Essentials Of Business Law Chapter 29 Product Liability McGraw-Hill/Irwin Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.

Essentials of Business LawChapter 29-2 Product Liability The liability of a manufacturer or seller for injury to purchasers, users, and third parties Plaintiffs must prove four elements in order to be successful in a product liability lawsuit  Duty  Breach  Proximate cause  Damages

Essentials of Business LawChapter 29-3 Product Liability Injury And Claims Product flaw  Abnormality or condition in a single unit of the product that was not intended  Makes a product more dangerous than it would have been had it been as intended Failure to warn  Dereliction of duty manufacturers and sellers have to advise purchasers and users of dangers inherent in a product Design defect  Fault in a product that creates a hazardous condition that causes injury  Exists throughout an entire product line

Essentials of Business LawChapter 29-4 Strict Liability Liability without the necessity of proving fault Application from state to state varies greatly Fewer new or innovative products are released due to the fear of liability lawsuits

Essentials of Business LawChapter 29-5 Drugs Food and Drug Administration  Federal agency responsible for ensuring all drugs sold in the U.S. be tested to for both safety and effectiveness Phase I: A small number of people are tested to determine safety and dosage, and to identify side effects Phase II: Effectiveness is measured, comparing subjects who receive the drug to those who receive a placebo Phase III: Safety and effectiveness of the drug is evaluated in trials involving a great number of people Phase IV: Continued testing occurs subsequent to FDA approval of the drug

Essentials of Business LawChapter 29-6 Drugs Costs a pharmaceutical company approximately $700 million for each drug approved Takes about 12 years One of 5,000 chemicals tested ultimately is approved for sale as a drug One-third of approved drugs become profitable One-fifth of all drugs that are approved have alleged safety problems

Essentials of Business LawChapter 29-7 Consumer Products Consumer Product Safety Commission  The federal agency responsible for the safety of consumer products sold in the U.S  Tests products to determine dangers  Order manufacturer’s to recall dangerous products Wool products, fur products, and textile fiber products  Must be properly labeled and identified Flammable products  Must incorporate flame retardant materials

Essentials of Business LawChapter 29-8 Consumer Products Hazardous substances, toxic, corrosive, irritant, or flammable  Must be properly labeled with appropriate warnings Children’s toys  May not contain electrical, thermal, or mechanical hazards Paint  Generally may not contain lead Radiation emitting products  Must contain appropriate safeguards

Essentials of Business LawChapter 29-9 Tobacco Federal and state statutes strictly regulate tobacco products  Cannot be advertised on television or radio  Tar and nicotine levels on cigarette packages must be disclosed  Cigarettes must contain the Surgeon General warning regarding the dangers of smoking

Essentials of Business LawChapter Tobacco Master Settlement Agreement  Tobacco companies agreed not to engage in certain advertising strategies Not to advertise using cartoon characters Not to place advertising on billboards or stadium signs Not to pay for product inclusion in films and television shows Not to provide free caps, t-shirts, etc Not to distribute free samples of cigarettes Not to target youth markets by sponsoring concerts, athletic events, etc  Support a foundation that provides education regarding the dangers of tobacco products

Essentials of Business LawChapter Automobiles National Highway Traffic Safety Administration  The federal agency responsible for the safety of automobiles sold in the U.S.  Requires that automobiles contain appropriate safety features Airbags, seat belts, antilock brakes