## Facts

- Mark Brewster purchased a 38-foot high-performance Fountain “Lightning” powerboat from Silver Sands Marina, Inc. (the selling dealer).
- Fountain Powerboats, Inc. manufactured the boat.
- On July 5, 2003, Brewster operated the boat on Lake Winnipesaukee in New Hampshire.
- Brewster reported that while traveling at high speed, he throttled back, slowed to about 45 mph, and began a turn to port; the boat then dropped to starboard, the bow plunged, and the stern rose, ejecting Brewster and four passengers.
- No one was seriously injured, but the boat capsized and sustained severe damage; Brewster’s insurer declared the boat a total loss.
- Soon after the accident, Brewster notified Silver Sands about the capsize and indicated he believed a design defect caused the event.
- Brewster did not provide direct notice of any alleged breach to Fountain before litigation.
- ACE American Insurance Company, as Brewster’s insurer, paid about $260,340 on the loss and then sued Silver Sands and Fountain as Brewster’s subrogee.
- The complaint asserted strict product liability, failure to warn, violation of the New Hampshire Consumer Protection Act, and breach of the implied warranty of fitness for a particular purpose.
- The court previously dismissed the strict-liability and failure-to-warn claims for failure to state a claim; Fountain later moved for summary judgment on the implied-warranty-of-fitness claim, arguing (among other things) that the claim was barred for lack of timely notice under New Hampshire’s UCC and that the evidence did not support the elements of a “particular purpose” warranty.

## Issues

1. Under New Hampshire’s UCC § 2-607(3)(a), was Fountain entitled to summary judgment on the implied-warranty-of-fitness claim because Brewster/ACE did not give Fountain timely notice of the alleged breach?
2. Was Fountain entitled to summary judgment because the record did not support that an implied warranty of fitness for a particular purpose arose (knowledge of a particular purpose and buyer reliance) or that it was breached?

## Decision

- The court denied Fountain Powerboats’ motion for summary judgment on the implied-warranty-of-fitness-for-a-particular-purpose claim.
- The court held that genuine disputes of material fact existed as to whether Fountain received legally sufficient and timely notice of the claimed breach, including through communications made to the selling dealer.
- The court held that genuine disputes of material fact also existed on whether the elements of an implied warranty of fitness for a particular purpose were met and whether the boat was unfit for Brewster’s intended high-performance use.

## Legal Principles

- Summary judgment may be granted only when the record shows no genuine dispute of material fact and the movant is entitled to judgment as a matter of law; the court views the evidence and reasonable inferences in favor of the nonmovant.
- Under UCC § 2-607(3)(a) (as adopted in New Hampshire), a buyer who has accepted goods must, within a reasonable time after discovering a breach, notify the seller of breach or be barred from any remedy.
- The content and timing of notice are measured by function: notice must alert the recipient that the transaction is claimed to involve a breach and allow investigation, discussion, and potential resolution; it need not be a formal demand or plead legal theories.
- Whether notice was given within a reasonable time and whether it was sufficient is commonly a fact question, particularly where notice may have been transmitted through a dealer or intermediary connected to the manufacturer.
- Under UCC § 2-315, an implied warranty of fitness for a particular purpose arises when (i) the seller has reason to know of the buyer’s particular purpose and (ii) the buyer relies on the seller’s skill or judgment to furnish suitable goods; whether those conditions are satisfied can depend on disputed facts about communications and expectations at the time of sale.
- In subrogation, the insurer stands in the insured’s shoes: the insurer may pursue the insured’s warranty rights, subject to the same defenses, including defenses based on notice and other UCC requirements.

## Conclusion

Because the summary-judgment record allowed a reasonable factfinder to conclude that Fountain received adequate and timely notice of the claimed breach (including via the selling dealer) and because material factual disputes remained about whether an implied warranty of fitness for Brewster’s particular high-speed use arose and was breached, the court denied Fountain’s motion for summary judgment and allowed the implied-warranty claim to proceed.


Ace American Insurance Co. v. Fountain Powerboats, Inc., 2007 WL 2438338 (2007)