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Liability of Component Part Manufacturer in Relation to Whole Product Manufacturer

A. Tort Claims

1. Generally
A final product assembler who takes products manufactured by a number of companies to create an end product is ultimately responsible for the end product if it is defective and injures a plaintiff. However, the final product assembler is not without recourse. The final product assembler can seek contribution and/or indemnification from the component manufacturer as long as a reasonable inspection of the component part would not have revealed the flaw, there was no previous knowledge to suggest the component part was defective, and it was the component part that failed and caused the plaintiff’s injuries. Bower v. Corbell, 1965 OK 163, 408 P.2d 307, 316; Restatement (Second) of Torts § 395. A component part manufacturer is a manufacturer of its own product and must use reasonable care in the design, production, and marketing of its product. A component part manufacturer can be held liable for damages caused to a consumer or final product assembler as a result of a product failure.

2. Economic Loss Rule As a Defense
The Oklahoma Supreme Court adopted the economic loss rule in Waggoner v. Town & Country Mobile Homes, Inc., 1990 OK 139, 808 P.2d 649, 652-53.

(i) Damage to the Product Itself – The economic loss rule bars a plaintiff from recovering through the theory of strict product liability for purely economic damages stemming from a product deteriorating, self-destructing, or failing to function which only results in damage to the product itself (i.e., the defectiveness of the product does not cause harm to plaintiff’s person or property). When the only damage is to the defective product itself, a plaintiff can only pursue monetary damages to recover the lost bargain from purchasing a defective product based on the sales contract or warranties set forth in the UCC. The plaintiff cannot maintain a strict liability product claim against the manufacturer.

(ii) UCC Privity Requirements- Under the UCC, only buyers, members of buyer’s family and household, or a guest of the buyer’s home are protected by either an express or implied warranty of quality under the UCC. Bystanders and employees are not third party beneficiaries and cannot recover. 12A O.S. § 2-318; Moss v. Polyco, Inc., 1974 OK 53, 522 P.2d 622.

B. Implied Warranty Claims

The Oklahoma UCC provides for three implied warranties of quality: (1) implied warranty of merchantability; (2) implied warranties based on course of dealing or usage of trade; and (3) implied warranty of fitness for a particular purpose. 12A O.S. §§ 2-314 & 2-315. A warranty that goods shall be merchantable is implied in a contract for sale if the seller is a merchant with respect to those particular types of goods. 12A O.S. § 2-314(1). For goods to be considered merchantable, they must be at least able to (a) pass without objection in the trade under the contract description; (b) in the case of fungible goods, are of fair average quality within the description; (c) are fit for the ordinary purposes for which such goods are used; (d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promises or affirmations of fact made on the container or label if any. 12A O.S. § 2-314(2). Moreover, “[w]here the seller at the time of contracting has reason to know any particular purpose for the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section, an implied warranty that the goods shall be fit for such purpose.” 12A O.S. § 2-315. Generally, “to exclude or modify the implied warranty of merchantability, or any part of it, the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous.” 12A O.S. § 2-316(2). “Language to exclude all implied warranties of fitness is sufficient if it states, for example, that ‘[t]here are no warranties which extend beyond the description on the face hereof.’” Id. There are additional ways to exclude implied warranties by expressions like “as is,” “with all faults,” examination of goods which should have revealed defects, course of dealing, course of performance, and usage of trade.

By Jeremy Ward