Breach of Contract – Nonconforming goods

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Civil

7th Circuit Court of Appeals

Officials:FLAUM, MANION, and HAMILTON, Circuit Judges

Breach of Contract – Nonconforming goods

No.14-3315; 14-3306 JMB Manufacturing, Inc. v. Harrison Manufacturing, LLC

Buyer attempts to circumvent the economic loss doctrine by bringing suit for negligent misrepresentation.

“There are two problems with this argument. First, even if Bienias made affirmative misstatements about whether the goods would or did comply with the contract’s specifications, he still made them within the scope of his authority as an agent for Summit. Holding Bienias personally liable for statements made within the scope of his authority as an agent to Summit would effectively “make the agent the promisor when the parties had arranged their affairs to put the principal, and only the principal, on the line.” See Greg Allen Construction, 798 N.E.2d at 173. Under Child Craft’s theory, however, a buyer bringing a breach of contract claim against a seller would always be able to bootstrap a negligent misrepresentation claim against any corporate employee who promised that the goods would conform to the contract’s specifications. That view of personal liability would work a dramatic change in Indiana law of business organizations and would effectively nullify the economic loss doctrine in cases of non-conforming goods.  “

Reversed in part. Affirmed in part

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Attorney Derek A. Hawkins is the managing partner at Hawkins Law Offices LLC, where he heads up the firm’s startup law practice. He specializes in business formation, corporate governance, intellectual property protection, private equity and venture capital funding and mergers & acquisitions. Check out the website at www.hawkins-lawoffices.com or contact them at 262-737-8825.