Bài giảng Business Law (13th edition) - Chapter 20: Product Liability

SalesFormation & TermsProduct LiabilityPerformance of Sales ContractsRemedies for Breach of Sales Contracts4McGraw-Hill/Irwin Business Law, 13/e© 2007 The McGraw-Hill Companies, Inc. All rights reserved.Product LiabilityPAETRHC20“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 Motor Company, in My Life and Work (cowritten with Samuel Crowther, 1922)Learning ObjectivesEvolution of product liability lawTheories of product liability recovery:Express warranty, implied warranties, negligence, strict liability Other theories of recoveryTime limitations, disclaimers, defenses Damages20 - *Express warranty created in three ways:If affirmation of fact or promise about goods becomes part of the basis of the bargainA description of the goods that becomes part of the bargain warrants that goods will conform to descriptionA sample or model of goods warrants that goods will conform to sampleExpress Warranty20 - *Implied warranties are created by operation of law rather than seller’s express statementsWarranty of merchantability [UCC 2-314(1)] See Crowe v. CarMax Auto Superstores, Inc. and Hong v. Marriott Corp.Warranty of fitness for a particular purpose [UCC section 2–315] See Bako v. Crystal Cabinet Works, Inc.Implied Warranties20 - *Product liability suits based on negligence allege that seller or manufacturer breached a duty to plaintiff by failing to eliminate a reasonably foreseeable risk of harm:(1) negligent manufacture of the goods (including improper materials and packaging) (2) negligent inspection(3) negligent failure to provide adequate warnings (4) negligent designNegligence Theory20 - *American Law Institute published section 402A of Restatement (Third) of Torts (1998) Seller or distributor of a defective product is subject to liability for harm to persons or property caused by the defectThree kinds of product defects: manufacturing defects, inadequate warnings or instructions, design defectsStrict Liability Theory20 - *Federal Magnuson-Moss Warranty Act applies to sales of consumer products > $10 per item:If written warranty, it must be full or limitedFull 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 repairedSeller who gives a limited warranty is bound to whatever promises it actually makesMagnuson-Moss Warranty Act20 - *Consequential damages: Physical, economic, or emotional damages directly or indirectly related to the event causing harmBasis-of-the-bargain damages: Value of goods as promised under the contract minus value of goods as receivedPunitive damages: To punish defendants for or deter others from knowing and outrageous conductDamages20 - *Product liability disclaimer: Seller attempts to eliminate risk of liability by clause in contractExample: Car sold “as is”Remedy limitation: attempt to bar recovery of certain damagesExample: “30 day warranty”See Trinity Industries, Inc. v. McKinnon Bridge Co.Disclaimers20 - *Test Your KnowledgeTrue=A, False = BImplied warranties are created by seller’s conduct rather than express statementsMerchantability, 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 law20 - *Test Your KnowledgeTrue=A, False = BUnder foreign–natural test, defendant is liable if object or substance is “foreign” to product, but not liable if it is “natural” to the productUnder the Restatement of Torts (Third), three kinds of product defects exist: manufacturing defects, inadequate warnings, design defectsThe Magnuson-Moss Warranty Act requires every written warranty to be a full warranty20 - *Test Your KnowledgeMultiple ChoiceExpress warranty may be created by _______ that becomes part of the basis of the bargain for the agreement: (a) a statement of fact or promise about goods(b) a description of the goods indicating goods will conform to the description(c) a sample or model of goods to be sold indicating goods will conform to the sample(d) all of the above(e) both A and B, but not C20 - *Test Your KnowledgeMultiple ChoiceDrew 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 liability(c) breach of warranty(d) all of the above20 - *Thought QuestionsWhat is your opinion of product liability lawsuits? If you were injured because of a defect in a product, would you file a lawsuit against the manufacturer?20 - *