## Facts

- Wullschleger & Company, Inc. (Wullschleger), a fabric converter, sold finished cloth to garment makers.
- Jenny Fashions, Inc. (Jenny) sold women’s dresses that were sewn by contract manufacturers.
- Jenny requested and received a six-yard sample of lightweight polyester/rayon woven fabric (style 6697).
- Wullschleger’s salesperson expressly described the fabric as “first quality” under industry standards, knowing Jenny was purchasing fabric for women’s dresses.
- Jenny’s contractors used the sample to make dresses with “circle” skirts; no problem appeared in the sample run.
- Based on the sample, Jenny ordered 37,500 yards of the same fabric pattern over the period from October 1983 to January 1984 to fill customer orders for four dress styles using circle skirts.
- Wullschleger delivered 23,577 yards (less than the full order). The delivered fabric was invoiced at $27,107.81; Jenny paid $11,402.94, leaving an unpaid balance.
- On receipt, Jenny visually inspected the fabric for quantity and quality using a measuregraph (an illuminated examining machine), and found no visible defects.
- After the fabric was cut, sewn into circle skirts, and then pressed, many skirts became distorted.
- Testing showed a substantial portion of the fabric was “skewed,” meaning the warp and filling yarns were not at right angles; the skew exceeded industry tolerance levels for first-quality goods. Wullschleger conceded that some skew existed.
- Jenny attempted to obtain replacement fabric but could not do so in time and cancelled a substantial number of orders from eight customers.
- Wullschleger sued for the unpaid purchase price (with interest). Jenny counterclaimed for breach of contract, alleging breach of an express warranty (“first quality”) and breach of the implied warranty of merchantability, and sought consequential damages in lost profits.
- The case was tried to the court in a bench trial under diversity jurisdiction.

## Issues

1. Did Wullschleger’s description of the fabric as “first quality” create an express warranty that the delivered fabric breached because it was skewed beyond industry standards?
2. Did the skewed fabric breach the implied warranty of merchantability by being unfit for the ordinary purpose of making women’s dresses, including circle-skirt dresses that would be pressed?
3. Was the skew a latent defect such that Jenny’s customary visual inspection on a measuregraph did not bar recovery for breach of warranty?
4. Was Jenny’s use of the fabric to make circle skirts and to press the garments (including by commercial pressing methods) a normal and foreseeable use covered by the warranties, rather than misuse breaking causation?
5. Were Jenny’s lost profits from cancelled customer orders recoverable consequential damages, and were they proven with sufficient certainty?

## Decision

- The court held that Wullschleger’s “first quality” statement was an affirmation of fact about the fabric’s grade under industry standards and created an express warranty.
- The court found that a substantial portion of the fabric was skewed beyond industry tolerances and therefore did not conform to the “first quality” warranty, constituting breach of express warranty.
- The court held the fabric was not merchantable because the skew made it unsuitable for the ordinary, expected use of dress fabric in garments that would be cut, sewn, and pressed; the resulting distortion in circle skirts demonstrated lack of fitness for ordinary purposes.
- The court concluded the skew was latent as to Jenny’s customary receiving inspection; a reasonable visual examination did not reveal the defect, and Jenny’s acceptance and processing did not defeat its warranty claims.
- The court rejected the argument that Jenny’s garment construction choices or pressing methods were abnormal; making circle skirts and pressing finished dresses were foreseeable uses of dress fabric.
- The court found the skew defect was the proximate cause of the skirt distortion, customer rejection, and Jenny’s resulting cancellations.
- The court awarded Jenny consequential damages for lost profits (with interest) attributable to the cancelled orders, and offset those damages against the amount owed on the delivered fabric; the net result was a judgment in Jenny’s favor.

## Legal Principles

- Under U.C.C. § 2-313, a seller’s factual description of goods’ grade or quality (such as “first quality” as measured by trade standards) can create an express warranty when it is part of the basis of the bargain.
- Under U.C.C. § 2-314, goods are merchantable only if they are fit for the ordinary purposes for which such goods are used; fabric sold for garment production is unmerchantable when a defect prevents normal cutting, sewing, and pressing into saleable garments.
- A buyer’s customary inspection on receipt does not bar warranty recovery for defects that are not reasonably discoverable by that inspection; latent defects may support breach claims even after acceptance and use.
- Foreseeable processing and finishing steps in the garment trade (including common pressing methods) are within the expected use of dress fabric; a seller remains responsible when a defect appears during such ordinary use.
- Under U.C.C. § 2-715, consequential damages such as lost profits are recoverable when they result from the seller’s breach and are shown with reasonable certainty, including where defective material causes cancelled resale orders.

## Conclusion

In Wullschleger & Co. v. Jenny Fashions, Inc., the court held that a fabric converter’s assurance that goods were “first quality” created an express warranty and that fabric skewed beyond industry tolerances breached both that express warranty and the implied warranty of merchantability. Because the skew was a latent defect not revealed by Jenny’s customary visual inspection and because making and pressing circle-skirt dresses was a normal, foreseeable use of the fabric, the seller was liable for the distortion-related losses, including Jenny’s proven lost profits from cancelled customer orders, offset against the unpaid price for delivered goods.


Wullschleger & Co. v. Jenny Fashions, Inc., 618 F. Supp. 373 (1985)