On February 17, 2004, the Minnesota Court of Appeals handed down a decision bringing together several important theories of law as to disclaimers of warranties of products. It is unfortunate that the decision is in the form of an "unpublished opinion", which means that the decision is not widely disseminated or binding on the courts, as the decision has great significance.
In Lester Building Systems v. Louisiana-Pacific Corporation, the Court of Appeals applied rules of law providing that disclaimers of warranties do not preclude an action for fraud (although they are effective to disclaim contractual actions for breach of warranties), and then pointed out that attempts to exclude consequential damages by a seller of goods are ineffective as to the seller's own fraud. In addition, the court held that the seller of goods cannot contractually disclaim liability for consequential damages resulting from its own fraudulent conduct.
The court then moved on to a very difficult area of the law involving what is known as the "economic loss doctrine". In its broadest form that doctrine holds that in the case of a purchase of goods which are defective resulting in damage to the goods themselves (and perhaps other goods), the purchaser could recover only for the damage to the defective goods themselves. By 1992, the Minnesota Legislature recognized that, at least as to private individuals (that is to say, not merchants in the type of goods involved), a plaintiff should be able to recover for damage to property other than the goods which were warranted but, as to merchants, continued the prior law by providing that "economic loss that arises from a sale of goods between parties who are each merchants in goods of the kind is not recoverable in tort." As between merchants, that left merely a claim based on the warranty on the goods themselves.
Think of a fraud claim by a dealer against the manufacturer of a twin engined aircraft falsely warranted to be flyable on one engine, which claim arises from a defective engine causing a total loss of the quarter million dollar aircraft and $13,000,000 of its contents. The dealer could not recover for the valuable contents even though the manufacturer had intentionally misrepresented that the aircraft could continue flight on a single engine with that load.
But then in 1998 the Minnesota Legislature added subdivision "(e)" to Minn. Stat. 604.10 and provided that the law "shall not be interpreted to bar tort causes of action based upon fraud or fraudulent or intentional misrepresentations or limit remedies for those actions." Thus the law no longer discriminates against merchant Plaintiffs in fraud cases. It is that provision which the Minnesota Court of Appeals in the Lester Building Systems case has so clearly applied allowing Lester to recover from Louisiana Pacific more than $13,000,000.00 for very broad losses arising from Lester's use of Defendant's defective siding for Lester's pig shelter products. Humans, on the other hand, with homes damaged by the same defective siding, have been relegated to a class action lawsuit against Louisiana Pacific. Mark one up for Minnesota's pigs!
In Lester Building Systems v. Louisiana-Pacific Corporation, the Court of Appeals applied rules of law providing that disclaimers of warranties do not preclude an action for fraud (although they are effective to disclaim contractual actions for breach of warranties), and then pointed out that attempts to exclude consequential damages by a seller of goods are ineffective as to the seller's own fraud. In addition, the court held that the seller of goods cannot contractually disclaim liability for consequential damages resulting from its own fraudulent conduct.
The court then moved on to a very difficult area of the law involving what is known as the "economic loss doctrine". In its broadest form that doctrine holds that in the case of a purchase of goods which are defective resulting in damage to the goods themselves (and perhaps other goods), the purchaser could recover only for the damage to the defective goods themselves. By 1992, the Minnesota Legislature recognized that, at least as to private individuals (that is to say, not merchants in the type of goods involved), a plaintiff should be able to recover for damage to property other than the goods which were warranted but, as to merchants, continued the prior law by providing that "economic loss that arises from a sale of goods between parties who are each merchants in goods of the kind is not recoverable in tort." As between merchants, that left merely a claim based on the warranty on the goods themselves.
Think of a fraud claim by a dealer against the manufacturer of a twin engined aircraft falsely warranted to be flyable on one engine, which claim arises from a defective engine causing a total loss of the quarter million dollar aircraft and $13,000,000 of its contents. The dealer could not recover for the valuable contents even though the manufacturer had intentionally misrepresented that the aircraft could continue flight on a single engine with that load.
But then in 1998 the Minnesota Legislature added subdivision "(e)" to Minn. Stat. 604.10 and provided that the law "shall not be interpreted to bar tort causes of action based upon fraud or fraudulent or intentional misrepresentations or limit remedies for those actions." Thus the law no longer discriminates against merchant Plaintiffs in fraud cases. It is that provision which the Minnesota Court of Appeals in the Lester Building Systems case has so clearly applied allowing Lester to recover from Louisiana Pacific more than $13,000,000.00 for very broad losses arising from Lester's use of Defendant's defective siding for Lester's pig shelter products. Humans, on the other hand, with homes damaged by the same defective siding, have been relegated to a class action lawsuit against Louisiana Pacific. Mark one up for Minnesota's pigs!