LAW 3800 - Summary of Chapter 22 PDF

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Download LAW 3800 - Summary of Chapter 22 PDF

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Chapter 22 ➢ Products Liability can be based on a number of theories, including warranty, negligence, and strict liability ➢ Warranties = contractual assurance the goods will meet a certain standard ○ Express Warranties ■ Warranties which seller creates through words or actions ● Seller clearly indicates that the goods will meet certain standards or have certain qualities ■ Can arise from: ● Affirmation of Fact or Promise ● Description of the Goods ● Samples or Models ■ Seller’s conduct must form part of the basis of the bargain ■ Rite Aid Corp. v Levy-Gray ● As it is common knowledge that sellers will deliver warranties after the contract has been made, some courts are recognizing that later statements found in these writings are part of the basis of the bargain ■ The Federal Magnuson-Moss Warranty Act governs written warranties given to consumers ○ Implied Warranties ■ Created by law (for example, the Uniform Commercial Code) ■ Merchantability ● Unless excluded or modified, a warranty that the goods are merchantable is implied in a contract for the sale of goods if the seller is a merchant of goods of that kind ○ Merchantable = fit for their normal purpose ● Dacor Corp. v. Sierra Precision ○ Hoses cracked or sheared within a year, so recalled 16,000 units of its scuba equipment to refit with safe hoses, sued for a breach of the implied warranty of Merchantability ● Goodman v Wenco Foods ○ The bone was natural to beef was no bar to recovery, compliance with state regulations and USDA standards is evidence that the jury can consider, but not in and of itself dispositive ■ Fitness for a particular purpose ● Where the seller at time of contracting knows about a particular purpose (special use) for which the buyer wants the goods, and knows that the buyer is relying on the seller’s skill or judgment, there is an implied warranty that the goods shall be fit for the purpose, unless excluded or modified

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The seller of goods impliedly warrants that her title is valid and that the goods are free of any security interest that the buyer knows nothing about unless the seller has excluded or modified the warranty Non-infringement ○ Unless otherwise agreed, the seller of goods who is a merchant warrants that the goods are free of any rightful claim of copyright, patent, or trademark infringement Disclaimers ○ A statement that says that a particular warranty does not imply ○ Oral Express - can be disclaimed ○ Written Express - usually cannot be disclaimed ○ Implied Warranty of Merchantability - can be disclaimed if disclaimer mentions the word merchantability and is clear and conspicuous ○ Implied Warranty of Fitness for Particular Purpose - can be disclaimed if disclaimer if clear and conspicuous ○ Implied Warranty of Title - can be disclaimed ○ CCB Ohio, LLC v Chemque Inc ■ Wins b/c there were four fact issues whether CCB Ohio ever received the spec sheet, whether the disclaimer was conspicuous, whether the disclaimer effectively disclaimed the implied warranty of merchantability, whether the disclaimer effectively disclaimed the express warranty Remedy Limitations ○ Permitted by most, but not all, states ○ Exclusion in contract of “consequential damages” that stem for the particular requirement of the buyer which can be valid unless unconscionable ■ Shockingly one-sided and fundamentally unfair ○ Unlikely to be enforced against a consumer who suffered personal injury ○ More likely to be enforced as between companies or other business entities ○ Logan Equipment v Simon Aerials, Inc. ■ Limitation of remedies was effective as between the two companies Privity ○ When two parties contact with each other they are “in privity” or “in privity of contract” ○ Traditionally, “lack of privity” was a defense ■ A consumer could sue the retailer from which it had purchased the goods for breach of contract or breach of warranty, but could not sue the upstream distributor or manufacturer with whom the consumer lacked privity ○ Courts (and states) are moving away from strict privity requirements ■ Most states permit a warranty claim to be brought by a plaintiff who suffered a personal injury, even if there is no privity ■ If only economic loss has been suffered, privity will be required by most if the plaintiff is a business, but not required if the plaintiff is a consumer ■ Reed v City of Chicago ● Beneficiary of any warranty made by the manufacturer and designer of the gown is necessarily a potentially suicidal detainee. If protection is not provided to plaintiffs like Reed, any warranty as to the safety of the

grown would have little, if any, effect. In designing and manufacturing the gown, defendants contemplated that the users of the gown would be detainees. Moreover, the safety of these detainees was necessarily a part of the bargain, whether explicitly or implicitly, between the seller and buyer. For these reasons, a detainee of the City like Reed must be able to enforce the protections of any warranties made by the manufacturer and designer of the gown ● No privity required ➢ Defenses to Breach of Warranty Action ○ Product Misuse ○ Statute of Limitations ■ UCC sets a limitation of four years from discovery of the breach, but the parties can in their agreement shorten that time to no less than 1 year ○ Failure to Give Notice of Breach ■ UCC requires notice be given within a reasonable time ➢ Negligence claims involving the sale of goods: ○ Negligent Design ■ Not designed free of unreasonable risks ○ Negligent Manufacture ○ Failure to Warn ■ Of risks of normal use and foreseeable misuse ○ Boumelhem v Bic Corp ■ Manufacturer of a simple product has no duty to warn of the product’s potentially dangerous conditions or characteristics that are readily apparent or visible upon casual inspection and reasonably expected to be recognized by the average user of ordinary intelligence ● In an earlier case was not persuaded that the risk of this danger imposes a duty upon the manufacturer of the lighter to make it child-resistant in light of the fact that the product is intended to be sold to adults, bound by the earlier Adams case

➢ Strict Liability ○ In addition to strict liability for ultrahazardous activities, the seller of defective products can be strictly liable if the product is sold (by a seller that normally engaged in selling such goods) in defective condition unreasonably dangerous to the user and the product reaches the user without substantial change ○ Privity not required for such strict liability defective product claims and use of reasonable care is no defense ○ Plaintiff does not have to show that the defendant's conduct was unreasonable ○ Two tests for design and warning claims ■ Consumer Expectation Test ● Manufacture liable for defective design if product is less safe than a reasonable consumer would expect

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Risk-Utility Test ● Benefits for society weighed against dangers of product ➢ Statute of Limitations in Tort Actions ○ Recall that UCC imposes a 4 year statute of limitations on warranty claims; many state tort statutes have different term running from when defect was discovered ➢ Economic Loss Rule ○ If injury is purely economic and arises from contract between two business, the recovery is under the contract, not for tort ○ Neibarger v Universal Cooperatives, Inc. ➢ Statue of Repose ○ Outside limit on lawsuit ■ X years from when product was sold regardless of when defect was discovered

Express warranty

Contract

UCC § 2-313

Created by affirmation of fact, promise, description of goods, or sample/model; must be part of basis of bargain

Implied warranty of merchantability

Contract

UCC § 2-314

Implied by law that goods are fit for reasonable use

Implied warranty of fitness for a particular purpose

Contract

UCC § 2-315

Implied by law that goods are fit for buyer’s particular purpose(special use); seller must know of particular purpose

Implied warranty of title

Contract

UCC § 2-312

Implied by law that seller has good title, free of security interests (of which buyer has no knowledge) and claims of IP infringement

Negligence

Tort

Common law

Seller liable if she failed to show the level of care a reasonable person would use (no duty to warn of obvious dangers)

Strict liability

Tort

Common law and/or state statutes

Seller liable if product sold in a dangerously defective condition...