Cite as: 520 U. S. 875 (1997)
Opinion of the Court
sion in East River: Does the term "other property," as used in that case, include the equipment added by the Initial User before he sold the ship to the Subsequent User? We conclude that it does: When a manufacturer places an item in the stream of commerce by selling it to an Initial User, that item is the "product itself" under East River. Items added to the product by the Initial User are therefore "other property," and the Initial User's sale of the product to a Subsequent User does not change these characterizations.
East River arose at the intersection of two principles that govern recovery in many commercial cases involving defective products. The first principle is that tort law in this area ordinarily (but with exceptions) permits recovery from a manufacturer and others in the initial chain of distribution for foreseeable physical harm to property caused by product defects. See Restatement (Second) of Torts § 402A (1965); W. Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on Law of Torts § 101 (5th ed. 1984); East River, 476 U. S., at 867. The second principle is that tort law in this area ordinarily (but with exceptions) does not permit recovery for purely economic losses, say, lost profits. See Restatement (Third) of Torts: Products Liability § 6, Comment d (Proposed Final Draft, Preliminary Version, Oct. 18, 1996); e. g., Rardin v. T & D Machine Handling, Inc., 890 F. 2d 24, 27-30 (CA7 1989). The Court in East River favored the second principle, for it held that an injury to the defective product itself, even though physical, was a kind of "economic loss," for which tort law did not provide compensation. 476 U. S., at 871.
The Court reasoned that the loss of the value of a product
that suffers physical harm—say, a product that destroys itself by exploding—is very much like the loss of the value of a product that does not work properly or does not work at all. See id., at 870. In all such cases, the Court held, "[c]ontract law, and the law of warranty in particular, is well suited" to setting the responsibilities of a seller of a product
879
Page: Index Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 NextLast modified: October 4, 2007