MT310 – Ethics and the Legal Environment Seminar Presentation UNIT 9 The Customer/Consumer Stakeholder Professor Kristen Biesiadecki, JD

Customer Stakeholder Essential to business Relationship easily strained Knowledge of laws is important –Product liability –Warranties 2

Product Liability Laws Developed in mid-1900s To shift the economic burden caused by defective products from the people who were being harmed to the entities that were better able to handle the cost of that harm Consumer may sue any entity in the manufacturing chain: –Manufacturer− Wholesaler –Distributor− Retailer 3

Product Liability to Consumer Customer must prove: –Product was defective and unreasonably dangerous –Defect existed at the time the product left the control of the defendant –Harm suffered by plaintiff was caused by defect Most states recognize strict liability not requiring negligence to be proven 4

Product Liability for Managers Steep punishments Must guard against lawsuits Common defense is no duty to warn, but usually only succeeds when danger is obvious Customer misuse is a useful defense 5

Ethics Application – Product Liability John purchased a new snow blower. Salesperson told John that blower would cut through 48 inches of snow “on any surface.” After the blizzard, John was afraid that his roof would collapse, so he carried the snow blower onto his roof to clear the snow. He slipped and fell from the roof, and the snow blower landed on top of him and severed his arm. He sued the company for failure to warn of the danger of taking the snow blower on a high surface. 6

Ethics Application Questions 1. Who are the stakeholders in this case? What are their needs? 2. Has Deero violated product liability law? Is Deero’s action (failing to warn) ethical based on your gut reaction? 3. How does the answer change if you apply a rights approach? A justice approach? A categorical imperative approach? A utilitarian approach? 4. Where would you put the Deero Corporation in Kohlberg’s Levels of Moral Development? 7

Warranty Laws Promise made from seller to buyer that product will perform in a certain way Article 2 of UCC governs warranties in sale of goods Two types of warranties: –Express – clearly stated either orally or in writing –Implied – guarantee not expressly stated, but is assumed by the buyer 8

Warranty Laws to the Consumer Gives peace of mind to consumers Builds consumer confidence Helps consumers Consumer expect warranties 9

Warranty Laws for Manager Must understand consumer expectations Consumers do not want to gamble with their money Manager must be aware of warranty terms 10

Express Warranties Warranty created by –Affirmation –Promise –Description, or –Sample Warranty not created by –Opinion –Value 11

Implied Warranties M erchantable (useful), as long as the seller is someone who regularly sells those goods no implied warranty if words such as “as is” or “with all faults” are used 12

Ethics Application – Warranty Laws Kevin purchased a used SUV to haul his boat. Vehicle was being sold “as is.” When Kevin asked if the SUV could pull the boat across the country, seller said the engine was in good shape and the SUV was made to pull large loads. The dealer placed trailer hitch on the vehicle, but the mechanic was concerned that the mount was too small to tow a boat. Halfway through the trip, the trailer hitch fell off at 50 miles per hour, but no one was hurt. The boat and trailer were destroyed. Kevin sued for a faulty trailer hitch mount. The dealership said the SUV was sold without warranty. 13

Ethics Application Questions 1. Who are the stakeholders in this case? What are their needs? 2. Has the dealership violated product liability law? Is their action ethical based on your gut reaction? 3. How does the answer change if you apply a rights approach? A justice approach? A categorical imperative approach? A utilitarian approach? 4. Where would you put the dealership in Kohlberg’s Levels of Moral Development? 14

Final Project Part III due by the end of Unit 9 –Write a recommendation for both the Energy Cooperative and the Clean Power Company. Your recommendations should include: A statement of the ethical concerns in each case How it will affect the stakeholders in each case At least 3 specific references to course material to support each recommendation. –Minimum of 3 pages (minimum 1 1/2 page for each case) in APA style format. 15

Questions & Reminders Questions on Unit 9 material? Unit 8 Grades – Monday after Unit closes Remember to complete all Assignments – Discussion (See Discussion Board Posting Requirements) – Assignments (Final Project Due!) – Activities – Web Field Trips – Debates Have a great week! 16