Alloway v. General Marine Industries6/30/1997
0-91. In addition, the court reasoned that the Bankruptcy Court's sale of the boat "free and clear of any interest in [the boat]" did not extend to law suits and, therefore, did not bar the instant action. Id. at 493. Finally, the court held that a suit against GMI as the purchaser of Century's assets in the bankruptcy sale did not constitute a claim against Century. Consequently, plaintiffs' suit against GMI did not offend the Bankruptcy Code's scheme for the priority of claimants. Ibid. Essentially, the Appellate Division held that GMI, as the successor to Glasstream, was liable to plaintiffs in negligence and strict liability for economic loss caused by the sinking of the boat.
II.
The threshold issue is whether plaintiffs may rely on theories of strict liability and negligence to recover damages for economic loss resulting from a defect that caused injury only to the boat itself. Plaintiffs seek damages for the cost of repair and for the boat's lost value on trade-in. They do not allege that other property was damaged or that anyone sustained personal injuries. The question reduces to whether plaintiffs may use tort theories to recover the lost benefit of their bargain from the purchaser of the manufacturer's assets, GMI.
Preliminarily, economic loss encompasses actions for the recovery of damages for costs of repair, replacement of defective goods, inadequate value, and consequential loss of profits. See James J. White & Robert S. Summers, Uniform Commercial Code 534-44 (3d ed. 1988); Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L. Rev. 917, 918 (1966). Economic loss further includes "the diminution in value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold." Comment, Manufacturers' Liability to Remote Purchasers For 'Economic Loss' Damages--Tort or Contract?, 114 U. Pa. L. Rev. 539, 541 (1966).
Allocation of economic loss between a manufacturer and a consumer involves assessment of tort and contract principles in the determination of claims arising out of the manufacture, distribution, and sale of defective products. Generally speaking, tort principles are better suited to resolve claims for personal injuries or damage to other property. See Spring Motors Corp., (supra) , 98 N.J. at 579-80; East River S.S. v. Transamerica Delaval, 476 U.S. 858, 871-72, 106 S. Ct. 2295, 2302-03, 90 L. Ed. 2d 865 (1986); Seely v. White Motor Co., 63 Cal. 2d 9, 403 P. 2d 145, 149-51, 45 Cal. Rptr. 17 (Cal. 1965); Bocre Leasing Corp. v. General Motors Corp., 84 N.Y.2d 685, 645 N.E. 2d 1195, 1197, 621 N.Y.S.2d 497 (N.Y. 1995). Contract principles more readily respond to claims for economic loss caused by damage to the product itself. See Spring Motors, (supra) , 98 N.J. at 580; East River, (supra) , 476 U.S. at 871-72, 106 S. Ct. at 2302, 90 L. Ed. 2d 865; Seely, (supra) , 403 P. 2d at 149-51; Lewinter v. Genmar Indus., 26 Cal. App. 4th 1214, 32 Cal. Rptr. 2d 305, 309 (Ct. App. 1994); Florida Power & Light Co. v. Westinghouse Elec. Corp., 510 So. 2d 899, 901-02 (Fla. 1987); Oceanside At Pine Point v. Peachtree Doors, Inc., 659 A.2d 267, 270 (Me. 1995); Bocre Leasing, (supra) , 645 N.E. 2d at 1199.
Various considerations support the distinction. Tort principles more adequately address the creation of an unreasonable risk of harm when a person or other property sustains accidental or unexpected injury. See Spring Motors, (supra) , 98 N.J. at 570-71, 579-80. When, however, a product fails to fulfill a purchaser's economic expectations, contract principles, particularly as implemented by the U.C.C., provide a more appropriate analytical framework. See East River, (sup
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