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SB-69 Sale of goods: breach of warranty: consequential damages.(2009-2010)

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CALIFORNIA LEGISLATURE— 2009–2010 8th Ext.

Senate Bill
No. 69

Introduced  by  Senator Huff
 (Coauthor(s): Senator Wyland)

February 16, 2010

An act to amend Section 2715 of the Commercial Code, relating to commercial transactions.


LEGISLATIVE COUNSEL'S DIGEST


SB 69, as introduced, Huff. Sale of goods: breach of warranty: consequential damages.
Existing law governs commercial contracts for the sale of goods and specifies damages that a buyer is entitled to recover upon a seller’s breach, including incidental and consequential damages. Consequential damages include any loss resulting from requirements and needs of which the seller had reason to know and that could not be prevented by the buyer through obtaining substitute goods, and injury to person or property proximately resulting from any breach of warranty.
This bill would provide that a seller is only liable for consequential damages to a buyer in an action for breach of warranty alleging that a product is defective if the seller is (1) the manufacturer of the product, (2) exercised substantial control over that aspect or aspects of the design, testing, manufacture, packaging, or labeling of the product, (3) altered or modified the product and that action was a substantial factor in causing the harm, or (4) had actual or constructive knowledge of the defect as specified.
The California Constitution authorizes the Governor to declare a fiscal emergency and to call the Legislature into special session for that purpose. The Governor issued a proclamation declaring a fiscal emergency, and calling a special session for this purpose, on January 8, 2010.
This bill would state that it addresses the fiscal emergency declared by the Governor by proclamation issued on January 8, 2010, pursuant to the California Constitution.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 2715 of the Commercial Code is amended to read:

2715.
 (1) Incidental damages resulting from the seller’s breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover, and any other reasonable expense incident to the delay or other breach.
(2) Consequential damages resulting from the seller’s breach include
(a) Any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and
(b) Injury to person or property proximately resulting from any breach of warranty.
(c) (i) In any action by a buyer for breach of warranty alleging that a product is defective, a seller other than the manufacturer of that product shall not be liable for consequential damages under this subdivision unless any of the following apply:
(A) The seller exercised substantial control over that aspect or aspects of the design, testing, manufacture, packaging, or labeling of the product that caused the harm for which recovery of consequential damages is sought.
(B) The seller altered or modified the product, and the alteration or modification was a substantial factor in causing the harm for which recovery of consequential damages is sought.
(C) The seller had actual or constructive knowledge of the defective condition of the product at the time the seller sold the product to the buyer.
(ii) It is the intent of the Legislature in enacting this paragraph (c) that a seller who is not actively negligent with respect to a product, but is instead a mere conduit of the product, shall not be liable for consequential damages under this subdivision (2).

SEC. 2.

 This act addresses the fiscal emergency declared by the Governor by proclamation on January 8, 2010, pursuant to subdivision (f) of Section 10 of Article IV of the California Constitution.