Bus_Law 07 2019.ppt - BUSINESS LAW Text Cases 14th Ed Chapter 7 Strict Liability and Product Liability 1 Product Liability Product Liability is a tort

Bus_Law 07 2019.ppt - BUSINESS LAW Text Cases 14th Ed...

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Unformatted text preview: BUSINESS LAW: Text & Cases , 14th Ed. Chapter 7 Strict Liability and Product Liability 1 Product Liability Product Liability is a tort action. It is not a new legal theory. Liability can be based on: 1. 2. 3. 4. Negligence; Misrepresentation; Strict Liability; Warranty Theory We discussed warranties under contract law in Chapter 23. 2 Product Liability Based on Negligence (1) Negligence-based product liability is based on a manufacturer’s breach of the reasonable standard of care and failing to make a product safe. – A manufacturer’s, seller’s, or lessor’s liability to consumers, users, and bystanders for physical harm or property damage that is caused by the goods. 3 Product Liability Based on Negligence (2) Plaintiff must prove: 1. 2. 3. Defendant owed Plaintiff a duty of care; Defendant breached that duty; Defendant’s breach caused the injury. I. Causation in Fact, and II. Proximate Cause. 4. Plaintiff suffered am injury(damages). Case 7.1 Schwarck v. Artic Cat, Inc. (2016) 4 Product Liability Based on Negligence (2) Manufacturer must exercise “due care” in: 1. Designing products; 2. Manufacturing and assembling Products; 3. Inspecting and testing Products; and 4. Placing adequate warning labels. 5 Product Liability Based on Negligence (3) No privity of contract required between plaintiff and manufacturer. Liability extends to any person’s injuries caused by a negligently-made (defective) product. – See Case in Point 7.2 at page 135. 6 Product Liability Based on Misrepresentation Occurs when fraud committed against consumer or user of product and injury. i.e., label or advertisement. Fraud must have been made knowingly or with reckless disregard for safety. Buyer must have relied on misrepresentation. Plaintiff does not have to show product was defective (i.e., fraudulent labeling). 7 Strict Liability (Slide 1 of 4) Development of Strict Liability: Theory of strict liability started with Rylands v. Fletcher (1868 England). See Case In Point 7.1 at page 134. Liability regardless of fault. A person who engages in certain activities can be held responsible for any harm that results to others, even if the person used the utmost care. 8 Strict Liability (Slide 2 of 4) Abnormally Dangerous Activities: Ultrahazardous or abnormally dangerous activities: Involve serious potential harm; Involve high degree of risk that cannot be made safe; and Are not commonly performed in the community or area. 9 Strict Liability (Slide 3 of 4) Wild Animals: Owners keeping wild animals are strictly liable for injuries. Persons who keep domestic animals are liable if the owner knew or should have known the animal was dangerous. 10 Strict Liability (Slide 4 of 4) Application of Strict Liability to Product Liability: The manufacturer can better bear the cost of injury because it can spread the cost throughout society by price increases. The manufacturer is making a profit from its activities and should bear the cost of injury as an operating expense. 11 Strict Product Liability Manufacturers liable without regard to fault based on public policy: 1. Consumers must be protected from unsafe products; 2. Manufacturers should be liable to any user of the product (regardless of contract privity); 3. Manufacturers, sellers and distributors can bear the costs of injuries since it is making a profit from the activity (pass costs to consumers). CASE 7.2 BRUESEWITZ V. WYETH, LLC USSC (2011). 12 Requirements for Strict Product Liability Plaintiff must show product was so “defective” it was “unreasonably dangerous” to recover damages: 1. 2. 3. 4. 5. 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. 6. Goods have not been substantially changed. 13 Proving a Defective Condition 1. Plaintiff need not show why or in what manner product became defective. 2. Plaintiff must show product was defective when it left control of seller, and 3. The defect made it unreasonably dangerous. 14 Unreasonably Dangerous Products Unreasonable Dangerous Product. 1. Product was dangerous beyond the expectation of the ordinary consumer. 2. A less dangerous alternative was economically feasible for the manufacturer, but the manufacturer failed to produce it. A product make be “unreasonably dangerous” due to a flaw in the manufacturing process , defective design or an inadequate warning label. 15 Three Types of Product Defects 1. Manufacturing defects. – Departure from design specifications – Opinions and expert testimony. 2. Design defects. – Create unreasonable risk to user. – Reasonable alternative design was available 3. Warning Defects. – Inadequate instructions or warnings. – A “reasonableness” test. 16 Strict Liability: 1. Manufacturing Defects Occurs when a product “departs from its intended design (Quality Control) even though all possible care was exercised in the preparation and marketing of the product.” – See Case In Point 7.4 at page 140: Defect in manufacturing of a 8 foot ladder. 17 Strict Liability: 2. Design Defects Product is unreasonably dangerous as designed even if it is manufactured correctly. Test for Design Defects: The plaintiff must show: 1. A reasonable alternative design was available. 2. Defendant’s failure to use a reasonable alternative design rendered the product not reasonably safe. 18 Strict Liability: 2. Design Defects Risk-Utility Analysis: Determines whether the risk of harm from the product outweighs its utility to the user and public. – See Case in Point 7.5 at page 141. Consumer Expectation Test: A product is unreasonably dangerous when it fails to perform in a manner that would reasonably be expected by an ordinary consumer. – See Case in Point 7.6 at page 141. 19 Strict Liability: 3. Warning Defects Liability based on foreseeability that proper instructions/labels would have made the product safe to use. No duty to warn about obvious or commonly known risk. Seller must also warn about injury due to product misuse. Key is whether misuse is foreseeable. See Case In Point 7.7 at page 141. 20 Strict Liability: 3. Warning Defects Content of Warning: Courts apply a “reasonableness” test to determine if the warnings adequately alert consumers to the product’s risks. Obvious Risks: No duty to warn about obvious or commonly known risks. – See Case In Point 7.8 at page 143. – Risk obvious to some may not be to other, i.e. children. 21 Strict Product Liability Market-Share Liability: Liability when multiple defendants contributed to manufacture of same defective product. Each defendant is proportionately liable based on its market share. Market-Share Liability theory not recognized by all jurisdictions. 22 Strict Product Liability Other Applications of Strict Liability: Virtually all courts extend strict liability to injured bystanders. Strict liability also applies to suppliers of component parts. Defenses to Product Liability Case 7.3 VeRost v. Mitsubishi Caterpillar Forklift America, Inc. (2015) – Where goods altered after they were sold? 23 Defenses to Product Liability (1) Preemption: Government regulations preempt claims for product liability. – SEE CASE 7.2 BRUESEWITZ V. WYETH, LLC USSC (2011). Assumption of Risk: (1) The plaintiff knew and appreciated the risk created by the alleged product defect, and (2) the plaintiff voluntarily assumed the risk, even though it was unreasonable to do so. (product recall) – See Case in Point 7.13 at page 145. 24 Defenses to Product Liability (2) Product Misuse: (1) Plaintiff was misusing the product, and (2) plaintiff’s misuse was not reasonably foreseeable to the defendant. Comparative Negligence (Fault): Plaintiff’s own negligence or wrongful acts contributed to her injury. 25 Defenses to Product Liability (3) Commonly Known Dangers: A danger so commonly known that the defendant had no duty to warn plaintiff. (knife, chain-saw) – See Case In Point 7.15 at page 146. Knowledgeable User: A danger so commonly known by particular users of the product that the defendant had no duty to warn plaintiff. – See Case In Point 7.16 at page 146. 26 Defenses to Product Liability (4) Statutes of Limitation: Vary by state law but are typically two to four years. – Claimed tolled until discovered. Statutes of Repose: Place outer time limits on product liability actions so that sellers and manufacturers are not left vulnerable to lawsuits indefinitely. (i.e. 12 years from date of manufacturer). 27 ...
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