Chapter 15: Warranties and Product Liability

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Chapter 1: Legal EthicsCHAPTER 15:

WARRANTIES ANDPRODUCT LIABILITY

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Learning Objectives

1. What factors determine whether a Seller’s or Lessor’s statement constitutes an express warranty or mere puffery?

2. What implied warranties under the UCC?


Learning Objectives

4. Can a manufacturer be held liable to any person who suffers an injury proximately caused by the manufacturer’s negligently made product?

5. What are the elements of a cause of action in strict product liability?

6. What defenses to liability can be raised in a product liability lawsuit?


Warranties A warranty is an assurance or

guarantee by the seller of certain facts concerning the goods being sold or leased.

If seller breaches a warranty, buyer can recover damages, or rescind the contract.


Warranties• Warranties automatically arise in most

commercial sales transactions.• Normally warranties can be disclaimed or

modified with specific language in the contract.


Warranties• Warranties of Title.– Under the UCC, three types of warranties arise in

sales and lease contracts:•Good Title.•No Liens.•No Infringements.


Warranties• Express Warranties.– Seller can create warranty by making

representations about quality, condition, or performance of good, by:• Any Affirmation or Promise.• Any Description.• Any Sample or Model.


Warranties• Express Warranties.– Seller does not have to use the words “guarantee”

or “warranty.”– Basis of the Bargain. • Reasonable buyer must only believe warranty was

‘basis of the bargain.’• Buyer must rely on warranty when he enters into

contract.


Warranties• Express Warranties.– Statements of Opinion and Value. • Only statements of fact create express warranties.• Exception for Statements of Opinion by Experts. • Puffery versus Express Warranties.


Warranties• Implied Warranties.– Implied Warranty of Merchantability:

Automatically arises from sale of goods by merchants which are “reasonably fit for ordinary purposes for which such goods are sold.”• Conform to promises on label.• Adequately packaged and labeled.


Warranties• Implied Warranties.– Implied Warranty of Merchantability:• Merchantable Goods: fit for ordinary purposes for

which such goods are used.• Merchantable Food: fit to eat.• CASE 15.1 WEBSTER V. BLUE SHIP TEA ROOM, INC.

(1964). Does a patron assume the risk of a fishbone in fresh fish soup?


Warranties Implied Warranties.–Implied Warranty of Fitness for a

Particular Purpose.• Arises by any seller who: –Knows the particular purpose for which the

goods are being bought; and–Knows the buyer is relying on seller’s skill and

judgment to select suitable goods.


Warranties Implied Warranties.–Implied Warranty of Fitness for a

Particular Purpose.• Ordinary vs. Particular Purpose: Goods can

be merchantable but unfit for a particular purpose.• Knowledge and Reliance Requirements.


Warranties Implied Warranties.–Implied Warranty from Prior Dealings or

Trade Custom.• Arises when both parties to a contract

have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.


Warranties Overlapping Warranties. Warranty Disclaimers: depends on

type of warranty.–Express Warranties can be disclaimed:• If a clear written disclaimer in contract

with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).


Warranties Warranty Disclaimers: depends on

type of warranty.–Implied Warranties. Unless

circumstances indicate otherwise, warranties of fitness and merchantability can be disclaimed with the words “As Is,” “With All Faults.


Warranties Warranty Disclaimers: depends on

type of warranty.–Implied Warranties. Disclaimer of the

Implied Warranty of Merchantability: must use the word merchantability.• Disclaimer of the Implied Warranty of

Fitness: must be in writing and conspicuous.


Warranties• 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.


Lemon Laws

• Coverage of Lemon Laws.– Applies primarily to automobiles.– Give consumer remedies for automobiles under

warranty that cannot be fixed with a certain number of attempts.

– Buyer is entitled to new car, replacement of defective parts or return of payment.

• Arbitration is typical Procedure.


Product Liability• Product Liability is not a new tort.• Liability can be based on:– Negligence; – Misrepresentation; – Strict Liability; – Warranty Theory.


Product Liability• Negligence.–Based on a manufacturer’s breach of the

reasonable standard of care and failing to make a product safe.

– Due Care Must Be Exercised in: design, selection of materials, using appropriate production process, assembling and testing, adequate warnings, inspection, and testing.


Product Liability• Negligence.– Privity of Contract Not Required. No privity of

contract required between Plaintiff and Manufacturer. Liability extends to any person’s injuries caused by a negligently made (defective) product.


Product Liability• Misrepresentation.– Occurs when fraud committed against consumer

or user of product. Fraud must have been made knowingly or with reckless disregard for safety.

– Plaintiff does not have to show product was defective.


Product Liability• Strict Product Liability.– Strict Liability holds people liable for results of

their acts, regardless of their intentions or exercise of reasonable care.


Strict Product Liability• Strict Product Liability and Public Policy. – Consumers should be protected from unsafe

products;– Manufacturers and distributors should be liable to

any user of the product;– Manufacturers, sellers and distributors can bear

the costs of injuries.


Strict Product Liability• Strict Product Liability and Public Policy.

–CASE 15.2 BRUESEWITZ V. WYETH, LLC (2011). What do you think about the ethical or moral implications of this decision?


Strict Product Liability• Requirements for Strict Liability:

1. Product must be in defective condition when sold.2. Defendant is in the business of selling the

product.3. Product must be unreasonably dangerous.


Strict Product Liability• Requirements for Strict Liability:

4. Plaintiff must be physically harmed5. Defective condition must be proximate cause of

injury.6. Goods are in substantially same condition.


Strict Product Liability• Requirements for Strict Liability:– Proving a Defective Condition.• Plaintiff does not need to show product or in what

manner the product become defective. • But plaintiff must show product was defective and

“unreasonably dangerous” to the user.


Strict Product Liability• Requirements for Strict Liability:– Unreasonably Dangerous Products.• The product was dangerous beyond the expectation of

the ordinary consumer.• A less dangerous alternative was economically feasible

for the manufacturer, but the manufacturer failed to produce it.


Strict Product Liability

Product Defects – Restatement (Third of Torts).–Manufacturing Defects. –Design Defects. –Warning Defects.


Strict Product Liability Product Defects – Restatement (Third

of Torts).–Manufacturing Defects.• Occurs when a product “departs from its

intended design even though all possible care was exercised in the preparation and marketing of the product.”



of Torts).–Design Defects. • Product is manufactured correctly, but

defect is based on design. Test: plaintiff must show defendant’s failure to use a “reasonable alternative design” rendered the product not reasonably safe.


Strict Product Liability Strict Product Liability.–Design Defects. • Factors to be Considered. –Magnitude and probability of

foreseeable risks. –Relative advantages and disadvantages

of product.–Most courts use “risk-utility” analysis.



of Torts).–Inadequate Warnings.• A product may be defective because of

inadequate warnings or instructions.• Liability based on foreseeability that

proper instructions/labels would have made the product safe to use.



of Torts).–Inadequate Warnings.• Obvious Risks. No duty to warn.• Foreseeable Misuses. Seller must warn

about foreseeable misuse.


Strict Product Liability Market Share Liability.–Theory of liability when multiple

Defendants contributed to manufacture of defective product.–Liability of each Defendant is

proportionate to the share of the market held by each respective Defendant.


Defenses to Product Liability Assumption of Risk.–CASE 15.3 BOLES V. SUN ERGOLINE,

INC. (2010). Why wasn’t assumption of risk a valid defense in this case?

Product Misuse. –Plaintiff does not know the product is

dangerous for a particular use.


Defenses to Product Liability Comparative Negligence.–Defendants may be able to limit

damages by apportioning fault.–Commonly Known Dangers.–Knowledgeable User.

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Chapter 15: Warranties and Product Liability