Breach of Warranty and Negligent Misrepresentation


General Electric Capital Corp. v. Rauch, 1998 WL 250841 (Mo. App. S.D. 5/19/98). BREACH OF WARRANTY AND NEGLIGENT MISREPRESENTATION- Plaintiff sued the purchaser of two leases, one regarding a front-end computer system and one regarding an imagemaster, for failure to make payments under the lease. Purchaser counterclaimed for breach of warranty and negligent representation. The Missouri Court of Appeals applied UCC Article Two after noting that the use of the term "transaction" instead of the term "sale" in UCC ?2-102 makes it clear that Article Two is not confined to those transactions in which there is an actual transfer of title.

In the case at bar, the seller promised that, if the computer equipment failed to perform properly, then the seller would "pick up the equipment and continue to make [the] lease payments." The imagemaster failed to function properly because of an internal hardware problem and the buyer eventually rented another imagemaster. As such, there was a clear claim for breach of warranty for the imagemaster. However, when the front-end computer system malfunctioned, the seller seasonably replaced the it. As such, the court held that the warranty was not breached with respect to the computer system.

The court also held that the problem with the imagemaster was an internal hardware problem. Had the imagemaster not been damaged, it would have operated in the manner described by the seller. According to the court, the seller could not be held culpable for negligent misrepresentation because of a latent defect.