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Alloway v. General Marine Industries6/30/1997
d that a consumer could maintain a strict-liability claim against a manufacturer for loss in value of a defective carpet. Essentially, the Appellate Division held that GMI, as the successor to Glasstream, was liable to Alloway and New Hampshire in negligence and strict liability for economic loss caused by the sinking of the boat.
The Supreme Court granted GMI's petition for certification.
HELD: Under New Jersey law, GMI is not liable in tort for Alloway's and New Hampshire's economic loss resulting from a defect in a purchased product that destroyed or diminished the worth of only that product.
1. Generally, tort principles are better suited to respond to claims for personal injuries or damage to other property, while contract principles more readily respond to claims for economic loss caused by damage to the product itself. (pp. 6-8)
2. The relative bargaining power of the parties and the allocation of the loss to the better risk-bearer are relevant to the distinction between tort principles and contract principles of recovery. (pp. 9-10)
3. The Legislature adopted a comprehensive system for compensating consumers for economic loss arising from the purchase of defective products by enacting the U.C.C., which attempts to strike the proper balance between manufacturers and purchasers for economic loss arising from injury to a defective product. (pp. 10-11)
4. The vast majority of courts across the country have concluded that purchasers of personal property, whether commercial entities or consumers, should be limited to recovery under contract principles. (pp. 11-17)
5. The extension of strict liability to include claims for purely economic loss has been criticized by scholars and has been rejected by the American Law Institute's proposed Restatement of Torts. (pp. 17-19)
6. Several state courts have confined consumers to contract principles in actions for economic loss. (pp. 20-22)
7. Because Alloway and New Hampshire have not raised the issue, the Court does not resolve the issue whether tort or contract law applies to a product that poses a risk of causing personal injuries or property damage but has caused only economic loss to the product itself. (pp. 22-23)
8. The Legislature did not intend to codify in the New Jersey Products Liability Law all common-law remedies and, consequently, that law is not dispositive of claims involving fraud. (pp. 23-25)
9. Because judicial decisions and statutory enactments, including the U.C.C., protect consumers from overreaching, a tort cause of action for economic loss duplicating the one provided by the U.C.C. is superfluous and counterproductive. (p. 26)
10. To impose liability on GMI would impose the cost of an uncertain liability on one that did not agree to assume that cost. (pp. 26-27)
11. In view of the Court's holding, it does not reach the additional issues concerning GMI's liability as Glasstream's successor or the effect on GMI of the purchase in bankruptcy of Glasstream's assets free and clear of all claims. (pp. 28-29)
Judgment of the Appellate Division is REVERSED, and the judgment of the Law Division dismissing the complaint is REINSTATED.
JUSTICE HANDLER filed a separate Concurring opinion in which JUSTICE STEIN joins, expressing confidence that the Court's decision does not preclude tort remedies for economic loss where there is a gross inequality of bargaining power on the part of the purchaser, whether it be a commercial or a non-commercial purchaser.
CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI and COLEMAN join in JUSTICE POLLOCK's
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