Tex Enterprises, Inc. v. Brockway Standard, Inc.

Brockway Standard, Inc. (Brockway) (defendant) made steel containers. J.F. Shelton Company (Shelton) (defendant) was a distributor of Brockway’s steel containers. When Brockway shipped steel containers to Shelton, Brockway included an invoice. Brockway’s invoice contained terms and conditions warranting that the containers were free from defects but disclaiming all other warranties, express or implied. Tex Enterprises, Inc. (Tex) (plaintiff) used steel containers to hold Tex’s liquid-coating product. Originally, Tex used containers made by a nonparty. In 1997, a Brockway representative persuaded Tex to switch to Brockway containers, claiming Brockway containers were “just as good” for Tex’s purposes. Tex began regularly purchasing Brockway steel containers from Shelton. Tex had no knowledge of the contract between Shelton and Brockway. By 1998, Tex received numerous customer complaints about the Brockway containers. The containers’ rust inhibitor had a negative reaction with Tex’s product that ruined Tex’s product. Tex sued Shelton and Brockway, alleging breach of express warranty, breach of implied warranties, and breach of contract. Tex settled with Shelton. Brockway moved to dismiss on the grounds that these claims needed some contractual basis, and Tex and Brockway were not in privity of contract, which means they were not both parties to the same contract. Brockway also argued that Tex could not bring any warranty claims as a third-party beneficiary of Brockway’s contract with Shelton because of the warranty disclaimers in that contract. The trial court agreed with Brockway and dismissed the suit. The appeals court reversed, holding that Brockway’s direct representation to Tex created an implied warranty.