A factory owner bought a brand-new machine from an assembly company. A machine parts company manufactured the machine. However, the machine parts company delivered it to the assembly company in a disassembled state, and the assembly company assembled it at the factory owner's plant.
Unfortunately, as soon as the machine was put into use on the production line, it malfunctioned and ended up damaging the materials which it was processing. The factory owner had to throw away the damaged materials, resulting in a substantial financial loss.
Upon conducting an inspection, it was discovered that the machine had an obvious defect which the assembly company should have detected during the assembly process. Unfortunately, the assembly company has gone out of business and was not insured.
In a legal dispute between a factory owner and a machine parts company over compensation for ruined materials, what is the likely outcome?
A factory owner bought a brand-new machine from an assembly company. A machine parts company manufactured the machine. However, the machine parts company delivered it to the assembly company in a disassembled state, and the assembly company assembled it at the factory owner's plant.
Unfortunately, as soon as the machine was put into use on the production line, it malfunctioned and ended up damaging the materials which it was processing. The factory owner had to throw away the damaged materials, resulting in a substantial financial loss.
Upon conducting an inspection, it was discovered that the machine had an obvious defect which the assembly company should have detected during the assembly process. Unfortunately, the assembly company has gone out of business and was not insured.
In a legal dispute between a factory owner and a machine parts company over compensation for ruined materials, what is the likely outcome?
Because the machine was supplied for assembly by the assembly company, the factory owner may not be able to establish that it was owed a duty of care by the machine parts company, and so is not likely to have a successful claim against the machine parts company to recover the cost of the materials.
(C) The factory owner, in this case, is unlikely to have a successful claim. This is because, in the tort of negligence, the manufacturer of a product (in this case, the machine parts company) owes a duty of care to the consumer (the factory owner) only when the product is intended to reach the consumer without any reasonable expectation of an intermediate examination. However, in this case, the product was supplied for assembly by the assembly company, and there was a clear expectation of an intermediate examination. Therefore, it's unlikely that the machine parts company owes a duty of care to the factory owner.
Option (A) is incorrect because even if the machine parts company fell below a reasonable standard of care, it doesn't necessarily establish that a duty of care exists. As explained above, the machine parts company doesn't appear to owe a duty of care to the factory owner.
Option (B) is incorrect because although the factory owner may have suffered damage caused by a product defect, this is not enough to make a successful claim against the machine parts company. The Consumer Protection Act 1987 requires proof of damage caused by a product defect, but it doesn't apply to business property damage. The machine parts company may be liable for negligence, but as discussed above, the factory owner is unlikely to have a successful claim.
Option (D) is incorrect because the machine parts company's contract for supply of the machine was with the assembly company, not with the factory owner. Therefore, the factory owner cannot rely on any implied terms in such contract.
Option (E) is incorrect because the cost of the damaged materials is not pure economic loss, but rather a consequential loss. However, this doesn't change the fact that the factory owner is unlikely to have a successful claim, as explained above.