# JIG the Third Corp. v. Puritan Marine Insurance Underwriters Corp.

> Court of Appeals for the Fifth Circuit · September 15, 1975 · 519 F.2d 171

URL: https://www.frixlaw.com/law-library/cases/8896955

## Case

- **Full name:** JIG THE THIRD CORPORATION v. PURITAN MARINE INSURANCE UNDERWRITERS CORPORATION, Defendants-Third-Party ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant James I. GEORGE, Jr. v. ATLANTIC MARINE, INC., Defendants-Appellants JIG THE THIRD CORPORATION v. Y. E. HALL, INC., Defendant-Third-Party ATLANTIC MARINE, INC., Third-Party-Defendant-Appellant
- **Court:** Court of Appeals for the Fifth Circuit
- **Decided:** September 15, 1975
- **Citations:** 519 F.2d 171; 1976 A.M.C. 118
- **Precedential status:** Published
- **Opinion:** Dissent by Gee
- **Judges:** Gee, Goldberg
- **Cited by:** 54 later opinions in the Frix Law Library

## Citator (automated)

- **Red flag:** Overruled on other grounds by East River Steamship Corp. v. Transamerica Delaval Inc., 476 U.S. 858 (1986).
- Negative treatments: 1
- Distinguished by: 0
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/8896955

## How later opinions describe it (automated extraction)

- holding that unless a warranty expressly disclaims liability for negligence, the plaintiff may recover his damages for negligent design and manufacture even though the only physical damage is to the product itself
- noting the divergence of “[o]ther states, such as Illinois” from the general or “clear and unequivocal” rule

## Opinion text

GEE, Circuit Judge
(dissenting):
I respectfully dissent, thinking the opinion of the majority confounds the laws of torts and contracts and imports this tangle into the general maritime law. As I have always understood it, the law of torts in its most basic sense imposes general duties upon persons, regardless of their consent and without reference to their agreements. The law of contracts, on the other hand, concerns itself with the enforcement of promises made. Tort relationships between individuals in society are basically fixed, exist for reasons of public policy, and neither are nor should be readily modifiable by individual action. As to sales and purchases and absent government regulation, however, the law of contracts has always recognized that individuals are free to bargain for the quality of what they expect to get. Therefore the law of sales (the branch of contracts with which we are here concerned) does not impose on a seller a greater burden than that which he has agreed to undertake. 1
It is clear to me that an elaborate contractual relationship exists between JIG III, the purchaser/owner of the Princess, and Atlantic Marine, Inc., its manufacturer/seller. It is also obvious that the Princess, because of the defective design of her shaft, was not merchantable: she would not have passed without objection in the trade under the contract description as a shrimp boat and was not fit for the ordinary purposes for which shrimp boats are used. Uniform Commercial Code § 2-314(2)(a) and (c) (hereafter U.C.C. or the code). It follows that JIG III has a fine cause of action for breach of warranty under Florida law unless Atlantic Marine successfully disclaimed that implied warranty or unless JIG III failed to give notice of the defect. 2 See U.C.C. § 2 — 316, 2-607(3)(a). It is also possible, although it was not developed at trial, that JIG III could have an action for breach of an express warranty or of the implied warranty of fitness for a particular purpose, if applicable and undisclaimed. The damages available to JIG III would, of course, be those provided for by the code as conscionably limited by agreement of the parties. See U.C.C. §§ 2-714, 715, 719.
In short, taken together, the commercial law of Florida and the contract adequately define all promises, express and implied, and disclaimers of promises which these two economically-comparable parties made one another respecting the Princess, its quality as well as its' . specifications and, of course, its price. If promises are made and broken, the code, modified by the contract, 3 provides adequate remedy. 4 There is no occasion *180 for resort to the law of torts for a right or a remedy. Moreover, allowing the plaintiff here, JIG III, to prosecute its tort cause of action is highly unfair to the defendant, Atlantic Marine, for it allows JIG III simply to ignore all of Atlantic’s attempted disclaimers of warranty and limitations of remedies, 5 which disclaimers and limitations were a part of the bargain and are specifically allowed by the jurisdiction most concerned with the contract between these two parties (Florida). These issues have never ^been decided and now never will be. Yet surely the parties thought these clauses, here cavalierly brushed aside, meant something. It also dispenses JIG III from following those commercially reasonable practices, such as notice of breach, demanded by the code.
The majority, rather than looking to the commercial law of the State of Florida, has chosen to look to general maritime, tort law. In so doing it holds that under the general maritime law a manufacturer/seller owes a purchaser with whom it is in a direct and elaborate contractual relationship regarding a product a free-floating duty 6 not to produce a negligently-constructed or designed product. The holding, I emphasize, is not that a duty is owed to avoid producing a negligently-designed product capable of causing personal injury or damage to property other than to the product itself; 7 rather it is that the manufacturer owes the purchaser (in direct contractual relationship) a duty to produce a product so negligence-free that it cannot harm itself. 8 Although there is, admittedly, some slender authority which supports this position, 9 there is equally persuasive (and in my opinion much better reasoned) authority to the contrary. *181 See, e. g., Hawkins Construction Co. v. Matthews Co., 190 Neb. 546 , 209 N.W.2d 643 (1973). I would follow the logic of the latter and hold that no such tort duty exists in the general maritime law.
There are grey areas where doubt may exist whether the principles of the law of torts or the law of sales control a given case, but this is not one. Just as tort principles clearly control when a consumer, whether or not in privity with a seller or manufacturer, is injured by a negligently-manufactured consumer product, so our case appears to fit squarely within the territory clearly reserved for the law of sales. Here the purchaser/owner was in a direct contractual relationship with the seller/manufacturer. There is no personal injury, and the only damage to JIG Ill’s property is to the hull of the Princess and the gear which had, at the time of the accident, become an integral part of the ship. When there is privity, no personal injury, and property damage only to the defective product itself, any remedies which a purchaser might have against his seller/manufacturer should be given by the laws of sales or the particular terms of the contract between the parties, not by the law of torts. The majority’s contrary rule, which gives tort law preeminence, mangles the intricate mechanism of the U.C.C. and rewrites past contracts of maritime manufacturers such as Atlantic Marine entirely, changing the negotiated terms concerning the quality of the goods to be delivered. Quality, of course, directly affects price. Both quality and price should be negotiable items, and the law of sales is the framework within which the negotiations should take place — and did take place here. For these reasons I would hold that the general maritime law should not and does not recognize a tort-based, product-liability cause of action based either on negligence or strict manufacturer liability when there is privity and when the only loss suffered results from damage to the defective product itself. In holding that it does, we simply withdraw from the parties, and after the fact, a portion of the freedom to contract which the codifiers meant them to keep.
Fortunately, the rich new legal lode discovered by the majority, which has lain largely unnoticed under the noses of courts for time immemorial — that of tor- *182 tious breach of contract — will likely remain largely unworked. In the normal contract case it does not signify whether the promisor carelessly but fortuitously performs his promise or negligently fails to do so: the question is whether or not he performed it at all. And the alien duties from the world of torts which the majority materializes on JIG’s side of the scales in our case may, they say, be disclaimed by contract — and doubtless promptly will be by knowledgeable shipbuilders operating within our reach. 10 And so we will return to the road which we should never have left, contract law, leaving as signs of our passage only a mulcted Atlantic Marine and a pitfall for the uninformed. I would reverse.
. Of course, not all of the details of each sales transaction are spelled out in a written or even an oral agreement. Rather, the parties are deemed to have contracted with the applicable commercial law in mind. Thus, many terms are now imposed, unless modified or disclaimed, by Article 2 of the Uniform Commercial Code (in 49 of the 50 states). It is important to note, however, that with certain limited exceptions virtually every term supplied by the U.C.C. is modifiable by the parties. See U.C.C. § 1-102(3) and (4). Usually the implied detail is simply displaced if specific provision is made on its subject. Other implied terms, for instance the implied warranty of merchantability, must be specifically disclaimed in a fixed manner — but even these are subject to negotiation.
. Breach and disclosure of warranty and notice were all issues in the district court. None, however, were submitted to the jury because the trial judge believed that if JIG could not prevail (on the facts) on its tort theories it would also lose on breach of warranty.
. Or, more correctly, the contract supplemented by the code.
. If, because of contractual modification of the code’s damages sections, it seems that one or the other of the parties is without adequate remedy, it must be remembered that limitations are negotiated. It is possible, of course, *180 that certain limitations could be commercially unreasonable, unconscionable, or could fail of their essential purpose. These can be ignored. U.C.C. §§ 2-718, 719.
. The legal effect of the purported limitations and disclaimers was never passed upon below.
. Duty is the sine qua non of tort liability. In considering whether such liability exists, one must examine what type of duty is owed (the scope) and to whom. The “to whom,” it seems to me, is of utmost importance here. The situation would be entirely different if JIG III were not in contractual privity with Atlantic Marine. Even the Supreme Court of New Jersey, which has pushed tort recovery for property damage to its prior outer limit in Santor v. A & M Karagheusian, Inc., 44 N.J. 52 , 207 A.2d 305 (1965), has recognized that privity is an important factor in the calculus. As a result, it has reserved the question of whether the rationale of Santor applies when a purchaser brings a strict liability tort suit against his seller for economic loss or for recovery of diminution in the basis of the bargain. Heavner v. Uniroyal, Inc., 63 N.J. 130 , 305 A.2d 412, 424, 426 , 427 n. 16 (1973).
The majority’s tautological observation that “. . the common assumption is that par-. ties intend their contractual relations to be governed by the law of contract, and their tortious relations, if any, to be governed by the law of torts; this is true even if the tortfeasor is a seller, the victim the buyer, and the only loss is property damage to a chattel purchased by the buyer from the seller”, post at 174, does little to explain from whence the tort duty arises in the wholly contractual relationship which it describes.
. The Princess was doubtless potentially dangerous to its crew. However, they suffered no personal injury or property damage. Had the majority restricted Atlantic Marine’s duty to that of producing a shrimp boat which was not dangerous to persons or external property the injury suffered here (the loss of the Princess) would not have been within the risk.
. As I read the majority opinion, its logic, for instance, would allow the purchaser of negligently-mixed paint which peels to recover its price even though all warranties were conspicuously disclaimed.
. The majority cites a number of cases, post at 175, as supportive of its position. Of these, Sterner Aero A. B. v. Page Airmotive, Inc., 499 F.2d 709 (10th Cir. 1974) is distinguishable. There the defective product was a replacement engine. The suit, however, sought recovery for damage to the body of the airplane which was clearly distinct from the new engine. The majority also asserts that its holding has been previously embraced a number of times by admiralty courts. However, of the cases cited, post at 175, only one, Dudley v. Bayou Fabricators, Inc., 330 F.Supp. 788 (S.D.Ala.1971) is on point. In Houston-New Orleans, Inc. v. Page Engineering Co., 353 F.Supp. 890 (E.D. La. 1972) the defective product was a reinstalled electric control panel. Plaintiff sued for damages caused by the panel, not to it. It was a barge and a crane boom (neither of which was manufactured by Page) which were damaged. In neither Sears, Roebuck & Co. v. *181 American President Lines, Ltd., 345 F.Supp. 395 (N.D.Cal.1971) and Taisho Fire & Marine v. Vessel Montana, 335 F.Supp. 1238 (N.D.Cal. 1971) was privity of contract present. In each the plaintiff sued the ship manufacturer/repairer for damage to cargo. Neither plaintiff was a shipowner. Also, obviously, neither suit involved an attempt to recover damages for injury to the defectively-designed ship. The remainder of the cases cited are personal injury suits.
Although Prosser and a number of other commentators state flatly that a seller’s tort liability for negligent design includes property damage to the defective chattel itself, most of the cases cited in support of the rule involve situations in which an ultimate consumer has sued a manufacturer and privity of contract is absent. See W. Prosser, The Law of Torts § 101 at 665-66 (4th ed. 1971) and cases cited therein. See also dissent footnote 6 post at 181.. Professor Wade, whom the majority cites, is not entirely satisfied that such a tort duty exists presently.
Between the situations involved in the last two paragraphs is one which is hard to classify. What happens when the product supplied by the defendant damages itself? Suppose the brakes in an automobile are defective; they fail and the automobile crashes and is destroyed. Suppose the electric wiring system in the car is defective; it develops a short and soon drains the battery so that it has to be replaced. Are these cases to be classified with the first paragraph, above or with the second, or do they require a separate classification? One could say that tort recovery is not available whenever the damage is to the product itself. Or he could say that tort recovery is permissible whenever the harm to the product itself is of the “accident” type, as in the first illustration above. There is no clearly correct decision between the two positions. My personal inclination is toward the second one, but it is by no means a conviction.
J. Wade, Is Section 402A of the Second Restatement of Torts Preempted by the U.C.C. and Therefore Unconstitutional?, 42 Tenn.L.R. 123, 129 (1974).
. The court’s opinion does stop short of imposing, in the name of public policy, an un-waivable minimum standard of quality, and so of price, in addition to the policy measures thought sufficient by those who drafted the basic U.C.C. and the legislatures which have enacted its various versions.

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/8896955. Public record. Not legal advice.