Bài giảng Business Law - Chapter 20: Product Liability

Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin4Formation and Terms of Sales ContractsProduct LiabilityPerformance of Sales ContractsRemedies for Breach of Sales ContractsSalesPARTProduct LiabilityPAETRHC20A 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)Learning ObjectivesExplain what is required to create an express or implied warrantyIdentify major categories of product liability claims based in negligenceDifferentiate strict liability claims from those based on negligence theoryDescribe the role of comparative negligence Product liability law is partly grounded in contract law and partly grounded in tort lawContract theories are based on an express or implied warrantyTort theories are based on arguments of negligence or strict liabilityProduct Liability TheoriesUCC 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 bargainStatements of value or opinion and sales puffery do not constitute a warrantyAdvertisements may contain statements of warranty as well as sales pufferyExpress WarrantyTwo other express warranties:A description of the goods that becomes part of the bargain creates an express warranty that the goods will conform to descriptionA sample or model of goods to be sold creates an express warranty that goods will conform to sampleExpress WarrantyImplied warranties are created by operation of law rather than seller’s express statementsWarranty of merchantability [UCC 2-314(1)] Seller must be a merchant in the goods of the kind soldWarranty of fitness for a particular purpose [UCC section 2–315] Seller must know the goods are to be used for special purposeImplied WarrantiesIn implied warranty cases, plaintiff argues that seller breached warranty by selling unmerchantable goods and plaintiff should recover damagesPrivity of contract between consumer and manufacturer is not requiredMerchantability, essentially, is that goods must be fit for the ordinary purposes for which such goods are usedImplied Warranty of MerchantabilityWarranty 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 goodsSee Moss v. Batesville Casket Co.Implied Warranty of Fitness for a Particular PurposeProduct 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 inspectionnegligent failure to provide adequate warnings negligent designNegligence TheoryAmerican 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 pricesAnother reason: stimulates manufacturers to design and build safer productsStrict Liability TheoryPublished 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 defectsRestatement (Third) of TortsFederal Magnuson-Moss Warranty Act applies to sales of consumer products more than $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 makesOther Product Liability TheoriesA seller’s misrepresentation about a material fact about the product — a fact that would matter to a reasonable buyer – may invoke liability to a buyerIndustrywide 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 TheoriesConsequential 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 disfigurementDamagesBasis-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 futureDamagesProduct 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 chapterRemedy limitation is a clause attempting to block recovery of certain damagesExample of time limitation: “30 day warranty”DisclaimersThree main defenses in a product liability suit are the overlapping trio of product misuse, assumption of risk, and contributory negligenceWhat could happen on a construction site? What defenses would exist?DefensesMost 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 injuryPlaintiff 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 soughtComparative NegligencePreemption defense rests on a federal supremacy premise, that federal law overrides state law when the two conflictRiegel v. Medtronic, Inc.: state claims by plaintiffs preempted by federal statute dealing with medical devicesCourts mixed whether to treat regulatory compliance as full defense or mere factor in determining defendant’s liabilityPreemption and Regulatory Compliance Thought QuestionWhat is your opinion of product liability lawsuits? If you were injured by a defective product, would you file a lawsuit against the manufacturer?