## Facts

- Dravo Equipment Company sold a used tractor with a rebuilt engine to Brooks, Boyer, and Bismark (BB & B) in April 1979.
- The sales agreement included a handwritten express engine warranty: the price included a rebuilt engine that would “carry 1500 hours of 100 percent engine warranty.”
- The agreement did not state whether the warranty could be transferred to later purchasers.
- In January 1980, BB & B sold their rock-crushing business, including the tractor, to Jerry German and Crocker J. Hunter (Modoc Rock).
- During negotiations for the business sale, German and Hunter were shown the warranty and checked the tractor’s hour meter to confirm the engine remained within the 1,500-hour warranty period.
- The engine later seized; German and Hunter brought the tractor to Dravo and insisted the work was covered by the warranty.
- Dravo replaced the engine with another rebuilt engine due to the seriousness of the malfunction and the need for quick repair.
- German and Hunter refused to pay for the replacement (including after Dravo offered to accept 50%).
- After defendants regained possession of the tractor, Dravo filed a nonpossessory lien and sued to foreclose the lien and recover the repair cost.
- German and Hunter asserted the express warranty as their sole defense.

## Issues

1. Whether privity of contract is required for a subsequent purchaser to assert an express warranty to defeat a claim seeking purely economic loss (the cost of repairs/engine replacement).
2. Whether German and Hunter, as nonparties to the original sales contract, could rely on the 1,500-hour express engine warranty as a defense to lien foreclosure.

## Decision

- The Oregon Court of Appeals affirmed judgment for the defendants.
- The court held that privity is not required to recover purely economic loss on an express warranty.
- German and Hunter were entitled to assert the express warranty as a defense to Dravo’s claim and lien foreclosure.

## Legal Principles

- A subsequent purchaser may enforce or invoke an express warranty for purely economic loss without contractual privity, at least when the facts support enforcement.
- An express warranty that is separately bargained for and provides a specific performance commitment (here, 1,500 hours of full engine coverage) may be treated as enforceable beyond the original buyer.
- Contract silence on transferability does not, by itself, bar a later purchaser from relying on an express warranty where the later purchaser was shown the warranty and relied on it in acquiring the goods.
- An express warranty may be asserted defensively to defeat a seller’s attempt to collect repair charges and foreclose a lien when the claimed charges fall within the warranty’s scope.

## Conclusion

The court allowed subsequent purchasers to raise an express, time-limited engine warranty as a complete defense to a seller’s attempt to collect repair costs and foreclose a lien, holding that privity is not required to enforce an express warranty for purely economic loss under the facts presented.


Dravo Equip. Co. v. German, 73 Or. App. 165, 698 P.2d 63 (Or. Ct. App. 1985)