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New Jersey Transit Corporation v. Harsco Corporation

497 F.3d 323 (3rd Cir. 2007)

CONTRACTS; WARRANTIES —Where a contract contains an express warranty, limited to a given time period, but contains no waiver that limits or excludes the implied warranty of merchantability or a fitness for a particular use, the express warranty, and its time limit, replace the warranty after the time limit has expired.

A transit company awarded a contract to a manufacturer to build a specialized railroad inspection vehicle. More than two years after the vehicle was placed in service, the vehicle was destroyed by a fire while in operation. The vehicle was under a one year written warranty from the manufacturer and the engine was under a one-year warranty that was issued by the engine maker to the manufacturer. Both warrantees had expired by the time the vehicle burned. The transit company brought a claim against the manufacturer and the engine maker who supplied the engine to the manufacturer.

The transit company alleged that the engine caused the fire and that aside from the one-year express warranty issued by the manufacturer, there was an implied warranty of fitness for a particular use and merchantability existed, and since the engine was being used under normal operating conditions, the implied warranty should have covered the damage that was caused by the fire. The lower court granted the manufacturer’s request for summary judgment and dismissed all claims, cross-claims, and third-party claims against the manufacturer, the engine maker, and all other parties named by the transit company.

On appeal, the transit company argued that while the language of the warranty limited the express warranty to one year, there was no language to limit or exclude the implied warranty of fitness for use. The Court found that there was no implied warranty of fitness for a particular use because the transit company, as the buyer, did not rely on the manufacturer’s expertise in the manufacturing of the engine, and because it was the transit company that issued its own specifications for what it needed and was not in an inferior bargaining position. The Court also found that the implied warranty for merchantability was only consistent with the express warranty for one year and that, after the year, it was in conflict with the one year express warranty, and that under such circumstances, the express warranty replaced the implied warranty. On that basis, the Court concluded that the vehicle was not under warranty when it caught fire. The Court noted that its finding was consistent with the principle that there should be no surprises encompassed within a warranty. Consequently, the lower court’s dismissal of the transit company’s claims was affirmed.

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