Circle Land & Cattle Corp. v. Amoco Oil Co.
35 U.C.C. Rep. Serv. (West) 403, 232 Kan. 482, 657 P.2d 532 (1983)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A seller breaches the implied warranty of fitness for a particular purpose when it knows of the buyer's purpose, the buyer relies on the seller's skill to select a suitable product, and the product proves unfit. Separately, a party that gratuitously undertakes to render services for another is liable for harm caused by its failure to exercise reasonable care if the other party relied on the undertaking.
Facts:
- Plaintiffs Circle Land and Cattle Corporation, led by Dean Gigot, operated 160 International Harvester (IH) irrigation engines.
- After experiencing engine problems in 1977, an IH representative advised Gigot to use a specific low-ash oil.
- Gigot contacted Amoco Oil Company, whose product expert, Don Means, was informed of the engine type and need for low-ash oil, and subsequently recommended Amoco's 'Amogas Ashless' oil.
- Relying on Amoco's recommendation and a provided pamphlet, plaintiffs purchased and began using Amogas Ashless oil in their engines for the 1978 season.
- In June 1978, IH initiated a 'surveillance program' on plaintiffs' engines, which involved IH periodically analyzing oil samples provided by plaintiffs.
- Throughout the summer, IH's lab reports consistently stated the oil was 'normal' and 'suitable for further use,' and plaintiffs relied on these reports to continue using the oil.
- The Amogas Ashless oil was in fact unsuitable for the engines and caused severe camshaft failures.
- In late August 1978, IH discovered the oil was improper and the cause of the damage, but by then significant and costly damage had already occurred to all of plaintiffs' engines.
Procedural Posture:
- Plaintiffs sued Amoco Oil Company, International Harvester Company, and Amoco's dealer, Bud Hebrlee, in a Kansas trial court.
- The trial court granted plaintiffs' pre-trial motion for summary judgment against Amoco on the issue of liability, leaving only the percentage of fault and damages for trial.
- The trial court also granted defendant Hebrlee's motion for summary judgment, dismissing him from the case.
- The case proceeded to a jury trial against the remaining defendants, Amoco and International Harvester, on the basis of comparative fault.
- The jury returned a verdict finding fault as follows: 60% Amoco, 30% International Harvester, and 10% plaintiffs, with total damages of $160,000.
- The trial court entered judgment on the verdict.
- Defendants Amoco Oil and International Harvester, as appellants, appealed the judgment to the Supreme Court of Kansas.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a seller who recommends an unsuitable product for a buyer's stated purpose breach an implied warranty of fitness, and can another party be held liable for negligently performing a gratuitously undertaken service if the buyer relied on it to their detriment?
Opinions:
Majority - Prager, J.
Yes. A seller breaches the implied warranty of fitness for a particular purpose when it recommends an unsuitable product upon which the buyer relies, and a party that gratuitously undertakes a service is liable for negligence if another party suffers harm due to reliance on that service. The court found that Amoco breached the implied warranty of fitness for a particular purpose under K.S.A. 84-2-315. The evidence was undisputed that Amoco, the seller, knew the particular purpose for which the oil was required (use in plaintiffs' IH engines) and knew that Gigot, the buyer, was relying on its agent's skill to select suitable goods. Gigot did in fact rely on the recommendation, and Amoco later admitted the oil was unfit and caused the damage. For International Harvester, the court formally adopted the Restatement (Second) of Torts § 323, which imposes liability for the negligent performance of a gratuitous undertaking. IH undertook to render a service (the oil analysis program), which it should have recognized as necessary for the protection of plaintiffs' engines. Plaintiffs suffered harm because of their reliance on IH's undertaking, as the reports stating the oil was 'O.K.' led them to continue using the damaging oil. Therefore, there was sufficient evidence for a jury to find IH liable for negligently performing its undertaking.
Analysis:
This decision formally adopts the Restatement (Second) of Torts § 323 in Kansas, establishing a clear precedent for liability arising from the negligent performance of a gratuitous undertaking. It broadens the scope of duty for manufacturers and service providers, cautioning that once they voluntarily offer assistance, they must perform with reasonable care if others are foreseeably relying on that assistance. The case also serves as a strong affirmation of the UCC's implied warranty of fitness, demonstrating that even a sophisticated buyer can establish reliance on a seller's expertise, leading to liability for an improper product recommendation.
