Peterson v. North American Plant Breeders
218 Neb. 258, 39 U.C.C. Rep. Serv. (West) 1637, 354 N.W.2d 625 (1984)
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Rule of Law:
The implied warranty of merchantability for goods sold in sealed containers extends from the manufacturer to the ultimate buyer-user, even in the absence of privity of contract, allowing for the recovery of purely economic losses.
Facts:
- Plaintiffs Robert and William Peterson, doing business as Peterson Brothers, were farmers in Rock County, Nebraska, who farmed on sandy soil.
- Defendant North American Plant Breeders produced a hybrid seed corn variety known as Migro SPX-8.
- Prior to purchase, Robert Peterson read advertising literature from the defendant describing Migro SPX-8 as having 'excellent stalk quality.'
- In the spring of 1981, the Petersons purchased 102 sealed bags of Migro SPX-8 seed from John Sandall, an independent local dealer.
- The sealed bags had tags attached which contained a disclaimer of all express and implied warranties, including the warranty of merchantability.
- The Petersons planted the Migro seed in their fields, alternating it with other seed varieties.
- On July 23, 1981, following a thunderstorm of ordinary severity, 65 to 70 percent of the Migro variety corn plants had broken off at ear level, while the other varieties sustained minimal damage.
- The Migro variety yielded only 19.5 bushels per acre, compared to an average of 113.75 bushels per acre from the other varieties planted in the same fields.
Procedural Posture:
- Robert and William Peterson (plaintiffs) sued North American Plant Breeders (defendant) in a Nebraska trial court for breach of express and implied warranties.
- The case was tried before a jury.
- The jury found in favor of the Petersons and awarded them $76,519.08 in damages.
- The trial court entered a judgment on the jury's verdict.
- North American Plant Breeders, as the defendant-appellant, appealed the judgment to the Supreme Court of Nebraska.
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Issue:
Does the implied warranty of merchantability extend from a seed producer to the ultimate buyer-user who purchased the seed through an independent dealer, allowing the buyer-user to recover for economic loss despite the lack of privity?
Opinions:
Majority - Colwell, D.J., Retired
Yes, the implied warranty of merchantability extends from a producer to the ultimate buyer-user even without privity of contract for recovery of economic loss. The court reasoned that there is no logical basis to distinguish between recovery for personal injury and recovery for economic loss in warranty cases. When a manufacturer places a product like hybrid seed in sealed bags into the chain of distribution, it carries an implied warranty of merchantability to the ultimate consumer because the consumer cannot inspect the goods and must rely on the manufacturer. The court also held that whether statements in advertising literature constitute an express warranty or mere 'puffing' is a question of fact for the jury. Because the buyer of sealed seed has no prior experience or ability to inspect the product's growing qualities, they may be justified in relying on the producer's claims as affirmations of fact, not just opinion.
Analysis:
This decision significantly expands manufacturer liability in Nebraska by eliminating the requirement of vertical privity for breach of implied warranty of merchantability claims seeking purely economic damages. It aligns Nebraska with a modern trend extending greater protection to consumers who purchase goods through intermediaries. The ruling is particularly impactful for industries involving pre-packaged goods, like agriculture and consumer products, where the end-user has no means of inspection before purchase and must rely on the manufacturer's quality control. By holding remote manufacturers responsible for the fitness of their products, the decision incentivizes better quality control and shifts the economic risk of defective goods from the consumer back to the producer who placed them in the market.
