Civil Engineering Reference
In-Depth Information
imposition of warranties of this kind on one person in favour of another, when there is no
contractual relationship between them, is contrary to any sound policy requirement.
It is, I think, just worth while to consider the difficulties which would arise if the wider
scope of the duty of care put forward by the respondents were accepted. In any case where
complaint was made by an ultimate consumer that a product made by some persons with
whom he himself had no contract was defective, by what standard or standards of quality
would the question of defectiveness fall to be decided? In the case of goods bought from a
retailer, it could hardly be the standard prescribed by the contract between the retailer and
the wholesaler, or between the wholesaler and the distributor, or between the distributor
and the manufacturer, for the terms of such contract would not even be known to the
ultimate buyer. In the case of sub-contractors such as the appellants in the present case, it
could hardly be the standard prescribed by the contract between the sub-contractors and
the main contractors, for, although the building owner would probably be aware of those
terms, he could not, since he was not a party to such contract, rely on any standard or
standards prescribed in it. It follows that the question by what standard or standards alleged
defects in a product complained of by its ultimate user or consumer are to be judged
remains entirely at large and cannot be given any just or satisfactory answer.
The reasoning in these passages receives powerful support from the unanimous decision of
the Supreme Court of the United States of America in
East River Steamship Corp
v.
Transamerica
Delaval Inc
(1986). Charterers of supertankers claimed damages from turbine manufacturers
resulting from alleged design and manufacturing defects which caused the supertankers to
malfunction while on the high seas. The court held
inter alia
, that:
whether stated in negligence or strict liability, no products-liability claim lies in admiralty
when a commercial party alleges injury only to the product itself resulting in purely eco-
nomic loss . . .
This appears to undermine the earlier American authorities referred to by Richmond P in the
New Zealand case of
Bowen
v.
Paramount Builders (Hamilton) Ltd
(1977). The opinion of Lord
Brandon of Oakbrook in
Junior Books Ltd
v.
Veitchi Co Ltd
(1982) and that expressed by the
Supreme Court of the United States of America are entirely in line with the majority decision
of the Supreme Court of Canada in
Rivtow Marine Ltd
v.
Washington Iron Works
(1973) that
the damages recoverable from the manufacturer by the hirers of a crane which was found to
have a defect which made it unsafe to use did not include the cost of repairing the defect.
These principles are easy enough to comprehend and probably not difficult to apply when
the defect complained of is in a chattel supplied complete by a single manufacturer. If the
hidden defect in the chattel is the cause of personal injury or of damage to property other
than the chattel itself, the manufacturer is liable. But if the hidden defect is discovered before
any such damage is caused, there is no longer any room for the application of the
Donoghue
v.
Stevenson
(1932) principle. The chattel is now defective in quality, is no longer dangerous.
It may be valueless or it may be capable of economic repair. In either case the economic loss
is recoverable in contract by a buyer or hirer of the chattel entitled to the benefit of a relevant
warranty of quality, but is not recoverable in tort by a remote buyer or hirer of the chattel.
If the same principle applies in the field of real property to the liability of the builder of a
permanent structure which is dangerously defective, that liability can only arise if the defect
remains hidden until the defective structure causes personal injury or damage to property
other than the structure itself. If the defect is discovered before any damage is done, the loss
sustained by the owner of the structure, who has to repair or demolish it to avoid a potential
