This is the question that the Colorado Court of Appeals tried to answer in its recent decision, , No. 09CA1966, 2010 WL 4361379 (Colo. Ct. App. September 30, 2010). The plaintiff had bought what the Court described as a “high performance automobile” — a Ford Mustang — which contained components manufactured by Saleen, Inc., a company that had a joint manufacturing agreement with Ford. Immediately after buying this fine vehicle, the plaintiff purportedly experienced numerous problems with it.
While we recognize that Ford has come a long way in recent years, there is great debate amongst the contributors here at Abnormal Use. Is the Mustang a “high performance automobile,” as the Court suggests? But, we digress. Judge for yourself:
The plaintiff sued Ford for breach of implied warranty of merchantability and revocation of acceptance under the Colorado Uniform Commercial Code, sections 4-2-314 and 4-2-608, C.R.S. 2010, respectively, as well as claims against Ford and Saleen for violation of the Colorado Lemon Law, revocation, and breach of express and implied warranties. Ford was dismissed after the mechanical defects in the vehicle were determined to be attributable to modifications performed by Saleen. Saleen subsequently ceased operations, which defeated the plaintiff’s claims against Saleen for express warranty on Saleen components. Only the plaintiff’s claims against Ford for revocation and breach of implied warranty remained.
Ford moved for summary judgment, arguing that the plaintiff’s claims were product liability claims and therefore barred by the “innocent seller” statute. The trial court agreed and dismissed his remaining claims. The plaintiff appealed.
The Court of Appeals framed the issue before it as follows:
We are called upon to decide whether the trial court erred in ruling that a product liability action may be based upon a claim for breach of an implied warranty of merchantability and a claim for revocation of acceptance where the product was defective and the only damage suffered by the buyer was the economic loss of the product itself.
After analyzing the Colorado “innocent seller” statute, which bars a product liability suit against a seller unless the the seller is also the manufacturer. The statute does not prevent “other actions” against sellers. The trial court had held that the action against Ford was indeed a products liability action, since causes of action for breach of warranty are based on products liability law.
The court of appeals reversed, holding that “contract claims which seek only economic loss for a defective product without collateral damage or risk of harm to others do not constitute product liability actions.”
The value of the court’s decision itself, in my opinion, is not the decision itself, but the history of products liability law that the court recites in coming to its decision. The court does an excellent job of tracking the development of products liability through the strange marriage of contract and tort law. The court also gives concise summaries of the economic loss rule and the innocent seller doctrines, which several other jurisdictions follow as well. As a result, this decision is worth a read.