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Chapter 20: Product Liability -Product liability: the body of legal rules governing civil lawsuits for losses and harms resulting from a defendant’s furnishing of defective goods The Evolution of Product Liability Law- 19th centuryo Rules were to manufacturers’ and sellers’ advantageo Caveat emptor: let the buyer beware o Plaintiff’s had difficulty proving negligence because the necessary evidence was usually under the defendant’s control o No liability outside privity of contract >> no liability without a direct contractual relationship between plaintiff and defendant o Importance of promoting industrialization encouraged laws to be manufactured oriented - 20th & 21st centuryo Long chains in distribution means the consumers do not directly deal with the manufacturerso Goods more complex now so harder to inspect them o Caveat venditor: let the seller bewareo Manufacturers and sellers are better able to bare the economic costs associated with product defectso Socialization of risk: manufacturers can pass on costs through higher prices- Increased costs sellers and manufacturers encounter in obtaining product liability insurance Theories of Product Liability Recovery- Some theories are contractual and some are tort based - Contract theorieso Involve product warranty: an express or implied promise about the nature of the product soldo Plaintiffs claim that the product failed to live up to the seller’s promiseo Express warranty: can be created in 3 ways If an affirmation of fact or promise regarding the goods becomes part of the basis of the bargain Any description of the goods that becomes part of the basis of the bargain creates an express warranty that the goods will conform to the description; descriptions include…- Statements that goods are of a certain brand, type or model- Adjectives that characterize the product- Drawings, blueprints and technical specifications- A description does not amount to an express warranty regarding quality or duration of the goods’ future performance  A sample of model of goods to be sold creates an express warranty that the goods will conform to the sample/model Statements of value (this chair is worth 200) and statements ofopinion (I think this chair is antique) and statements of sales talk/puffery (this chair is a good buy) do NOT create an express warranty - In close cases, a statement is more likely to be an express warranty if it is specific rather than indefinite, ifit is state in the sales contract or is it is unequivocal rather than hedged/qualified  There is no recovery for breach of an express warranty unless the buyer significantly relied on that warranty in making the purchase  Basis of the bargain requirement: must prove there was significant reliance on the warranty when making the purchaseOR seller’s warranty was a contributing factor in the buyer’s decision to purchase  Multiple express warranties that conflict? >> Warranties should be read as consistent with each other and as cumulative>> if this is not possible then the parties’ intention controls- In determining intention: exact or technical specifications defeat a sample/model/general descriptive language and a sample defeats general descriptive language o Implied warranty: is a warranty created by operation of law rather than the seller’s express statements  Implied warranty of merchantability: - The plaintiff argues that the seller breached the warranty by selling unmerchantable goods and that the plaintiff should therefore recover compensatory damages; such claims can succeed only where the seller is a merchant with respect to goods of the kind sold - To be merchantable goods must pass without objection in the trade, be fit for the ordinary purposes for which such goods are used, be of even kind, quality and quantity within each unit, be adequately contained, packaged and labeled, conform to any promises or statements of act made on the container or label and in the case of fungible goods be of fair average quality - When food products have been alleged to be unmerchantable: there are 2 testso Traditional test: foreign natural test: the harm causing object/substance is foreign or natural to the product? If foreign then it is unmerchantable o Reasonable expectations test: product is unmerchantable if consumers would not reasonably have expected to encounter such an object/substance in the food product  Implied warranty of fitness- Arises when the seller has reason to know a particular purpose for which the buyer requires the good, the seller has reason to know that the buyer is relying on the seller’s skill/judgment for the selection of suitable goods, the buyer actually relied on the seller’s skill or judgment in purchasing the goods - Sellers warrant only that the gods are fit for the buyer’s particular purposes not the ordinary purposes for whichsuch goods are used - Tort caseso Plaintiffs content that the defendant was negligent or that strict liability should apply o Negligence: allege that the seller or manufacturer breached a duty to the plaintiff by failing to eliminate a reasonably foreseeable risk of harm associated with the product  Negligent manufacture: often encounter obstacles bc the evidence needed to prove a breach of duty is under the defendant’s control  Negligent inspection: middlemen are usually not liable for failing to inspect goods  Negligent failure to warn: was there a duty to warn? Was the warning adequate? >> look at the foreseeability of the risk, the magnitude/severity of harm, the ease/difficulty of providing a warning and the likely effectiveness of a warning; there is NO duty to warn if the risk is open and obvious  Negligent design: severity of foreseeable harm, industry practices, state of the art, government safety regulations - Risk utility test: design’s social utility, the availability and effectiveness of alternative designs, and the cost of safer designs o Strict liability  Section 402A: a seller is liable for physical harm or property damage suffered by the ultimate user if the product was in a defective condition unreasonably dangerous to the user; this rule applies even though the seller has exercised all possible care in the preparation and sale of the product; plaintiff does not have to prove a breach of duty- The seller must be engaged in the business of selling theproduct that harmed the plaintiff - The product must be in a defective condition when sold


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UMD BMGT 380 - Chapter 20: Product Liability

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