Advanced Torts – Product Liability Outline- Ausness Fall 2012
I. Rationales of Strict Liability
a. Deterrence
i. Aka Allocative Efficiency (resource allocation)
ii. Aka Accident Cost-Avoidance
b. Risk Spreading
i. Everyone pays a little.
ii. Ex: Insurance
c. Institutional Competence
d. Paternalism v. Personal Autonomy
e. Moral Issues
i. Justice
f. Industrial Liability
II. Note
a. “Fault theories”
b. Negligent Marketing
c. Conspiracy
d. Fraudulent Misrepresentation
e. Public Nuisance
III. Defects
a. Design Defects
b. Inadequate Warning/Failure to Warn
c. Manufacturing Defects
IV. Transactions Subject to Strict Liability in Tort
Class Introduction: Historically
I. Baxter
a. Lack of privity in warranty case
b. Product must be as good as manufacturer claims
II. Escola
a. Dictum suggested enterprise liability
III. Henningsen
a. Car was defectively manufactured
b. Lack of privity is not a defense
c. Disclaimers defeat policy of implied warranties
IV. Greenman
V. Rest. 2d Torts §402A
a. Cornerstone of product liability law
VI. 3 Theories of Liability
a. 1. Negligence
b. 2. Warranty
i. Not fault-based
c. 3. Strict Liability
VII. Statute of Limitations
a. If tort statute of limitations has run, Ps will bring claim for warranty
Chapter 2: Negligence
I. Examples of Negligence
a. Res Ipsa Loquitur
b. Warnings
c. Design Defects
II. MacPherson v. Buick
a. D is manufacturer who sold to retail dealer, who sold to P.
b. Manufacturing defect – P injured, crash because of defective wooden wheels.
c. H: D liable for negligently failing to inspect car when reasonably certain to place life and limb in peril when negligently made.
d. D’s duty of care not only to retail dealer.
e. When manufacturer was negligent in making defective product, victim may sue manufacturer regardless of lack of privity.
f. Manufacturer responsible, even though wheels made by other company.
g. Manufacturer may sue maker of component in indemnity suit. P not required to do so.
Chapter 4: Warranty
I. 3 Types of Warranty
a. Express Warranty
b. Implied Warranty of Merchantability
c. Implied Warranty of Fitness for Particular Purpose
Express Warranty
I. Kolarik v. Cory International
a. P fractured tooth on “minced pimento stuffed” olives. Claims express warranty.
b. Warranty was merely that jar contained pimento-stuffed olives, it did.
c. H: SJ for D
d. Note: Trade usage may be used to interpret warranty language, but not to reduce its scope.
e. Aus: There is no express warranty here.
II. UCC §2-313: Express Warranties by Affirmation, Promise, Description
a. Express warranties by seller are created as follows:
i. Affirmation of fact/promise…that becomes basis of bargain
ii. Description…that becomes basis of bargain
iii. Sample or model…that becomes basis of bargain
iv. Does not create a warranty:
1. Affirmation merely of value of goods, or
2. Statement purporting to merely the seller’s opinion, or
3. Commendation of the goods
Implied Warranty of Merchantability
I. UCC §2-314: P must prove:
a. 1. Merchant sold goods
b. 2. Which were not “merchantable” at time of sale
i. Merchantable =
1. Pass without objection in trade under K description
2. If fungible, of fair average quality within the description
3. Fit for ordinary purposes for which goods used
4. Quality/quantity within each unit and all units
5. Adequately contained, packaged and labeled as K requires
6. Conform to promises or affirmations of fact made on container or label
c. 3. Injury and damages to P or property
d. 4. Which were caused proximately and in fact by defective nature of goods
e. 5. Notice to seller of injury.
II. Definitions:
a. Must pass without objection in the trade; Fair, average quality;
b. Ausness prefers: Fit for ordinary purposes for which goods are used.
Parties & Privity
I. Vertical Privity
a. Contractual relationship between parties up and down the chain of distribution
b. Manufacturer (top) to consumer (bottom)
c. Express warranties in advertisements run directly to purchasers
II. Horizontal Privity
a. Non-purchasing parties affected by product who seek to stand in consumer’s shoes to benefit from warranties
i. Ex: Bystander (not consumer) injured
b. Could have problems with this privity
c. UCC §2-218 has alternatives
*Market Failure
I. Disparities in bargaining power
II. Information Asymmetries
a. Manufactures more informed of product risks
b. Consumers sometimes unaware of risks when they agree to assume them.
III. Cognitive Limitations
a. Consumers not as good at estimating and evaluating risks
b. Manufacturers can exploit this, especially through advertisements
IV. Third Party Externalities
a. Could injure bystanders, etc.
Contractual Limitations of Responsibility
I. Henningsen v. Bloomfield Motors
a. P purchased car from D retailer. Mechanical defect caused wreck and injury.
b. D: Disclaimer in warranty shields from liability for breach of warranty.
c. H: Disclaimer of an implied warranty of merchantability by dealer, elimination of all obligations other than replacement of parts, and limits on remedies, violates public policy and is void.
d. D attempted to substitute express warranty in place of implied warranty of merchantability.
e. This is a breach of implied warranty of merchantability
f. Adhesion Contracts, decision based on public policy.
II. Unconscionable
a. Court may not enforce
III. Merchant
a. May not disclaim so as to show faith in their product
IV. Seller
a. If seller successfully disclaims implied warranty of merchantability:
i. Caveat emptor, or
ii. Substitute express warranty, limit remedies.
Disclaimers under UCC
I. Class
a. Disclaimer destroys warranties; especially implied warranties
b. May also be struck down if unconscionable
c. To do: Disclaim implied warranty and agree upon express warranty.
II. Disclaimers of Warranty: §2-316
a. Words/conduct to negate/limit warranty is inoperative if construct unreasonable
i. Ex: 30 day warranty on front, disclaimer on back
b. Conspicuous Requirement to exclude/modify implied warranty of merchantability or fitness
c. All implied warranties are excluded by expressions like “as is,” “with all faults,” or other that calls buyers attention and makes plain there is no implied warranty.
d. If before buyer has chance to examine, there is no implied warranty for defects that an examination ought in the circumstances to have revealed to him.
e. Implied warranty may also be excluded/modified by course of dealing, course of performance, or usage of trade
III. Dorman
a. P had problems with tractor purchased from D and sued for breach of warranty.
b. I: Whether D contained valid disclaimer of implied warranties.
c. H: Disclaimer was insufficiently conspicuous to inform reasonable buyer he was waiving rights to have quality product.
d. Exclusion of implied warranty of merchantability must be conspicuous: so written that reasonable person against whom it operates ought to have noticed
e. Conspicuous = clear and distinct langua
mmercial lease transactions.
II. Keen v. Dominick’s Food
a. P sued grocery store for injury sustained by shopping cart in their store.
b. H: Store is not part of distributive chain within ambit of principles of strict product liability.
c. Shopping cart is a license – use for limited purpose. D is merely a user of cart.
d. Party charged with strict liability must be in business of placing allegedly defective product into stream of commerce for use and consumption by others.
e. Different from Bainter (gas tank) because tank was incident to sale of sold product, and strict liability applied to sale “spill overs.” Not everyone will use shopping cart. (Ausness: this reasoning is bogus)
III. Note
a. JDs differ on cases like Keen
b. Ex: Golf cart malfunctions on golf course; more like shopping cart
c. Analyze cases by license (shopping cart) v. gas tank
IV. Leases & Bailments
a. Long-Term No Maintenance Leases
i. Ex: Car lease is functionally a sale
b. Short-Term Lease (Bailment)
i. Strict liability rationales apply, especially if lessor leases frequently
c. Long-Term Maintenance Lease
i. Lease + Maintenance Contract
ii. Hybrid of sale-service; Strict liability applies because more like sale
d. License
i. Limited right to use product; no transfer of possession
ii. Ex: shopping cart
iii. JDs split on whether to apply strict liability (CA says yes)
e. Finance Lease
i. When manufacturer sells product to bank or financing company, and it leases to consumer
ii. Courts usually reject strict liability
f. Ausness: Courts are inconsistent in applying strict liability
Services
I. Cafazzo v. Central Medical
a. Defective prosthesis implanted in P. D is doctor.
b. I: Whether hospital and doctor are subject to strict liability for medical services.
c. H: Hospital and doctors are not “sellers” under §402A.
d. Even if Ds “marketed” prosthesis, strict liability does not apply.
e. Strict liability applies only when defective product is provided by seller engaged in the business of selling such a product.
II. Francioni TEST
a. 1. Which members of marketing chain are available for redress.
i. Is there some other remedy?
b. 2. Whether imposition of liability would serve as incentive to safety
i. Would strict liability provide incentive for greater safety?
c. 3. Whether supplier is in better position than consumer to prevent circulation of defective products, and
i. Does D have control over risk?
d. 4. Whether supplier can distribute cost of compensation for injuries by charging for it in his business.
i. Is D a good risk spreader? Who is better?
