Business Law Chapter 13 Study Guide

Defenses to Product Liability

1. Preemption 2. Assumption of Risk 3. Product misuse; except in situations where particular misuse is reasonably foreseeable 4. Comparative Fault 5. Commonly Known Dangers 6. Knowledgeable User 7. Statutes of Limitations/Repose

In an action for strict liability, liability can be nearly unlimited if:

1. Product was in defective condition when defendant sold it; i. Manufacturing defects: the product departs from its intended design resulting in a product that is flawed, damaged or incorrectly assembled ii. Design Defect: the product is made in conformity with the design, but the design was faulty; plaintiff claiming design defect must prove: 1. A reasonable alternative design was available 2. The defendant's failure to adopt the alternative design made the product unsafe iii. Inadequate warning also renders product defective: when foreseeable risks of harm could have been reduced/avoided if there had been reasonable instructions or warnings 1. Johnson vs. Medtronic Inc. 2. Seller must warn about foreseeable misuses 3. There is no duty to warn about obvious risks 2. Defendant is normally engaged in business or selling/distributing the product 3. Product is unreasonably dangerous to user/consumer because of defective state 4. Plaintiff must incur physical harm to self or property by use or consumption of product 5. Defective condition is proximate cause of injury 6. Product was not substantially changed from the time it was sold to the time the injury was sustained

Comparative Fault

A defendant may be able to limit some or all liability if it can show that the plaintiff's misuse of the product contributed to the injuries.

Manufacturing Defects

A departure from a product unit's design specifications that results in products that are physically flawed, damaged, or incorrectly assembled. Quality control.

Preemption

Government regulations preempt claims for product liability.

Product Liability

Liability of manufacturers and sellers for harmful or defective products; based on 2 factors: 1. The manufacturer can better bear the cost of injury because it can spread the cost throughout society by increasing the prices of its goods 2. The manufacturer is making a profit from its activities and therefore should bear the cost of injury as an operating expense

Statues of Limitations and Repose

Restrict the time within which an action may be brought. Tolled: suspended until the party suffering an injury has discovered it or should have discovered it. Statute of repose: place outer time limits on product liability actions.

To Prove a Defective Condition

The plaintiff must show that the product was defective when it left the seller's hands and that the defective condition made the product unreasonably dangerous. 1. The product was dangerous beyond the expectations of the ordinary consumer; or 2. A less dangerous alternative was economically feasible for the manufacturer, but the manufacturer failed to produce it

Based on Misrepresentation

When a user/consumer is injured as a result of a manufacturer's/seller's fraudulent misrepresentation, the basis of liability may be the tort of fraud. The misrepresentation must have been made knowingly or with reckless disregard for the facts. The misrepresentation must be of a material fact, and the seller must have intended to induce the buyer's reliance on the misrepresentation. In addition, the buyer must have relied on the misrepresentation. (ex. Intention mislabeling of a package)

Market Share Liability

A plaintiff may attempt to establish a case against a group of product manufacturers for an injury caused by a product, even when the plaintiff does not know from which defendant the product originated.

Inadequate Warnings

A product will be considered defective when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor and the omission of the instructions or warnings renders the product not reasonably safe. There is no duty to warn about risks that are obvious or commonly known. A seller must warn those who purchase its product of the harm that can result from the foreseeable misuse of the product.

Assumption of Risk

Defendant must show that; 1. Plaintiff knew of and appreciated risk created by product defect 2. Plaintiff voluntarily assumed risk - by express agreement or by words or conduct - even though it was unreasonable to do so

Product Defects

Defines the three types of product defects that have been recognized in product liability 1. Manufacturing Defects 2. Design Defects 3. Inadequate Warnings

Based on Negligence

If a manufacturer fails to exercise "due care" to make a product safe, a person who is injured by the product may sue the manufacturer for negligence. Manufacturers must use due care in all of the following: 1. Designing the product 2. Selecting the materials 3. Using the appropriate production process 4. Assembling and testing the Product 5. Placing adequate warnings on the label to inform the user of damages of which an ordinary person might not be aware 6. Inspecting and testing any purchased components used in the product Does not require privity of contract between the injured plaintiff and the defendant - manufacturer. Privity of contract refers to the relationship that exists between the parties to a contract. A person who is injured by a defective product may bring a negligence suit even though her or she was no the one who actually purchased the product and thus is not in privity. A manufacturer, seller, or lessor is liable for failure to exercise due care to any person who sustains an injury proximately caused by a negligently made (defective) product.

Design Defects

Is made in conformity with the manufacturer's design specifications. A product is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, and the omission of the alternative design renders the product not reasonably safe. To successfully assert a design defect, a plaintiff has to show: 1. A reasonable alternative design was available 2. The defendant's failure to adopt the alternative design rendered the product not reasonably safe

Strict Product Liability

The result of public policy that consumers should be protected against unsafe products. The public policy rests on the threefold assumption that: 1. Consumers should be protected against unsafe products 2. Manufacturers and distributors should not escape liability for faulty products simply because they are not in pivity of contract with the ultimate user of those products 3. Manufacturers and distributors can better bear the costs associated with injuries caused by their products - because they can ultimately pass the costs on to all consumers in the form of higher prices 1. Irrelevant whether act was intentional or whether there was a failure to exercise due care. 2. In an action for strict liability, liability can be nearly unlimited if: 3. To prove a defective condition 4. Market Share Liability 5. Strict Product Liability also applies to injured bystanders and suppliers of component parts

Abnormally Dangerous Activities

Those that involve a high risk of serious harm to persons/property that cannot be completely guarded against by the exercise of reasonable care. 1. Blasting 2. Storing explosives/hazardous material

Product Liability

Those who make, sell or lease goods can be held liable for physical harm/property damage caused by the goods to a consumer, user or bystander. 1. Based on Negligence 2. No requirement that person injured by a product be the buyer or a third party beneficiary 3. Based on Misrepresentation 4. Strict liability 5. Warranties

Strict Liability

When a person is legally liable for damages caused by his acts or omission regardless of fault; applies to: 1. Abnormally Dangerous Activities 2. Keeping Wild Animals 3. Product Liability