Chapter 1: Legal Ethics CHAPTER 15: WARRANTIES AND PRODUCT LIABILITY 1
Feb 25, 2016
1
Chapter 1: Legal EthicsCHAPTER 15:
WARRANTIES ANDPRODUCT LIABILITY
2© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Learning Objectives
1. What factors determine whether a Seller’s or Lessor’s statement constitutes an express warranty or mere puffery?
2. What implied warranties under the UCC?
3© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Learning Objectives
4. Can a manufacturer be held liable to any person who suffers an injury proximately caused by the manufacturer’s negligently made product?
5. What are the elements of a cause of action in strict product liability?
6. What defenses to liability can be raised in a product liability lawsuit?
4© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties A warranty is an assurance or
guarantee by the seller of certain facts concerning the goods being sold or leased.
If seller breaches a warranty, buyer can recover damages, or rescind the contract.
5© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Warranties automatically arise in most
commercial sales transactions.• Normally warranties can be disclaimed or
modified with specific language in the contract.
6© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Warranties of Title.– Under the UCC, three types of warranties arise in
sales and lease contracts:•Good Title.•No Liens.•No Infringements.
7© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Express Warranties.– Seller can create warranty by making
representations about quality, condition, or performance of good, by:• Any Affirmation or Promise.• Any Description.• Any Sample or Model.
8© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Express Warranties.– Seller does not have to use the words “guarantee”
or “warranty.”– Basis of the Bargain. • Reasonable buyer must only believe warranty was
‘basis of the bargain.’• Buyer must rely on warranty when he enters into
contract.
9© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Express Warranties.– Statements of Opinion and Value. • Only statements of fact create express warranties.• Exception for Statements of Opinion by Experts. • Puffery versus Express Warranties.
10© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Implied Warranties.– Implied Warranty of Merchantability:
Automatically arises from sale of goods by merchants which are “reasonably fit for ordinary purposes for which such goods are sold.”• Conform to promises on label.• Adequately packaged and labeled.
11© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Implied Warranties.– Implied Warranty of Merchantability:• Merchantable Goods: fit for ordinary purposes for
which such goods are used.• Merchantable Food: fit to eat.• CASE 15.1 WEBSTER V. BLUE SHIP TEA ROOM, INC.
(1964). Does a patron assume the risk of a fishbone in fresh fish soup?
12© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Implied Warranties.–Implied Warranty of Fitness for a
Particular Purpose.• Arises by any seller who: –Knows the particular purpose for which the
goods are being bought; and–Knows the buyer is relying on seller’s skill and
judgment to select suitable goods.
13© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Implied Warranties.–Implied Warranty of Fitness for a
Particular Purpose.• Ordinary vs. Particular Purpose: Goods can
be merchantable but unfit for a particular purpose.• Knowledge and Reliance Requirements.
14© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Implied Warranties.–Implied Warranty from Prior Dealings or
Trade Custom.• Arises when both parties to a contract
have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.
15© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Overlapping Warranties. Warranty Disclaimers: depends on
type of warranty.–Express Warranties can be disclaimed:• If a clear written disclaimer in contract
with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).
16© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Warranty Disclaimers: depends on
type of warranty.–Implied Warranties. Unless
circumstances indicate otherwise, warranties of fitness and merchantability can be disclaimed with the words “As Is,” “With All Faults.
17© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties Warranty Disclaimers: depends on
type of warranty.–Implied Warranties. Disclaimer of the
Implied Warranty of Merchantability: must use the word merchantability.• Disclaimer of the Implied Warranty of
Fitness: must be in writing and conspicuous.
18© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Warranties• Magnuson-Moss Warranty Act.– Federal law to prevent deception in warranties by
making them easier to understand.– Enforced by Federal Trade Commission.• Full Warranty (free repair/replacement).• Limited Warranty.• Implied Warranties arise under UCC -- not Magnuson-
Moss.
19© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Lemon Laws
• Coverage of Lemon Laws.– Applies primarily to automobiles.– Give consumer remedies for automobiles under
warranty that cannot be fixed with a certain number of attempts.
– Buyer is entitled to new car, replacement of defective parts or return of payment.
• Arbitration is typical Procedure.
20© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Product Liability• Product Liability is not a new tort.• Liability can be based on:– Negligence; – Misrepresentation; – Strict Liability; – Warranty Theory.
21© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Product Liability• Negligence.–Based on a manufacturer’s breach of the
reasonable standard of care and failing to make a product safe.
– Due Care Must Be Exercised in: design, selection of materials, using appropriate production process, assembling and testing, adequate warnings, inspection, and testing.
22© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Product Liability• Negligence.– Privity of Contract Not Required. No privity of
contract required between Plaintiff and Manufacturer. Liability extends to any person’s injuries caused by a negligently made (defective) product.
23© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Product Liability• Misrepresentation.– Occurs when fraud committed against consumer
or user of product. Fraud must have been made knowingly or with reckless disregard for safety.
– Plaintiff does not have to show product was defective.
24© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Product Liability• Strict Product Liability.– Strict Liability holds people liable for results of
their acts, regardless of their intentions or exercise of reasonable care.
25© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Strict Product Liability and Public Policy. – Consumers should be protected from unsafe
products;– Manufacturers and distributors should be liable to
any user of the product;– Manufacturers, sellers and distributors can bear
the costs of injuries.
26© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Strict Product Liability and Public Policy.
–CASE 15.2 BRUESEWITZ V. WYETH, LLC (2011). What do you think about the ethical or moral implications of this decision?
27© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Requirements for Strict Liability:
1. Product must be in defective condition when sold.2. Defendant is in the business of selling the
product.3. Product must be unreasonably dangerous.
28© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Requirements for Strict Liability:
4. Plaintiff must be physically harmed5. Defective condition must be proximate cause of
injury.6. Goods are in substantially same condition.
29© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Requirements for Strict Liability:– Proving a Defective Condition.• Plaintiff does not need to show product or in what
manner the product become defective. • But plaintiff must show product was defective and
“unreasonably dangerous” to the user.
30© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability• Requirements for Strict Liability:– Unreasonably Dangerous Products.• The product was dangerous beyond the expectation of
the ordinary consumer.• A less dangerous alternative was economically feasible
for the manufacturer, but the manufacturer failed to produce it.
31© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability
Product Defects – Restatement (Third of Torts).–Manufacturing Defects. –Design Defects. –Warning Defects.
32© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Product Defects – Restatement (Third
of Torts).–Manufacturing Defects.• Occurs when a product “departs from its
intended design even though all possible care was exercised in the preparation and marketing of the product.”
33© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Product Defects – Restatement (Third
of Torts).–Design Defects. • Product is manufactured correctly, but
defect is based on design. Test: plaintiff must show defendant’s failure to use a “reasonable alternative design” rendered the product not reasonably safe.
34© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Strict Product Liability.–Design Defects. • Factors to be Considered. –Magnitude and probability of
foreseeable risks. –Relative advantages and disadvantages
of product.–Most courts use “risk-utility” analysis.
35© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Product Defects – Restatement (Third
of Torts).–Inadequate Warnings.• A product may be defective because of
inadequate warnings or instructions.• Liability based on foreseeability that
proper instructions/labels would have made the product safe to use.
36© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Product Defects – Restatement (Third
of Torts).–Inadequate Warnings.• Obvious Risks. No duty to warn.• Foreseeable Misuses. Seller must warn
about foreseeable misuse.
37© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Strict Product Liability Market Share Liability.–Theory of liability when multiple
Defendants contributed to manufacture of defective product.–Liability of each Defendant is
proportionate to the share of the market held by each respective Defendant.
38© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Defenses to Product Liability Assumption of Risk.–CASE 15.3 BOLES V. SUN ERGOLINE,
INC. (2010). Why wasn’t assumption of risk a valid defense in this case?
Product Misuse. –Plaintiff does not know the product is
dangerous for a particular use.
39© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Defenses to Product Liability Comparative Negligence.–Defendants may be able to limit
damages by apportioning fault.–Commonly Known Dangers.–Knowledgeable User.