125 Wash. 2d 413, 886 P.2d 172 (Wash. 1994)
Safety Factors, Inc., a company engaged in renting, repairing, and selling equipment, purchased seven Night Warrior light towers from Federal Signal Corporation for rental and sale.1 Before the purchase, Safety Factors president Steve Fors discussed the capabilities and features of the new Night Warrior model with Federal Signal representative David Robbins.2 Fors compared it to the older TPME model that Safety Factors had used successfully.3
Safety Factors tested the towers through a full field of motion for approximately five minutes without incident before placing them into service.4 Problems began in late February 1989 during the first rental to Tucci & Sons.5 These included the restrike problem in which lamps failed to relight after an interruption or shut down once reaching full intensity, and one tower had reversed fuel lines.6 Safety Factors contacted Federal Signal service manager Herbert Moore, who visited the site and traced the restrike problem to the Lima generator.7 By May 1989 a local service company retrofitted all seven towers with a voltage regulator device at no cost.8
After the restrike fix, excessive oil leakage from the diesel motors caused repeated shutdowns because vibration loosened the bolts securing the crankcase to the generator mount.9 All Power, the authorized service agent for engine manufacturer Hatz, accepted units for repair beginning in October, but the repairs proved unsuccessful after nine to twelve months of attempts.10 By the end of July 1991, Hallett had made this repair to every tower.11 Additional problems occurred from the outset of use.12 The electric winches failed to raise and lower the lights reliably.13 They were not watertight.14 They had underpowered motors whose gears stripped under binding.15 Ignitions mounted on the generator vibrated apart.16 Short exhaust pipes rusted out and fell off.17 The long loose main power cable was easily pinched when lowered in the dark.18
Federal Signal sued Safety Factors to recover the purchase price of the towers and other items.19 Safety Factors counterclaimed for breach of warranty and damages.20 Following a bench trial the court entered judgment for Federal Signal in the amount of $74,446.64 after allowing limited repair credits.21 The Court of Appeals certified the case to the Washington Supreme Court on October 12, 1993.22
Whether Federal Signal made express warranties to Safety Factors concerning the Night Warrior light towers?23
Under RCW 62A.2-313(1)(a), express warranties are created by any affirmation of fact or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain.24 Formal words such as warrant are unnecessary.25 Mere opinions or commendations do not create a warranty.26
Yes. Steve Fors discussed the Night Warrior capabilities and compared the newer model to the TPME with David Robbins before purchase.27 Robbins provided advertising literature stating the tower is built tough for long lasting reliable performance and will stay ready and roadworthy in all kinds of weather.28 These statements relate directly to the goods and formed part of the basis of the bargain when Safety Factors bought the seven towers for rental and sale.29
The trial court made no findings of fact supporting its conclusion that no express warranties were made despite this evidence of specific affirmations.30
The trial court erred by failing to make findings on whether the oral statements and brochure created express warranties, requiring remand for such findings.31
Whether the implied warranty of merchantability was breached only by the restrike problem or by the full range of problems with the towers?32
Under RCW 62A.2-314(2), goods are merchantable if they pass without objection in the trade under the contract description. They must be fit for the ordinary purposes for which such goods are used. They must conform to other listed standards. Breach occurs if the goods fail any of these requirements under a reasonableness standard considering usage in the trade and characteristics of similar goods.33
No. Although the restrike problem was fixed by May 1989, Safety Factors also experienced excessive oil leakage caused by vibration loosening bolts on the diesel motors.34 The electric winches failed to raise and lower the lights reliably because they were underpowered and not watertight, causing gears to strip.35 Ignitions vibrated apart from excessive vibration, short exhaust pipes rusted out and fell off, and the main power cable was easily pinched when lowered in the dark.36 These multiple defects, all arising from the outset of field use, made the Night Warriors far below the quality of other light towers on the market and prevented their ordinary use for rental customers such as Tucci & Sons.37
Therefore the breach of the implied warranty of merchantability was not limited to the restrike problem.38
Whether the seller or the buyer bears the burden of proving failure to mitigate consequential damages under RCW 62A.2-715(2)(a)?41
Yes. Federal Signal as seller bore the burden to plead and prove that Safety Factors failed to mitigate by cover or otherwise.44 Federal Signal never pleaded failure to mitigate and raised only other affirmative defenses.45 The U.C.C. incorporates common law mitigation without shifting the burden to the buyer.46 A majority of courts treat mitigation as an affirmative defense that the seller must establish.47
The seller bears the burden of proving failure to mitigate consequential damages under RCW 62A.2-715(2)(a).48
Whether the issue of mitigation was tried by the implied consent of the parties?
Under CR 15(b) and Reichelt v. Johns-Manville Corp., an issue is tried by implied consent only when the record shows affirmative references by both parties through pleadings, interrogatories, arguments, or evidence such that the opposing party had notice and opportunity to address it.49
No. Neither party mentioned mitigation in pleadings or trial briefs and no interrogatories addressed it.50 Safety Factors objected when the issue arose in closing argument.51 Federal Signal presented no evidence that cover was feasible or that repairs were unreasonable.52 The only evidence on mitigation came from Safety Factors showing its repair efforts and customer notifications.53 The trial court's questions were indirect and insufficient to establish implied consent.54
The issue of mitigation was not tried by implied consent, so Federal Signal waived the defense.55
Whether Safety Factors presented sufficient evidence of the difference in value between the towers as accepted and as warranted?56
Under RCW 62A.2-714(2), the measure of damages for breach of warranty is the difference at acceptance between the value of the goods as accepted and as warranted.57 Repair costs may serve as evidence of that difference when objective market value evidence is unavailable, provided the buyer meets its burden of proof.58
Yes. Safety Factors presented evidence that the towers had so many problems they were worth basically nothing to customers.59 Repair costs totaled over $8,000 in shop time plus All Power charges.60 It offered no objective market or appraisal value.61 The trial court properly found that Safety Factors failed to sustain its burden to prove the difference equaled the full purchase price.62 Repair costs through July 1991 were properly awarded as a surrogate measure.63
Whether Safety Factors is entitled to consequential damages for lost rentals, lost sales, and rental replacement delivery costs?66
Under RCW 62A.2-714(3) and RCW 62A.2-715(2), a buyer may recover consequential damages including lost profits and incidental costs when the seller had reason to know of the buyer's requirements at contracting and the losses could not reasonably be prevented.67 Damages need not be shown with mathematical precision if the evidence affords a reasonable basis for estimation.68
Yes. Safety Factors lost rentals to Tucci & Sons and Kiewit.69 It lost potential sales estimated at over $39,000.70 It incurred $1,825 in delivery costs for replacements.71 All resulted from the towers' repeated failures that Federal Signal knew would affect rental use.72 Because Federal Signal waived mitigation, the trial court must consider these claims on remand using the proper standards for reasonable estimation rather than requiring mathematical certainty.73
Safety Factors is entitled to have its claims for consequential damages for lost rentals, lost sales, and rental replacement delivery costs considered on remand under the correct burden and proof standards.74