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Warranties CHAPTER and Product Liability
West's Business Law
10th Edition
Kenneth W. Clarkson, University of Miami Roger LeRoy Miller, Institute for University Studies, Arlington, Texas Gaylord A. Jentz, University of Texas, Austin, Emeritus Frank B. Cross, University of Texas, Austin
COPYRIGHT 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license.
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Overview
A warranty is an assurance of fact upon which a
party may rely.
Warranty of Title. Express Warranty. Implied Warranty of Merchantability. Implied Warranty of Fitness for a Particular Purpose. Implied warranty arising from the course of dealing or trade usage.
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1: Warranties of Title
Automatically arises in most commercial sales
transactions. UCC-312 creates 3 warranties:
Good Title. No Liens. No Infringements.
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Warranty Title Disclaimer
Title warranty can generally be disclaimed only
with specific language in contract. Circumstances may be obvious to clearly indicate disclaimer of title, such as a sheriff's sale.
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Express Warranties
Can be oral or written-- don't have to use the
words "warrant" or "guarantee."
Any Affirmation or Promise. Any Description. Any Sample or Model.
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Express Warranties
To create an express warranty, the affirmation of
fact must become the "basis of the bargain." And Buyer must rely on warranty when he enters into contract. Statements of Opinion and Value.
Generally excludes "puffing" "Best car in town", not an express warranty. However, expert opinion is not puffery.
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Implied Warranties
Warranty inferred at law based on the
circumstances or nature of the transaction. Under the UCC, merchants warrant the goods they sell are "merchantable", i.e., fit for ordinary purpose for which such goods are sold.
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Implied Warranty of Merchantability
Automatically arises from merchants. Goods are of average, fair, or medium-grade. Adequately packaged and labeled. Conform to promises on label. Have a consistent quality and quantity among the
commercial units. Case 23.1: Webster v. Blue Ship Tea Room, Inc. (1964).
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Implied Warranty of Fitness for a Particular Purpose
Arises by any Seller who:
Knows the particular purpose for which the goods are being bought; and Knows the buyer is relying on seller's skill and judgment to select suitable goods.
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Implied Warranty Arising from Course of Dealing or Trade Usage
Arises when both parties to a contract have
knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.
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Magnuson-Moss Warranty Act
FTC enforces; Attorney general or
consumer can bring action. Modifies UCC for consumer sales. Only applies when written warranties are made by Seller (including a service contract).
If goods > $10 label "full" or "limited." If goods > $15 Seller must make additional disclosures.
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Magnuson-Moss Act
Full Warranty: Seller must repair or replace. Limited Warranty must be conspicuous.
If limit of time only must say, e.g., "full twelvemonth warranty."
UCC Implied Warranties:
May not be disclaimed, but can be limited, but must correspond with time of express warranty.
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2: Overlapping Warranties
Occurs when two or more warranties made in a
single transaction:
If warranties are consistent, they are construed as cumulative. If inconsistent:
First: implied warrant of fitness for a particular purpose. Then: express.
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3: Warranty Disclaimers and Limitations on Liability
Express Warranties can be disclaimed:
If they were never made (evidentiary matter). If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer's attention (BOLD CAPS UNDERLINED).
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Warranty Disclaimers
Implied Warranties can be disclaime:
Merchantability: "As Is," "With All Faults." Fitness for a Particular Purpose: must be in writing and conspicuous.
Buyer's right to fully inspect and either: does so
or refuses to do so, warranties are disclaimed as to defects that could reasonably be found.
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Statute of Limitations
Action for Breach of Warranty :
Begins to toll at tender. Buyer must notify Seller within a reasonable time. Buyer must sue within four years after cause of action accrues.
If warranty is for future performance, action
accrues when performance happens and breach is discovered.
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4: Product Liability
Product Liability is not a new tort. Liability can be based on:
Negligence; Misrepresentation; or Strict Liability; Warranty Theory.
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Product Liability Based on Negligence
Negligence-based product liability is based on a
manufacturer's breach of the reasonable standard of care and failing to make a product safe. Manufacturer must exercise "due care" in:
Designing products; Manufacturing and Assembling Products; Inspecting and Testing Products; and Placing adequate warning labels.
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Product Liability Based on Negligence
Manufacturers who violate state or federal law in
the manufacture or labeling of a product, may be negligent per se. No privity of contract required between Plaintiff and Manufacturer. Liability extends to any person's injuries caused by a negligently made (defective) product.
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Product Liability Based on Misrepresentation
Occurs when fraud committed against consumer
or user of product. Fraud must have been made knowingly or with reckless disregard for safety. Plaintiff does not have to show product was defective.
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5: Strict Product Liability
Manufacturers liable without regard to fault
based on public policy:
Consumers must be protected from unsafe products; Manufacturers should be liable to any user of the product; Manufacturers, sellers and distributors can bear the costs of injuries.
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Strict Product Liability
Requirements for strict liability:
Product is unreasonably dangerous when sold Defendant sells the product; Plaintiff injured by use or consumption of product and defective condition is the proximate cause of injury.
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Requirements for Strict Product Liability
Plaintiff must show product was so "defective" it was "unreasonably dangerous":
Product must be in defective condition when sold. Defendant is in the business of selling the product. Product must be unreasonably dangerous. Plaintiff must be physically harmed Defective condition must be proximate cause of injury. Goods are in substantially same condition.
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Market Share Liability
Theory of liability when multiple Defendants
contributed to manufacture of defective product. Liability of each Defendant is proportionate to the share of the market held by each respective Defendant.
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6: Defenses to Product Liability
Assumption of Risk. Product Misuse (Plaintiff does not know the
product is dangerous for a particular use).
Case 23.2: Ward v. Arm & Hammer (2004).
Contributory/Comparative Negligence. Commonly known dangers.
Case 23.3: Pelman v. McDonald's Corp. (2003).
Statutes of Limitation.
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Product Defects
Three types of product defects:
Manufacturing defects. Design defects. Warning Defects
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Warning Defects
There is no duty to warn about obvious or
commonly known risks. Seller must also warn about injury due to product misuse. Key is whether misuse was foreseeable.
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Strict Liability: Manufacturing Defects
Occurs when a product "departs from its
intended design even though all possible care was exercised in the preparation and marketing of the product."
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Strict Liability: Design Defects
Occurs when the "foreseeable risks of harm
posed by the product could have been reduced or avoided by the adoption of a reasonable alternative . . . and the omission of the alternative design renders the product not reasonably safe."
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Strict Liability: Warning Defects
A product may be defective because of
inadequate warnings or instructions. Liability based on foreseeability that proper instructions/labels would have made the product safe to use.
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