## Facts

- Draft Systems, Inc. (Draft) manufactured dispensing devices used for tapping beer kegs.
- Each device used a valve and a syphon tube; Draft bought the syphon tubes from Rimar Manufacturing, Inc. (Rimar).
- Draft’s purchase orders called for tubing made from nylon-11 (also referenced as nylon 2908L).
- Rimar delivered tubing that was actually made from nylon-6 rather than nylon-11.
- When the shipment arrived, Draft inspected for size and quantity and reviewed accompanying certification documents stating the tubing was nylon-11.
- Nylon-6 and nylon-11 were not distinguishable by ordinary visual inspection; distinguishing them required infrared testing.
- After Draft incorporated the tubing into its dispensing units and the units went into the field, Draft received complaints from beer distributors that the dispensers were malfunctioning and causing beer to go bad.
- The nylon-6 tubing absorbed more beer than nylon-11 would have, contributing to product failure and spoilage.
- Draft repaired and replaced defective units and financed those remedial efforts with borrowed funds, incurring interest expense.
- Draft sued Rimar for breach of the implied warranty of merchantability and breach of the implied warranty of fitness for a particular purpose.
- A jury found for Draft on both implied-warranty theories and awarded approximately \$409,184.16, including consequential damages that covered (in part) interest Draft paid on loans taken during the repair-and-replacement period.
- After trial, Rimar moved for judgment notwithstanding the verdict (JNOV) and, alternatively, a new trial, challenging the evidentiary basis for the damages award and objecting in particular to consequential damages and loan-interest recovery.

## Issues

1. Whether the evidence was sufficient to sustain the jury’s finding of breach of the implied warranties and that the nonconforming nylon tubing caused Draft’s losses.
2. Whether the evidence was sufficient to sustain an award of consequential damages under U.C.C. § 2-715, including interest on loans Draft obtained to fund repair and replacement of defective units.
3. Whether Draft’s inspection and acceptance of the tubing defeated or limited its warranty recovery where the nylon-6/nylon-11 difference was not discoverable by ordinary inspection and Draft relied on Rimar’s certification.

## Decision

- The court denied Rimar’s motion for JNOV.
- The court denied Rimar’s motion for a new trial.
- The court held that the trial record provided an adequate basis for the jury to find that Rimar supplied tubing that did not conform to the contract and that the nonconformity caused the field failures and resulting losses.
- The court upheld the jury’s consequential-damages award, including recovery of interest Draft paid on loans taken to finance repair and replacement, as a compensable loss proximately resulting from the breach and supported by the evidence.
- The court rejected Rimar’s contention that Draft’s inspection and acceptance barred recovery, reasoning that the defect was not detectable through the kind of inspection Draft performed and that Draft reasonably relied on the seller’s certification.

## Legal Principles

- A court may not set aside a jury verdict on a JNOV motion if, viewing the evidence in the light most favorable to the verdict winner, there is a legally sufficient evidentiary basis for the jury’s findings.
- A new trial is not warranted where the verdict has adequate support in the record and is not against the weight of the evidence.
- Under U.C.C. § 2-715, consequential damages include losses resulting from the seller’s breach that were reasonably foreseeable at contracting and proven with reasonable certainty.
- Consequential damages can include financing costs, such as interest on loans, when the borrowing is a reasonable response to the breach and the interest represents an actual loss tied to repair and replacement efforts.
- A buyer’s inspection and acceptance do not bar warranty remedies for defects that are not discoverable by ordinary inspection, particularly where the buyer relies on the seller’s certifications regarding the goods’ material characteristics.

## Conclusion

In this post-trial decision, the Eastern District of Pennsylvania upheld a jury verdict finding that Rimar breached the implied warranties of merchantability and fitness by supplying nylon-6 syphon tubing instead of specified nylon-11 for Draft’s beer-dispensing units. The court ruled that the evidence supported both causation and the amount of damages, and it permitted consequential damages under the U.C.C., including interest on loans Draft obtained to finance repair and replacement of defective units, while rejecting defenses based on Draft’s inspection and acceptance because the defect could not be detected without specialized testing and Draft reasonably relied on Rimar’s certification.


Draft Systems, Inc. v. Rimar Manufacturing, Inc., 524 F. Supp. 1049 (1981)