Copyright © 2004 by Prentice-Hall. All rights reserved. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Chapter 6 Strict Liability.

© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman Copyright © 2004 by Prentice-Hall. All rights reserved.

Chapter 6Strict Liability and Product Liability

Chapter 6Strict Liability and Product Liability

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 2

Products LiabilityProducts Liability

The liability of manufacturers, The liability of manufacturers, sellers, and others for the injuries sellers, and others for the injuries caused by defective products.caused by defective products.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. CheesemanChapter 1 35 - 3

Negligence and Fault

Negligence Intentional Misrepresentation

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 4

Negligence and Fault(continued)

• Negligence– A person injured by a

defective product may sue.– The plaintiff must prove

that the defendant breached a duty of due care to the plaintiff that caused the plaintiff’s injuries.

– In a negligence lawsuit, only a party who was actually negligent is liable to the plaintiff.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 5

Negligence and Fault(continued)

• Negligence (continued)

– Consumer can recover damages from the manufacturer of the product even though he or she was only in privity of contract with the retailer

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 6

Tort Liability Based on Fault (continued)

• Negligence (continued)

Failure to exercise due care includes:

– Failing to assemble the product carefully.

– Negligent product design.– Negligent inspection or

testing of the product.– Negligent packaging.– Failure to warn of the

dangerous propensities of the product.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 7

Tort Liability Based on Fault (continued)

• Misrepresentation– Seller or lessor fraudulently

misrepresents the quality of a product, or conceals a defect in it

– Recovery limited to persons injured because they relied on the misrepresentation.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 8

Strict Liability

• In Greenmun v. Yuba Power Products, Inc., the California Supreme Court adopted the doctrine of strict liability in tort as a basis for product liability actions.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 9

Strict Liability (continued)

• Liability Without Fault– Unlike negligence, strict

liability does not require the injured person to prove that the defendant breached a duty of care.

– Strict liability is imposed on manufacturers, sellers, and lessors who make and distribute defective products that cause injury to users and others.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 10

Strict Liability (continued)

• Chain of Distribution– All parties in the chain of

distribution of a defective product are strictly liable for the injuries caused by that product.

– All manufacturers, distributors, wholesalers, retailers, lessors, and subcomponent manufacturers may be sued under doctrine of strict liability in tort

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 11

Strict Liability (continued)

• Privity of contract is not required for a plaintiff to sue for strict liability.

• The doctrine applies even if the injured party had no contractual relations with the defendant.

• The damages recoverable in a strict liability action vary by jurisdiction.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 12

Strict Liability (continued)

• Damages recoverable for personal injuries– May be dollar limited

• Property damage recoverable• Economic loss rarely granted• Punitive damages are often

awarded if the plaintiff proves that the defendant either:– Intentionally injured him or her;

or– Acted with reckless disregard for

his or her safety.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 13

Defective product causes injury

Negligence

lawsuit lawsuit

Strict liabilityConsumer

Retailer

Distributor

Manufacturer (negligent)

Defective product

DefendantDefendant

Defendant

DefendantAll in the chain of distribution are liable

Negligent party is liable

Doctrines of Negligence and Strict Liability Compared

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 14

Defective Product

• To recover for strict liability, the injured party must first show that the product that caused the injury was somehow defective.

• Plaintiffs can allege multiple product defects in one lawsuit.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 15

Defective Product(continued)

The most The most common common types of types of defects:defects:

ManufactureManufactureDesignDesign

PackagingPackagingFailure to WarnFailure to Warn

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 16

Defect in Manufacture

• Defect that occurs when the manufacturer fails to:

1. Properly assemble a product

2. Properly test a product, or

3. Adequately check the quality of a product

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 17

Defect in Design

• Defect that occurs when a product is improperly designed.

Design defects include:1. Toys designed with

removable parts that could be swallowed by children.

2. Machines and appliances designed without proper safeguards.

3. Trucks designed without a backup warning device.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 18

Defect in Design(continued)

• In evaluating the adequacy of a product’s design, the courts apply a risk-utility analysis – Gravity of the danger posed

by the design– Likelihood that injury will

occur– Availability and cost of

producing a safer design– Social utility of the product

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 19

Crashworthiness DoctrineCrashworthiness Doctrine

The courts have held that automobile The courts have held that automobile manufacturers are under a duty to design manufacturers are under a duty to design automobiles so they take into account the automobiles so they take into account the possibility of harm from a person’s body possibility of harm from a person’s body striking something inside the automobile striking something inside the automobile in the case of a car accident.in the case of a car accident.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 20

Failure to Warn

• Defect that occurs when a manufacturer does not place a warning on the packaging of products that could cause injury if the danger is unknown.

• Proper and conspicuous warning insulates all in chain of distribution

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 21

Defect in Packaging

• Defect that occurs when a product has been placed in packaging that is insufficiently tamperproof.– Manufacturers owe a duty

to design and provide safe packages for their products.

– Failure to meet this duty subjects the manufacturer and others in the chain of distribution of the product to strict liability.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 22

Other Product Defects

• Failure to provide adequate instructions

• Inadequate testing of products

• Inadequate selection of component parts or materials

• Improper certification of the safety of a product

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 23

Generally Generally Known DangersKnown Dangers

Supervening Supervening EventEvent

Assumption of Assumption of the Riskthe Risk

Misuse of the Misuse of the ProductProduct

Statute of Statute of LimitationsLimitations

Government Government Contractor Contractor DefenseDefense

Contributory & Contributory & Comparative Comparative NegligenceNegligence

Defenses Defenses to Product to Product LiabilityLiability

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 24

Defenses to Product Liability (continued)

• Generally Known Dangers– Certain products are

inherently dangerous – Products are known to the

general population to be so– Sellers are not strictly liable

for failing to warn of generally known dangers.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 25

Defenses to Product Liability (continued)

• Government Contractor Defense – Contractor who was provided

specifications by the government is not liable for any defect in the product that occurs as a result of those specifications

– Product must conform to specifications

– Contractor must have warned of known defects or dangers

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 26

Defenses to Product Liability (continued)

• Assumption of Risk– Defendant must prove

that the plaintiff knew and appreciated the risk

– the plaintiff voluntarily assumed the risk

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 27

Defenses to Product Liability (continued)

• Misuse of the Product – Relieves the seller of

product liability if the user abnormally misused the product.

– Products must be designed to protect against foreseeable misuse.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 28

Defenses to Product Liability (continued)

• Correction of a Product Defect– Manufacturer must notify

purchasers and users– Must correct defect– Usually achieved through

recall and repair or replacement

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 29

Defenses to Product Liability (continued)

• Supervening Event– Alteration or modification of

a product by a party that absolves seller from strict liability

– Modification must be made after it leaves seller’s possession

– Alteration must cause injury

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 30

Statute of Limitations

• Statute that requires an injured person to bring an action within a certain number of years from the time that he or she was injured by the defective product

• Limitation period set by each state

• Defendant relieved of liability if action not brought within limitation period

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 31

Statute of Repose

• Limits the seller’s liability to a certain number of years from the date when the product was first sold

• Varies from state to state

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Contributory Negligence

• Person who is injured by a defective product

• Injured party has been negligent– contributed to his or her

own injuries

• Cannot recover from the defendant.

© 2006 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman 5 - 33

Comparative Negligence

• Plaintiff is contributorily negligent for his or her injuries

• Responsible for a proportional share of the damages

• Damages proportioned between plaintiff and defendant