Court Opinion

ID: 9542759
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:38:19.675307+00
Date Added: 2024-06-11T15:08:53.784529
License: Public Domain

O’CONNELL, J.,
concurring in part; dissenting in part.
With the adoption of the majority opinion it would *276appear that the Oregon law of products liability can now be roughly summarized as follows:
Personal Injury ■
A seller, either remote or immediate, who is negligent in selling a defective product is liable for personal injuries. Similarly, both a remote and'immediate seller are liable for personal injuries resulting from the sale of an article unreasonably dangerous. In none of these instances is liability predicated upon the Uniform Commercial Code.

Property Damage

Immediate and remote sellers are liable for property damage resulting from negligence in selling a defective product. This liability is not predicated upon the Uniform Commercial Code.
An immediate seller is strictly liable for property damage.① Liability may arise either upon an express or an implied warranty. The liability is predicated upon the Uniform Commercial Code. Whether a remote seller would be strictly liable for property damage resulting from the sale of an unreasonably dangerous product is left open by the majority opinion. If the court were to recognize strict liability under these circumstances, I assume that it would be based upon Section 402A of the Restatement of Torts (Second) and not upon the Uniform Commercial Code.

Loss of Bargain and Loss of Profits

An immediate seller is strictly liable for loss of bargain or loss of profits. Liability may arise either upon an express warranty or an implied warranty and is predicated upon the Uniform Commercial Code.
It is not clear from the opinion whether the remote *277seller is liable for a loss of bargain or loss of .profits resulting from a breach of express warranty. He is not liable on a theory of implied warranty under the Code. The remote seller is liable for loss of bargain or loss of profits resulting from negligence in selling a defective product. This liability is not predicated upon the Uniform Commercial Code. Whether a remote seller would be strictly liable for loss of profits or loss of bargain resulting from the sale of an unreasonably dangerous product is left unresolved by the majority opinion.
The foregoing summary points up some very interesting features in our treatment of the law of products liability in this state. First, it should be noted that the law described in the summary is fashioned in part by this court and in part by- the legislature under the Uniform Commercial Code. This allocation of the law-making function has been made by the court, but the basis upon which the allocation is made is not entirely clear. Thus, although the Code contains provisions which evidence a legislative purpose to deal with the liability for personal injuries arising out of the sale of a defective product we have, without explanation, deemed this aspect of the law of sales to fall outside of the provisions of the Code. Likewise, we have allocated to this court the function of developing the law relating to the liability for loss of bargain or loss of profits resulting from the seller’s negligence and possibly from the sale of an unreasonably dangerous product. On the other hand, we have decided that the Code has pre-empted the law relating to liability for loss of bargain or loss of profits resulting from non-negligent sales by immediate sellers of defective products not unreasonably dangerous.
In the ease at bar the majority attempts to explain the foregoing legislative pre-emption of the law relat*278ing to .the remote' seller’s liability for loss of bargain or loss of profits. The explanation is very difficult to follow. It begins with the thought that buyers . are aware of the risk that “a product may not perform as it should” and that by choosing their sellers “with care” buyers can obtain a warranty and thus be provided with an “adequate remedy.” Although my criticism does not center here, it should be noted in passing (as it has been noted in the cases) that in the purchase of many products the buyer does not have this power to bargain for protection; if the buyer wants the product he must take it upon the terms of an “adhesion contract” designed by the seller for his own protection.② The court goes on to explain that to allow a non-privity warranty action to vindicate every disappointed consumer “would unduly complicate the code’s scheme.”- Since the “code’s scheme” is described in terms of “the consensual elements of commerce,” I assume that the court is discussing liability under an express warranty and one which is “bargained” for between a buyer and his immediate seller.
The majority’s analysis of the Code’s provisions is unacceptable to me for a number of reasons. At the outset it should be observed that the Code was not designed to confine the buyer’s warranty remedy to actions against the immediate seller. The official comment appended to the Code makes it clear that the liability of the remote seller was left for the courts to work out through ease law. This is made clear in the official comment to ORS 72.3130 (the section dealing with express warranties):
“2. Although ORS 72.3130 is limited in its scope and direct purpose to warranties made by the seller *279to ■ the buyer as part of a contract for sale, the warranty sections of ORS 72.1010 to 72.7250 are not designed in any way to disturb those lines of case law growth which have recognized that warranties need not be confined either to sales contracts or to the direct parties to such a contract. * * * The provisions of ORS 72.3180 on third party beneficiaries expressly recognize this case law development within one particular area. Beyond that, the matter is left to the case law with the intention that the policies of the Uniform Commercial Code may offer useful guidance in dealing with further cases as they arise.”
I read the Code to mean that the court is free to adopt a rule imposing liability upon a remote seller for the breach of an express warranty (whether or not the remote buyer bargained for the warranty) or for breach of an implied warranty, or on some other theory not couched in terms of “warranty.” I believe that the drafters of the Code and the legislature did not have the fears expressed in the majority opinion that “to allow a non-privity warranty action * * *' would unduly complicate the Code’s scheme.”
Considering first the liability of a remote seller upon an “express warranty,” I assume from what the majority has written that an action upon an “express warranty” cannot be brought in Oregon against a remote seller. This I gather from the court’s insistence that the liability arise out of a “consensual” transaction, that it be keyed to remedies which are “matters for bargaining” and from the observation that “actions between buyers and remote sellers would lend themselves to the proliferation of unprovable claims by disappointed bargain hunters, with little social benefit.”
That this view is not compelled by the Code is *280demonstrated by'the ease of Seeley v. White Motor Co., 45 Cal Bptr 17, 403 P2d 145 (1965) decided by the. California Supreme Court. In that case the court held .that the remote seller was liable to a purchaser for loss of profits upon the theory of a breach of express warranty. As Mr. Justice' Peters pointed out in dissent, the remote seller’s liability could not have rested upon the basis of a “bargain” because the purchaser did not rely upon the warranty — he testified that he was unaware of any. representation made by the remote seller.
In the present case the more serious defect in the court’s analysis is the failure to consider the liability of the remote seller upon the theory of implied warranty. This is the very heart of the problem in this case and we should face up to it. Contrary to the majority’s characterization, the Code’s “scheme” is not simply to deal with liability arising out of a “consensual” exchange between seller and buyer in which the parties “bargain” with respect to the seller’s liability. The Code also deals with the liability of the seller upon an implied warranty. That liability is not consensual. It is now pretty well agreed that liability upon an implied warranty is essentially strict liability in tort and should be dealt with on that basis.③
The majority opinion concedes that the purchaser can recover from the immediate seller for loss of profits. It is not made clear whether this liability would arise only out of an express warranty or whether it would also extend to an implied warranty. The majority opinion makes it appear that the only question is one of establishing the limits on who may be sued and concludes that the remote seller cannot be. *281The reasons given, relate, to notions of consensuality and bargaining and to the social benefits which flow from avoiding the “proliferation of nnprovable claims” and in reducing the costs of litigation (“benefits,” incidentally, which do not seem to have any significance when the court considers the liability of a non-privity defendant based upon negligent conduct).
The crucial question in this case is not whether liability for loss of profits should artificially be limited to immediate sellers, but whether reasons exist for holding all sellers, immediate or remote, strictly liable to a purchaser for loss of profits. If there is a policy justification for imposing strict liability then it is inappropriate to attempt to delimit the range of potential defendants according to notions of privity. To relate this more important question to the Uniform Commercial Code and its coverage, I would first ask whether an immediate seller can be liable under the Code for loss of profits.
We have held under the Sales Act that in actions by the buyer against his immediate seller for breach of an implied warranty he may recover for loss of profits.④ I assume that the same result would be reached under the Code (ORS 72.7150). As I have previously pointed out, the liability imposed for breach of an implied warranty is simply another way of saying that there is strict liability in tort. Once the liability is identified as tortious rather than contractual in character, it is difficult to see why any distinction should be made between the liability of an immediate and a remote seller. The distinction becomes especially *282ténuous when the product is sold through an integrated marketing process in which the manufacturer, the distributor, and the retailer constitute, in effect, one selling organization.⑤. But even where the marketing process is not integrated, I can see no reason for making a distinction between a seller who is in privity with the buyer and a seller who is not.
As I previously indicated, it is more important that we explain why strict liability should or should not be imposed upon a seller, whether he is immediate or remote. The reason for imposing strict liability upon a seller or upon any other class of defendants is difficult to formulate. It is not enough to say, as some courts have, that the seller is liable simply because he is the better or more convenient risk bearer. As we explained in Wights v. Staff-Jennings, 241 Or 301, 405 P2d 624 (1965), this proves too much and would serve as well to explain why persons other than sellers should be held strictly liable for another’s loss.
The rationale for imposing liability in any case ultimately calls for the acceptance of some scheme of values. G-enerally we look for this scheme in the norms established by the community. It is necessary to determine how these norms are to be applied in relation to the sellers of goods. Although, as Judge Learned Hand points out, these norms are “not susceptible of any quantitative estimate,” they must be .identified in some fashion if they are to be weighed. The law assumes that either the court or the jury, in the exercise of their respective functions* will be able to determine what these values are and to weigh them. Sometimes these values are described in terms of “moral” values *283with- the connotation of fanlt and the norm then is the moral sense of the community.⑥ On the other hand, they may he expressed simply in terms of social values *284unrelated to individual fault and the norm then becomes one of social efficiency in distributing and adjusting losses.
Whether we characterize the actor’s conduct as innocent or blameworthy would seem unimportant. The more one studies the problem the clearer it becomes that liability “without fault” and liability “with fault” (i.e., liability for negligent, intentional conduct, etc.) are both a part of a single graduated scale of legal responsibility which measures the actor’s conduct in terms of the probability of harm inherent in the conduct, the social value or utility of defendant’s conduct, the social value of plaintiff’s interest, and the interest of the public generally.
Plaintiff bases his claim in this case upon that aspect of implied warranty (or more properly strict liability) which permits recovery for what I have described as “innocent misrepresentation.” This representation is “that the goods sold conform to the standard of quality generally attributable to goods of that description, and that they are reasonably fit for the purpose for which they are designed.”⑦ Since the representation is deemed to arise, not by virtue of a contract between the seller and buyer but by operation of law it may be regarded as having been made not only by the immediate seller but by the remote seller as well. Both should be liable or neither should be liable. It is not enough to say that historically only the immediate seller was held liable. Some reason must be given for perpetuating the distinction. I know of none.
In imposing liability upon the seller for breach of an implied warranty the courts have not, generally *285speaking, explained adequately the basis for implying the representation.
I attempted to do so in Price v. Gatlin, 241 Or 315, 319, 405 P2d 502, 504 (1965). I suggested a rationale for the imposition of liability upon the seller for loss of profits and for personal injury and property damage. There I strove to differentiate between liability based upon the innocent misrepresentation of a seller (which would require the recognition of a new tort form) and liability based upon conduct, other than the seller’s representation. The distinction was imperfectly expressed,⑧ but it was an effort to isolate two separate grounds for imposing strict liability upon the seller. Restated, I would impose strict liability upon a seller of a defective product for loss resulting from a representation by the seller justifiably relied upon by the purchaser.
I went on to suggest that liability could be explained even in the absence of a misrepresentation strictly defined by resting it upon the principle that a seller should not be permitted to impose an unfair “sale” upon those who are not in a position to bargain for the terms of the sale. This is j.ust another way of ex*286pressing the general feeling of the community that one who engages in an activity for gain and who is-in a position to dictate the terms of the sale, should not be able to disclaim all responsibility to the victim. When either of these elements expressed in Price v. Gatlin, supra, is identified in a particular transaction, — i.e., reliance upon a misrepresentation or imposition of unfair terms — it is unnecessary to show that the conduct created a high risk.
On the other hand, where the emphasis is on the high probability of loss resulting from the activity, the crucial factor is not the seller’s representations or superior bargaining position. Instead, as we' held in Wights v. Staff-Jennings, supra, we apply the principle under which liability is imposed for ultrahazardous conduct, thus integrating the law relating to defective products with the law of torts generally.⑨ The principle reflects the feeling in the community that *287one who. deliberately chooses to engage in a type of conduct having a high risk potential should compensate the victims of that activity.
When the basis for the seller’s liability for the sale of a defective product is explained by identifying and weighing the values of the community, there is no sound reason for distinguishing the liability of the immediate and remote seller. Moreover there is no reason for assuming that the Uniform Commercial Code was .intended to make applicable to those two classes of sellers a different rule of liability for defective goods causing expectation losses.
Sloan and Denecke, JJ., join in this opinion.

 Apparently this would include not only damage to the defective product, but also damage to other property of the purchaser caused by the defect.

 E.g., Henningsen v. Bloomfield Motors, Inc., 32 NJ 358, 161 A2d 69, 75 ALR2d 1, 23 (1960).

 Prosser, “The Assault Upon the Citadel” (Strict Liability to the Consumer) 69 Yale L J 1099 (1960).

 Western Feed Co. v. Heidloff, 230 Or 324, 370 P2d 612 (1962); American Oil Etc. Co. v. Foust, 128 Or 263, 274 F 323 (1929).

 This point is developed at greáter length in the dissent in Price v. Gatlin, 241 Or 315 at 329, 405 P2d 502 (1965).

 Professor Robert E. Keeton in “Conditional Fault in the Law of Torts,” 72 Harv L Rev 401 (1959), develops the thought that strict liability for certain types of conduct involves moral fault which he has denominated “conditional fault.” It is his thesis that one who for his own gain engages in an activity which he knows is likely to cause loss to others should compensate those who suffer loss resulting from the activity. “It is the moral sense of the community that one should not engage in this type of conduct, because of risk or certainty of loss to others, without making reasonable provision for compensation of losses.” Id. at pp 427-28.
The thesis applied to personal injuries resulting from defective products is stated by Cowan: “Some Policy Bases of Products Liability,” 17 Stan L Rev 1077, 1088 (1965), as follows:
“Where the producer one-sidedly shifts to the consumer a calculated risk of injury from a defective product, we may look upon this process as a conscious expropriation of a certain valuable interest of the consumer, namely, his interest in freedom from bodily harm.
“The thought which underlies this branch of the law is not that the defendant has not conformed to norms of reasonably careful behavior respecting his own activities that secondarily, though perhaps inevitably, affect the life or property of another. It is the fact that he has deliberately chosen to cast his loss or the risk of loss onto another. It may be that defendant was wholly innocent in his appropriation of plaintiff’s interest. Nevertheless, he must pay for deliberately assigning risk of loss to another in damages appropriate to his ‘wrongful’ conduct.”
The assertion that the community senses fault or blameworthiness in these cases, Keeton admits “is not demonstrable by logic. Rather its validity is dependent upon an observation of the moral views of the community. The appeal for the reader’s agreement with this assertion is an appeal for confirmation from his own observations.” Keeton, 72 Harv L Rev supra, at 435.
Another author expresses a similar view:
“* * * [I]t may be said that strict liability on retailers comports harmoniously with contemporary ideas of fairness and • with what the buyer may reasonably expect from a modern and highly integrated commercial world.” Retailer and Manufacturer Liability in Germany and the United States for Personal Injury from Defective Products: -Duke L J 94,1Q8 <1959).

 Price v. Gatlin, supra, note 5.

 In particular, the attempt made in the Price v. Gatlin, supra, dissent at p 320, to distinguish between “(1) cases in which the defect causes an accident resulting in personal injury or property damage, and (2) cases in which the defect causes a pecuniary loss not arising out of an accident” has been justifiably criticized in Franklin, 18 Stan L Rev 974, pp 986-88 (1966). As Franklin points out each of the major types of harm (personal injury, property damage, repair loss and expectational loss) may occur with or without accidents. It is further observed that “expectation loss also can be found in both accident and nonaccident situations.” Finally, he adds that where the imposition of liability is justified because the consumer has been forced to purchase the product he needs upon unfair terms designed to protect the seller, “no reason remains • for differentiating- accidents from nonaccidents.” , •>

 The recognition of this process is most clearly expressed in the treatment of the law of nuisance in Restatement of Torts, § 827, p 244 (1939),-where it states that in determining whether a nuisance exists the following factors are to be considered:
“(a) the extent of the harm involved;
“(b) the character of the harm involved;
“(c) the social value which the law attaches to the type of use or enjoyment invaded;
“(d) the suitability of the particular use or enjoyment invaded to the character of the locality;
“(e) the burden on the person harmed of avoiding the harm.”
The same process is seen in Judge Learned Hand’s well-known description of liability for failure to exercise “care,” found in Conway v. O’Brien, 111 F2d 611, 612 (CCA2d 1948):
“The degree of care demanded of a person by an occasion is the resultant of three factors; the likelihood that his conduct will injure others, taken with the seriousness of the injury if it happens, and balanced against the interest which he must sacrifice to avoid the risk.' All these are practically not susceptible of any quantitativé estimate, and the second two aré *287generally not so, even theoretically. For this reason a solution always involves some preference, or choice between incommensurables, and it is consigned to a'jury because their decision is thought most likely to accord with commonly accepted standards, real or fancied. * *
An exceptionally keen analysis of the weighing process in the area of strict liability is made by John R. Faust, Jr. in “Strict Liability in Landowner Cases,” 42 Or L Rev 273 (1963).