© 2004 West Legal Studies in Business, a Division of Thomson Learning 23.1 Chapter 23 Product Liability

23.2 Product Liability Law Determines when manufacturers and sellers of goods are liable Theories of product liability recovery are rules stating things a plaintiff must prove in order to recover damages

23.3 Contract Theories of Product Liability Recovery Three important contract-based theories of product liability Express warranty Implied warranty of merchantability Implied warranty for fitness for a particular purpose Each created by Article 2 of UCC Each refers to the sale of goods

23.4 Express Warranty Affirmations and descriptions Samples and models Basis-of-the-bargain requirement Advertisements, catalogs, brochures, etc.

23.5 Implied Warranty of Merchantability The merchant requirement refers to Sellers who deal in products Sellers who deal in services or installations of goods

23.6 Implied Warranty of Merchantability Merchantability refers to goods that Pass without objection in the trade Are of average quality if fungible Are fit for the ordinary purposes for which such goods are used Are of even kind, quality, and quantity within each unit Are adequately contained, packaged, and labeled Conform to any promises or affirmations of fact made on the container or label

23.7 Implied Warranty of Fitness The seller knows of the particular purpose for which the buyer desires the goods The seller must have reason to know that buyer is relying on seller’s skill or judgment The buyer must actually rely on the seller’s skill or judgment

23.8 Tort Theories Strict liability (liability without fault) Risk spreading (liability insurance) Socialization of risk (passing costs on to consumers)

23.9Negligence Improper manufacture, handling, packaging, or inspection Duty to warn of foreseeable harm Design defects

23.10 Strict Liability Requirements of Section 402A Design in defects and failure to warn Unavoidably unsafe products Wholesalers and retailers

23.11 The Reinstatement (Third) Manufacturing defects Inadequate instructions or warnings Design defects

23.12 Other Theories of Product Liability Magnuson-Moss Act Misrepresentation Industry-wide liability

23.13 Type of Damages Bases-of-the-bargain damages Consequential damages Personal injury, property damage, indirect economic loss Punitive damages Damages under the UCC Tort damages Tort reform measures

23.14 The No-Privity Defense Privity of contract is the existence of direct contractual relationship between two parties Privity under the UCC Privity in tort cases

23.15 Liability Disclaimers The easy cases Express warranty disclaimers Disclaimers and tort liability Implied warranty disclaimers The basic tests Additional ways to disclaim implied warranties Unconscionability Impact of Magnuson-Moss

23.16 Defenses Involving Plaintiff’s Behavior Traditional defenses Product misuse Contributory negligence Assumption of risk Movement toward comparative fault

23.17 Recap – Terms to Know Express warranty Implied warranty of fitness for a particular purpose Warranty of merchantability Negligence Strict liability Restatement (Third) of Torts Damages Defendant’s defenses