Business Law II Week 4 Lecture 1
Warranties and Product Liability
This week we will discuss what happens when a product fails
to work as advertised or even becomes harmful to consumers.
Most goods are now covered by a warranty. This warranty is an assurance
that a product will be suitable for various usages, and unless the remedies of
these warranties are limited, a breach of a warranty is equivalent to a breach
of contract that entitles the buyer to a remedy.
These warranties come in various types. Express warranties exist when the
seller states that goods will conform to: 1) an affirmation or promise of fact;
2) a description; or 3) a sample of model. These affirmations may take many
forms. However, it is important to note that a sellers puffery or an
inflated statement of opinion does not create a warranty. Implied warranties
arise from a presumption that the goods merchants sell are either merchantable
or are fit for a particular purpose. The implied warranty of merchantability
arises in every sale of goods by a merchant who deals in goods of the kind.
Merchantability means that the goods are reasonably fit for the ordinary
purposes for which such goods are used. The implied warranty of fitness for a
particular purpose arises when a seller knows a particular purpose for which a
buyer will use goods and that the buyer is relying on the sellers skill and
judgment to select suitable goods. For example if a buyer goes to a sporting
goods store and tells the buyer that he is looking for skis that are suitable
for slalom skiing, then the goods selected by the salesperson may be covered by
the implied warranty of fitness for a particular purpose.
Warranties can be disclaimed. However, the courts look on such
disclaimers with extreme disfavor, and the courts will often require that this
disclaimers be clear and conspicuous enough to protect the buyer from unfair
surprise. For example, implied warranties can be disclaimed by an expression
that goods are sold as is or with all faults.
The law of product liability will hold manufactures and sellers of goods
liable to consumers and others for personal injury or property damage that is
caused by goods. There are various theories of recovery a consumer can use to
recover in a products liability action.
The buyer may use a negligence theory. This is the same cause of action
discussed in BA 260 relating to tort law. Basically, the theory is that the
seller has a duty of due care to buyers of the products. To succeed in
negligence, the buyer must show: 1) a duty owed by the seller; 2) a breach of
that duty; 3) causation; and 4) damage.
Additionally, the buyer may use a strict liability theory. Under this
doctrine, persons and businesses may be liable for the results of their acts
regardless of their intentions or their exercise or reasonable care. This is in
direct contrast to negligence. However, buyers often will plead both negligence
and strict liability in the same action. The elements of this cause of action
are:
·
A product must be in a defective condition when
the manufacturer sells it.
·
The manufacturer must be normally engaged in the
business of selling it.
·
The product must be unreasonably dangerous to a
user or consumer because of its defective condition (not required in all
states).
·
A plaintiff must incur physical harm to self or
property by use or consumption of the product.
·
The defective condition must proximately cause
the injury or damage.
·
The product must not have been substantially
changed from the time it was sold to the time of the injury.
The product will be considered unreasonably dangerous if it is beyond the
reasonable expectations of the ordinary consumer and a less dangerous
alternative was economically feasible but the manufacturer failed to produce
it. And there are three types of defects. A manufacturing defect exists when
the product departs from its intended design even though all possible care was
exercised in the preparation and marketing of the product. The classic example
of this is an improperly made bottle of soda that explodes upon opening. In
this case, it does not matter how much care the manufacturer put into making sure
bottles do not explode. Because this bottle deviated from the design, there is
a manufacturing defect. A design defect exists when the foreseeable risks of
harm posed by the product could have been reduced or avoided by the adoption of
a reasonable alternative design by the seller or other distributor. This theory
reflects that there are some products that have some danger inherent in their
use. A manufacturer will only be held liable for this if there wasnt a
reasonable alternative design. The final defect is a failure to provide an
adequate warning of the risks of the product.
