Business Torts and Product Liability: Chapter 7

negligence in tort

Manufacturer must exercise reasonable care under the circumstances. Failure to inspect or test materials used in the product can be negligence -were the dangers foreseeable? -care must be taken to avoid misrepresentation in product promotion -defects and dangers must be revealed -causal connection must be present between the product or the design defect and the injury -by the 60s, courts began to apply strict liability -producers are responsible for damages even if no negligence

primary areas of product liability law

(1) defect in product from manufacturing (2) manufacturers failed to warn consumer of risks of use or of known hazards in certain uses of product (3) product has design defect that could have been avoided by alternative design (4) product resulted in latent injuries that may not become known for years

joint and several liability

-most states have held plaintiffs may sue any or all manufacturers to share the liability created -manufacturers are allowed to fight it out as to which should pay for amounts of damages -any of the defendant-manufacturers my be held responsible for all damages -limits put on applications of joint and several liability in some areas in some states -market share liability (Collins v. Eli Lilly and Co)

defenses to negligence and strict liability

-product misuse or abuse -assumption of risk -sophisticated user defense and bulk supplier doctrine

manufacturing defect

Liability is imposed when product comes off assembly line with defect that causes danger consumers do not expect such defects- consumer expectation test

ultrahazardous activity

- abnormally dangerous activity - common law rules developed about uncommon activities where utmost care is needed

Torts in the Business Setting

- no such thing as "business tort" - often cases with business settled out of court (gives a def answer, allows secrecy, confidential) - there are often big awards, "deep pockets"

consumer products and negligence

-In the 19th century courts, there was the privity of contract requirement (a contractual relationship between injured party with the manufacturer was needed) -Burden on consumer -If there was no relationship, caveat emptor applied (let the buyer beware)

strict liability and unknown hazards or latent defects

-dangers not known at the time of the product's manufacture -hazard associated with the product is not known for many years -consumer expectation standard use by courts -claims are often class action suits -manufacturers must have recalls or warnings when hazard is detected

torts particular to businesses

-fraud or intentional misrepresentation -interference with contract -interference with prospective advantage -product liability -consumer products and negligence -strict liability for products -ultra-hazardous activities

categories of business torts

-intentional -negligence -strict liability -torts are traditionally common law but increasingly, statutes are playing an important role in this area

intentional misrepresentation or fraud

1. misstatement of an important or material fact - misstatement induces another to enter into a business relationship - unrelated or unimportant misstatement cannot be a basis of fraud 2. scienter or intent to defraud -intentionally misleading and deceiving another 3. person knows or has reason to know that statement being made is false 4. recipient of false information justifiably relies on the information and decides to enter into the deal 5. privity between the parties; relationship exists 6. proximate cause : logical link between reliance on misstatement and losses suffered by the plaintiff 7. damages

interference with prospective advantage

Known also as Interference With Prospective Economic Advantage or Interference With Prospective Contractual Relationship -One party makes it difficult/impossible for another party to continue in some/all business dealings -A business attempts to improve its place in the market by interfering with another's business -Unreasonable, improper manner of interference -Predatory behavior, not "merely competitive"

strict liability in tort

Manufacturers are strictly liable for defective products courts ask: -was the product defective? -did the defect create an unreasonably dangerous product or instrumentality? -was the defect a proximate cause or substantial factor of the injury? -did the injury cause damages? courts do not worry about carefulness, due care, reasonableness, etc

fraud

deliberate deception the tort may be called fraud, misrepresentation, fraudulent misrepresentation, or deceit -intentional misrepresentation or fraud *relationship of parties is a factor in creating legal duties * "malice, intent, knowledge and other conditions of a persons mind may be alleged generally" when claiming fraud -claim often added to a suit of breach of contract

failure to warn

failure by manufacturer to warn of dangers in using a product includes a wide variety of circumstances -failure to give information about specific dangers -failure to issue added warnings about problems that become known after product has been in use -failure to give special emphasis on biggest dangers

express warranty

guarantee of safety or performance -by model -by statement -by contract -by advertising misrepresentation of product safety may be basis of strict liability

strict liability under contract law

implied warranty express warranty

implied warranty

implied warranty of safety at common law -began with food -safety implied at law whether the manufacturer wants to warrant the product or not from UCC: -implied warranty of merchantability -implied warranty of fitness for a particular purpose

interference with contracts

known also as : interference with business relations or inference with contractual relations when breaking a contract will benefit a 3rd party:(established in Lumley v. Gye) 1. existence of a contractual relationship 2. 3rd party knows about the contract 3. 3rd party intentionally induces of breach of contract or interferes with the contractual relationship 4. absence of justification for the interference 5. damages as a result of the interference

product liability

liability of producers of defective products -want companies to have incentives to ensure their products are safe -but do not want companies to pay for injuries consumers suffer while using products improperly -product liability is a general term that is based primarily in tort law, but elements of contract law come into play

restatement (third) of torts on products liability

restatement (third) of torts defines categories of defect 1. product departing from intended design 2. foreseeable risk of harm could be reduced or avoided by an alternative design 3. harm could have been reduced by reasonable instructions or warnings -restatement third speaks of "risk-utility balancing" -encourages courts to move away from the distinction between negligence and strict liability