that causes damage only to the product itself and the type that is dangerous to other property or persons. A hazardous product that has harmed something or someone can be labeled as part of the accident problem; tort law seeks to protect against this type of harm through allocation of risk. In contrast, a damaging event that harms only the product should be treated as irrelevant to policy considerations directing liability placement in tort. Consequently, if a defect causes damage limited solely to the property, recovery should be available, if at all, on a contract-warranty theory. [3] The Uniform Commercial Code was adopted by the Legislature as a comprehensive and integrated act to facilitate the continued expansion of commercial practices. Tex.Bus. & Comm.Code Ann. § 1.102. For sales of products the above purpose is carried out by Article 2 of the Code, which supplies a complete framework of rights and remedies for transacting parties. In light of the Code's scope and purpose, its terms should not be nullified by applying strict liability when the parties have contracted otherwise. Such an expansion of strict liability would frustrate the Code's purposes of codifying the law of commercial transactions by displacing its applicability in all cases where the sale of faulty products is involved. Some losses resulting from product transactions are best covered by contract liability under the Code. See Nobility Homes of Texas v. Shivers, supra . Strict liability arose initially to compensate consumers for personal injuries caused by defective products, although it was sometimes referred to as implied warranty in law as a matter of public policy. Jacob E. Decker & Sons, Inc. v. Capps, supra ; McKisson v. Sales Affiliates, Inc., supra ; Greenman v. Yuba Power Products, Inc., 59 Cal.2d 57, 27 Cal.Rptr. 697, 377 P.2d 897 (1962). It was reasoned that injured consumers should not be made to depend on the intricacies of sales law for compensation. Greenman v. Yuba Power Products, Inc. supra, 377 P.2d at 901. The present case does not involve personal injury but concerns only economic loss to the purchased product itself. Distinguished from personal injury and injury to other property, damage to the product itself is essentially a loss to the purchaser of the benefit of the bargain with the seller. Loss of use and cost of repair of the product are the only expenses suffered by the purchaser. The loss is limited to what was involved in the transaction with the seller, which perhaps accounts for the Legislature providing that parties may rely on sales and contract law for compensation of economic loss to the product itself. Tex.Bus. & Comm.Code Ann. § 2.715(b)(2). The consumer protection needs upon which strict liability is based are not sufficiently strong to impose that theory of recovery over the existing sales law remedies for Curry County's loss in this case. In transactions between a commercial seller and commercial buyer, when no physical injury has occurred to persons or other property, injury to the defective product itself is an economic loss governed by the Uniform Commercial Code. Curry County's cause of action for the damage of the airplane lies in breach of warranty as provided by the Code.