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20-1
Product Liability
PA ET RHC 20
A manufacturer is not through with his customer when a sale is completed. He has then only started with his customer.
Henry Ford, founder of Ford MotorCompany, in My Life and Work (co-written with Samuel Crowther, 1922)
20-2
Learning Objectives
• Explain what is required to create an express or implied warranty
• Identify major categories of product liability claims based in negligence
• Differentiate strict liability claims from those based on negligence theory
• Describe the role of comparative negligence
20-3
• Product liability law refers to the body of legal rules governing civil lawsuits for losses and harms resulting from a defendant’s furnishing of defective goods
• Rule was caveat emptor (buyer beware), but has shifted over the past century to caveat venditor (let the seller beware) since sellers are better able than consumers to bear the costs of defective products
Development of Product Liability Law
20-4
• Product liability law is partly grounded in contract law and partly grounded in tort law
• Contract theories are based on an express or implied warranty
• Tort theories are based on arguments of negligence or strict liability
Product Liability Theories
20-5
• UCC 2–313(1): express warranty may be created in any of three ways:– If affirmation of fact or promise about
goods becomes part of the basis of the bargain• Statements of value or opinion and
sales puffery do not constitute a warranty
• Advertisements may contain statements of warranty as well as sales puffery
Express Warranty
20-6
• Royal Indemnity Co. v. Tyco Fire Products, LP: Apartment complex fire linked to defects in sprinkler system and plaintiff insurer sued Tyco on breach of express warranty theory
• Technical data sheet expressed a one-year warranty, not an warranty of future performance for an indefinite amount of time
• Trial court’s dismissal of express warranty claim affirmed
Example of Express Warranty
20-7
• Two other express warranties:– A description of the goods that
becomes part of the bargain creates an express warranty that the goods will conform to description
– A sample or model of goods to be sold creates an express warranty that goods will conform to sample
Express Warranty
20-8
• Implied warranties are created by operation of law rather than seller’s express statements– Warranty of merchantability [UCC 2-314(1)]
• Seller must be a merchant in the goods of the kind sold
– Warranty of fitness for a particular purpose [UCC section 2–315]
• Seller must know the goods are to be used for special purpose
Implied Warranties
20-9
• In implied warranty cases, plaintiff argues that seller breached warranty by selling unmerchantable goods and plaintiff should recover damages– Privity of contract between consumer and
manufacturer is not required
• Merchantability, essentially, is that goods must be fit for the ordinary purposes for which such goods are used
Implied Warranty of Merchantability
20-10
• Crowe v. CarMax Auto Superstores, Inc.: – Couple bought car from CarMax with express
warranties. Car required many repairs, all covered by warranties, but couple sued CarMax claiming unmerchantability
– Court found for CarMax: goods need not be perfect to be fit for their ordinary purposes, but must only meet reasonable expectations of average consumer
• Couple had unreasonable expectations
Meaning of Merchantability
20-11
• Newton v. Standard Candy Co.: – Demonstrates disagreement over standard
for food products alleged to be unmerchantable because they contain harmful objects or substances
– Under foreign–natural test, defendant is liable if object or substance is “foreign” to the product, but not liable if it is “natural” to the product
– But reasonable expectations test increasing in use
Meaning of Merchantability
20-12
• Warranty of fitness for a particular purpose implied if: (1) seller has reason to know a particular purpose for which buyer requires the goods; (2) seller has reason to know that buyer is relying on seller’s skill or judgment for the selection of suitable goods; and (3) buyer actually relies on seller’s skill or judgment in purchasing the goods– See Moss v. Batesville Casket Co.
Implied Warranty of Fitness for a Particular Purpose
20-13
• Product liability suits based on negligence allege that manufacturer or seller breached a duty to plaintiff by failing to eliminate a reasonably foreseeable risk of harm:– negligent manufacture of the goods (including
improper materials and packaging) – negligent inspection– negligent failure to provide adequate warnings – negligent design
Negligence Theory
20-14
Croskey v. BMW of North America, Inc.
• Facts and Procedural History: – Croskey severely burned when plastic
neck on car radiator failed and spewed scalding radiator fluid
– Croskey pleaded two theories: negligent design and negligent failure to warn
– Evidence of similar incidents existed, but court excluded for negligent design claim
– Jury returned verdict in favor of defendants
20-15
• Appellate Court: – Primary issue is design
defect, which requires plaintiff to show that the product was not reasonably safe for its foreseeable uses and a risk-utility analysis favored a safer design
– Trial court wrongly excluded evidence of similar incidents
– Reversed and remanded
Croskey v. BMW of North America, Inc.
20-16
• American Law Institute published section 402A of Restatement (Second) of Torts (1965) – Most important reason is socialization-of-
risk strategy: strict liability makes it easier for plaintiffs to prove breach of duty and sellers pass on costs in higher prices
– Another reason: stimulates manufacturers to design and build safer products
Strict Liability Theory
20-17
• Published in 1998, basic rule is: “One engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect.”
• Three kinds of product defects: manufacturing defects, inadequate warnings or instructions, design defects
Restatement (Third) of Torts
20-18
• Plaintiff was passenger in Ford Bronco involved in a rollover and sued Ford for defective seatbelt sleeve and handling and stability design defect
• Jury awarded damages and Ford appealed
• In design defect cases, plaintiff must show existence of reasonable design alternative and risk-utility test, with objective factors, provides best means to analyze whether product is designed defectively– Affirmed in part, reversed in part; case remanded
Branham v. Ford Motor Co.
20-19
• Federal Magnuson-Moss Warranty Act applies to sales of consumer products more than $10 per item:– If written warranty, it must be full or limited– Full warranty promises to (1) remedy any
defects in the product and (2) replace product or refund purchase price if, after reasonable number of attempts, it cannot be repaired
– Seller who gives a limited warranty is bound to whatever promises it actually makes
Other Product Liability Theories
20-20
• A seller’s misrepresentation about a material fact about the product — a fact that would matter to a reasonable buyer – may invoke liability to a buyer
• Industrywide liability: plaintiffs bypass problems of causation that exist where several firms within an industry manufactured a harmful standardized product, and plaintiff cannot prove which firm produced the injurious product
Other Product Liability Theories
20-21
• Consequential damages: personal injury, property damage, indirect economic loss (e.g., lost profits or lost business reputation), and noneconomic loss, such as pain and suffering, physical impairment, mental distress, loss of enjoyment of life, loss of companionship or consortium, inconvenience, and disfigurement
Damages
20-22
• Basis-of-the-bargain damages: – Buyers of defective goods loss of full value
for the goods’ purchase price is direct economic loss (value of goods as promised under the contract minus value of goods as received)
• Punitive damages:– Intended to punish defendants who have
acted in an especially outrageous fashion, and to deter them and others from so acting in the future
Damages
20-23
• Product liability disclaimer is a clause in the sales contract whereby the seller attempts to eliminate liability it might otherwise have under the theories of recovery described earlier in the chapter
• Wilke v. Woodhouse Ford, Inc.: court upheld implied warranty disclaimer, but possible liability for negligent failure to inspect product
Disclaimers
20-24
• Remedy limitation is a clause attempting to block recovery of certain damages– Example of time limitation: “30 day
warranty”
Disclaimers & Limitations
20-25
• Three main defenses in a product liability suit are the overlapping trio of product misuse, assumption of risk, and contributory negligence– What could happen on a
construction site? What defenses would exist?
Defenses
20-26
• Most states require fact-finder to apportion damages based on relative fault of plaintiff’s and defendant’s percentage shares of the total fault for the injury– Plaintiff is awarded total provable damages
times defendant’s percentage of fault • Green v. Ford Motor Co.: fact-finder shall
apportion fault to injured person only if fault of injured person is a proximate cause of injuries for which damages are sought
Comparative Negligence
20-27
• Preemption defense rests on a federal supremacy premise, that federal law overrides state law when the two conflict– Riegel v. Medtronic, Inc.: state claims by
plaintiffs preempted by federal statute dealing with medical devices
• Courts mixed whether to treat regulatory compliance as full defense or mere factor in determining defendant’s liability
Preemption and Regulatory Compliance
20-28
Test Your Knowledge
• True=A, False = B– Implied warranties are created by seller’s
conduct rather than express statements– Merchantability, essentially, is that goods
must be fit for the ordinary purposes for which such goods are used
– A disclaimer is a clause in the sales contract in which seller attempts to eliminate liability seller might otherwise have under law
20-29
• True=A, False = B– Under foreign–natural test, defendant is
liable if object or substance is “foreign” to product, but not liable if it is “natural” to the product
– Under the Restatement of Torts (Third), three kinds of product defects exist: manufacturing defects, inadequate warnings, design defects
– The Magnuson-Moss Warranty Act requires every written warranty to be a full warranty
Test Your Knowledge
20-30
• Multiple Choice– Express warranty may be created by
________ that becomes part of the basis of the bargain for the agreement:
a statement of fact or promise about goodsa)a description of the goods indicating goods
will conform to the descriptionb)a sample or model of goods to be sold
indicating goods will conform to the samplec)all of the aboved)both A and B, but not C
Test Your Knowledge
20-31
• Multiple Choice– Drew was injured when his car rolled
over after the tires delaminated and caused him to lose control. Drew could sue, claiming: a) negligence (design or manufacture)b) strict liabilityc) breach of warrantyd) all of the above
Test Your Knowledge
20-32
Thought Question
• What is your opinion of product liability lawsuits? If you were injured by a defective product, would you file a lawsuit against the manufacturer?