Implied Warranties Case Study

Implied Warranties Case Study Implied Warranties FACTS: Peter and Tanya Rothing operated Diamond R Stables near Belgrade, Montana, where they bred, trained and sold horses. Arnold Kallestad owns a ranch in Gallatin County, Montana, where he grows hay and grain, and raise Red Angus cattle. For more than twenty years, Kallestad has sold between 300 and 1,000 tons of hay annually, sometimes advertising it for sale in the Bozeman Daily Chronicle. In 2001, the Rothing’s bought hay from Kallestad for $90 a ton.

They received a delivery on April 23. In less than two weeks, at least nine of the Rothings’ horses exhibited symptoms of poisoning that was diagnosed as botulism. Before the outbreak was over, nineteen animals died. Robert Whitlock, associate professor of medicine and the director of the Botulism Laboratory at the University of Pennsylvania concluded that the Kallestad’s hay was the source. The Rothing’s filed a suit in a Montana state court against Kallestad, claiming in part, breach of the implied warranty of merchantability.

Kallestad asked the court to dismiss the claim on the grounds that, if botulism had been present, it had been in no way foreseeable. ISSUE: Should the court grant this request? Why or why not? [Rothing v. Kallestad, 337 Mont. 193. 159. P. 3d22 (2007)] DECISION: The court should not grant Kallestad’s request for dismissal because he breached his contract with the Rothings and failed to honor the implied warranty of merchantability. In addition, Kallestad should be ordered to reimburse or compensate the Rothings for the goods and products they’ve lost due to the defective product they received from Arnold Kallestad’s ranch.

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REASONS: From a personal standpoint, Arnold Kallestad may have not known the true conditions of the hay he sold to Peter and Tonya Rothing. For more than two decades Kallestad provided quality alfalfa hay at a competitive price. This, from what the facts tell us, is the first major incident to occur within their business relationship. All the other purchases of hay were perfectly fine and free of disease and toxins. This isolated incident could be viewed as an unforeseeable accident. From a legal standpoint, Peter and Tonya Rothing have the law on their side.

The Rothings claimed Kallestad breached the implied warranty of merchantability which is defined as “a warranty that goods being sold or lease are reasonably fit for the general purpose for which they are sold or leased, are properly packaged and labeled, and are of proper quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased” (Miller and Gaylord 360). The goods in question would be the alfalfa hay Kallestad harvested from his property annually.

For the purpose of this case, goods are defined as “at §  30-2-105(1), MCA, to mean:  all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities ... and things in action” (asci. uvm. edu). Kallestad would be considered a merchant of these goods because he has sold 300 to 1,000 tons of hay every year and advertises his product in the local newspaper on a regular basis.

Therefore, it is established In Arnold Kallestad’s testimony, he admitted the hay the Rothings received were second cuttings and properly treated and dried. He also admitted “the hay was exposed to moisture during the winter months and that, one winter, a ditch near the stacked hay overflowed causing water to go along the west side of the stack of hay and then onto the road” (asci. uvm. edu). During this possible exposure, the overflow of water could have contained toxins from the soil or standing water located on Arnold Kallestad’s ranch, and contaminated the hay sold to Peter and Tonya Rothing.

According to the U. S. National Library of Medicine, “Clostridium botulinum is found in soil and untreated water throughout the world” which may be where the botulism came from (nlm. nih. gov). As for the compensation for the goods and products lost due to the defective hay sold to the Rothings, Kallestad is held liable refunding all monies paid for the purchase of the hay. In addition to the refund, he must also remit monies for the clean-up of infected areas on Diamond R. Stables, veterinary bills for services rendered, and compensation for the 19 animals killed as a result of the hay infected with botulism. Botulism: MedlinePlus Medical Encyclopedia. " U. S National Library of Medicine. Ed. Linda J. Vorvick, MD and Jatin M. Vyas, MD, PhD. U. S. National Library of Medicine, 24 Aug. 2011. Web. 05 Mar. 2012. . Miller, Roger LeRoy. , and Gaylord A. Jentz. Business Law Today: The Essentials: Text & Summarized Cases: E-commerce, Legal, Ethical, and International Environment. 9th ed. Mason, OH: South-Western Cengage Learning, 2011. Print. "Rothing v. Kallestad. " Department of Animal Science (ASCI): University of Vermont. The University of Vermont. Web. 04 Mar. 2012. .

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