Slide 1 : 1 Sales Contracts: Warranties & Product Liability Chapter18 BUSINESS LAW TODAY Standard 8th Ed.Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus
Learning Objectives : 2 Learning Objectives What factors determine whether a Seller’s statement constitutes an express warranty or mere “puffing”?
What implied warranties arise under the UCC?
Can a manufacturer be held liable to any person who suffers an injury proximately caused by the manufacturer’s negligently made product?
What are the elements of a cause of action in strict product liability?
What defenses to liability can be raised in a product liability lawsuit?
Warranties of Title : 3 Warranties of Title Warranties of Title – automatic in most sales contracts:
Good Title.
No Liens.
No Infringements.
Disclaimer of Title Warranty.
Express Warranties : 4 Express Warranties Representations of fact about quality, condition, description or performance.
Goods must conform to model or sample.
Warranty must be Basis of the Bargain.
Statements of Opinion do not create express warranties.
Implied Warranties : 5 Implied Warranties UCC/Law derives from implication or inference of circumstances.
Implied Warranty of Merchantability:
Merchantable Goods.
Merchantable Food.
CASE 18.1 Webster v. Blue Ship Tea Room, Inc. (1964).
Implied Warranty of Fitness for a Particular Purpose.
Warranty Disclaimers : 6 Warranty Disclaimers Express warranties displace/preempt implied warranties—except for implied warranties of fitness for a particular purpose.
Express Warranties:
Courts view unfavorably.
Must be conspicuous.
Buyer must be aware of disclaimer at time of sale.
Implied Warranties:
Disclaimer of Implied Warranty of Merchantability.
Disclaimer of the Implied Warranty of Fitness. (“As Is” or “With All Faults”).
Buyer’s Refusal to Inspect.
Unconscionability.
Magnuson-Moss Warranty Act : 7 Magnuson-Moss Warranty Act Federal law to prevent deception in warranties by making them easier to understand.
Enforced by Federal Trade Commission.
Full Warranty (free repair/replacement).
Limited Warranty.
Implied Warranties arise under UCC -- not Magnuson-Moss.
Product Liability-Negligence : 8 Product Liability-Negligence Manufacturers, sellers and lessors of goods can be liable for a defective good that causes injury.
Negligence:
Due care in designing the product.
Selecting materials.
Production Process.
Assembly.
Adequate warning label for ordinary person.
Privity of Contract Not Required.
Strict Product Liability : 9 Strict Product Liability Liability without regard to fault or standard of care.
Injured party can be 3rd party (not the buyer).
Assumption that:
Consumers should be protected against unsafe products.
Manufacturers and distributors should not escape liability for defective products, and
Manufacturers and sellers are in a better position to bear the costs of injury.
Requirements for Strict Liability : 10 Requirements for Strict Liability Product must be in a defective condition when sold
Defendant must be engaged in selling that product
Product must be “unreasonably dangerous”: product is dangerous beyond ordinary expectation or less dangerous alternative not used.
Plaintiff must incur injury to self or property by use or consumption of the product
Defective condition must be cause
Goods have not be substantially changed from time of sale.
Product Defects--Restatement (Third) of Torts : 11 Product Defects--Restatement (Third) of Torts Manufacturing Defects.
CASE 18.2 Derienzo v. Trek Bicycle Corp. (2005).
Design Defects.
Inadequate Warnings.
Manufacturer must warn if foreseeable misuse will cause injury.
Factors: user groups, content of message.
Strict Product Liability : 12 Strict Product Liability Market Share Liability.
Multiple Defendants involved are liable based on the share of the market.
Other Applications.
All courts extend liability of manufacturers and other sellers to injured bystanders.
Defenses to Product Liability : 13 Defenses to Product Liability Assumption of Risk.
Product Misuse.
Severely limited.
Comparative Negligence.
Commonly Known Dangers.
Sharp knives and guns.
Knowledgeable User Defense.