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Diamond Fruit Growers, Inc. v. Krack Corp.

United States Court of Appeals, Ninth Circuit
794 F.2d 1440 (1986)


Facts

Krack Corp. (Krack) (defendant) manufactures cooling units using steel tubes manufactured by Metal-Matic, Inc. (Metal-Matic) (third party defendant). Each year, Krack submitted a blanket purchase order for steel tubes to Metal-Matic. Throughout the year, Krack sent release purchase orders to Metal-Matic requesting that tubing be shipped. Metal-Matic responded to these release purchase orders by sending Krack an acknowledgement form and then shipping the tubing. Metal-Matic’s acknowledgement form contained a disclaimer of all liability for consequential damages from its tubing. Additionally, Metal-Matic’s form contained a clause limiting its liability for defects in the tubing to a refund of the purchase price, or to repair or replacement of the tubing. On several occasions, Krack expressed disapproval of these terms, but Metal-Matic refused to change them and Krack continued to accept and pay for Metal-Matic’s tubing. In 1981, Krack sold one of its cooling units, manufactured with Metal-Matic tubing, to Diamond Growers, Inc. (Diamond) (plaintiff). Shortly thereafter, the unit began leaking ammonia into Diamond’s warehouse and damaged a significant amount of Diamond’s stored fruit. Upon closer inspection, the leak was discovered to be caused by a small hole in Metal-Matic’s tubing. Diamond brought suit against Krack to recover damages for the damaged fruit. Krack brought a third party complaint against Metal-Matic for indemnification. The trial court held Krack liable for damages, and found Krack was entitled to contribution from Metal-Matic for thirty percent of these damages. Metal-Matic appealed on the ground that it disclaimed all liability for consequential damages and limited its other liability in its purchase order with Krack, and that no evidence showed that the defective tubing was actually manufactured by Metal-Matic and not one of Krack’s other tubing suppliers.

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Holding and Reasoning (Wiggins, J.)

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