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Consequential Damages can be Recovered when Privity of Contract is Absent

This article was edited and reviewed by FindLaw Attorney Writers | Last reviewed March 26, 2008

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On September 12, 1997, the Virginia Supreme Court resolved a difficult conflict regarding the types of damages which a plaintiff can seek to recover from a defendant absent privity of contract. The Virginia Supreme Court answered the following certified question from the United States Court of Appeals for the Fourth Circuit in the case Beard Plumbing and Heating, Inc. v. Thompson Plastics, Inc., et al., Record No. 970131, in the affirmative:

Is privity required to recover economic loss under Va. Code 8.2-715(2) due to the breach of the implied warranty of merchantability, notwithstanding the language of Va. Code 8.2-318?

Beard Plumbing and Heating, Inc. was a plumbing subcontractor in a condominium development in Woodbridge, Virginia. Beard Plumbing installed chlorinated polyvinyl chloride ("CPVC") plumbing fittings which ultimately failed when used in hot water applications. Beard Plumbing sued the manufacturers of the CPVC fittings, Thompson Plastics, Inc. ("TPI") and NIBCO, Inc., for negligence and breach of implied warranty of fitness for a particular purpose and implied warranty of merchantability. Beard Plumbing purchased the fittings through various plumbing supply houses and therefore, there was no purchase contract between Beard Plumbing and the CPVC fittings manufacturers NIBCO and TIP. Beard Plumbing alleged only economic damages in its complaint. NIBCO filed a Motion for Summary Judgement which was granted by the District Court on the basis that economic damages are not recoverable without privity of contract. The Fourth Circuit affirmed the grant of summary judgment on all counts except for the breach of implied warranty of merchantability claim on which they certified the above issue.

The Virginia Supreme Court initially held that Va. Code 8.2-715(2)(a) requires the existence of a contract between the plaintiff and defendant before the plaintiff can recover any type of consequential damage from the defendant. The Court then held that Va. Code 8.2-318 does not preempt the requirement of privity of contract under Va. Code 8.2-715(2)(a) which must exist before a claim for consequential damages can proceed. The Court held that Va. Code 8.2-318 abrogates the common law requirement of privity of contract as a defense to complete causes of action while the Va. Code 8.2-715(2)(a) privity defense only limits the collection of consequential damages. Specifically, the Court held "Section 8.2-715(2)(a) does not address the general subject of the common law privity requirement's effect on the ability of a litigant to maintain an action for breach of warranty. It is limited to that part of the litigation dealing with the damages which may be recovered and imposes a contract requirement only where recovery of consequential damage is sought."

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