McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 9 Torts and Product Liability

9-2 SOURCES OF TORT LAW For the most part, tort law is governed by state common law principles. Courts also look to rules articulated by the American Law Institute (ALI) for guidance on applying common law legal principles. (The Restatement of Torts)

9-3 CATEGORIES OF TORTS Torts fall into one of three general categories: intentional negligence strict liability

9-4 Defamation Defamatory statement Dissemination to a third party Specificity Damages

9-5 Trade Libel and Product Disparagement (1) clear and specific reference to the disparaged party or product, (2) knowledge the statement was false, or reckless disregard for the truth, (3) communicated to a third party.

9-6 Fraudulent Misrepresentation (1) the misrepresentation was a material fact known to be false by the tortfeasor (or reckless disregard for the truth); (2) the tortfeasor intended to persuade the innocent party to rely on the statement and the innocent party did, in fact, rely on it; and (3) damages were suffered by the innocent party.

9-7 False Imprisonment In the business context, a merchant most commonly encounters these circumstances in cases of suspected retail theft. While the merchant has the right to briefly detain a suspected shoplifter-must be cautious about giving rise to a false imprisonment claim when detaining an individual.

9-8 Business Competition Torts Tortious Interference with Existing Contractual Relationship  (1) had specific knowledge of the contract,  (2) actively interfered with the contract,  (3) caused some identifiable damages

9-9 NEGLIGENCE When party fails to act reasonably, Even though that party does not intend for harm to occur, The party is still liable for any injuries or damages suffered by another party as a result of the unreasonable conduct.

9-10 Elements of Negligence Duty: Did the tortfeasor owe a duty of care to the injured party? Breach of duty: Did the tortfeasor fail to exercise reasonable care? Cause in fact: Except for the breach of duty by the tortfeasor, would the injured party have suffered damages? Proximate (legal) cause: Was there a link between the breach of duty and the damages suffered by the injured party? Actual damages: Did the injured party suffer harm?

9-11 STRICT LIABILITY TORTS Strict liability is a concept rooted in the notion that the general public benefits when liability is imposed on those who engaged in certain activities that result in harm to another party, even if the activities were undertaken in the most careful manner possible (without negligence)

9-12 PRODUCTS LIABILITY In a products liability case, the injured party may pursue a legal remedy against the seller under one of three theories: (1) negligence, (2) warranty, or (3) strict liability.

9-13 learning outcomes checklist Articulate a basic definition of a tort and identify the source of law governing various types of torts Give specific examples of how tort law applies in the business environment Determine the classification of tort based on the conduct of the wrongdoer.

9-14 learning outcomes checklist 9- 4 Apply the elements and defenses of the torts of defamation, trade libel, and product disparagement, and discuss its applicability to the business environment Identify the differences in terms of liability for traditional print defamation and defamation in cyberspace.

9-15 learning outcomes checklist 9- 6 Distinguish business competition torts from other intentional torts and understand their applicability in commercial relationships Recognize conduct that is classified as negligent and identify any potential defenses Provide alternate theories of liability and defenses when a product is the cause of an injury.