Chapter 15 Consumer Protection

Debate Hot Debate Hot Debate What protection does Edison have? What protection does Edison have? How should this case be resolved? How should this case be resolved? What’s Your Verdict What’s Your Verdict Pg 259 Pg 259 How should this case be resolved? How should this case be resolved?

Governmental Protection Consumer – individual who acquires goods that are intended for personal use. Consumer – individual who acquires goods that are intended for personal use. Caveat Emptor Caveat Emptor Let the buyer beware Let the buyer beware Caveat Venditor Caveat Venditor ??? ??? Why the change in philosophy? Why the change in philosophy?

Class Actions Class Actions – Allows one or several people to sue on behalf of themselves, and others. Class Actions – Allows one or several people to sue on behalf of themselves, and others. Ex: Erin Brockovich, concert tickets, etc. Ex: Erin Brockovich, concert tickets, etc. Is this necessary? Why? Is this necessary? Why?

Governmental Procedure Cease-and-desist order: an order requiring a company to stop the specified conduct. Cease-and-desist order: an order requiring a company to stop the specified conduct. Consent order: voluntary, court- enforceable, agreement to stop a practice. Consent order: voluntary, court- enforceable, agreement to stop a practice. Restitution: Permits a party to a contract to recover money or property given to the other party. Restitution: Permits a party to a contract to recover money or property given to the other party.

Protection Against Inferior Services and Goods What’s your verdict? What’s your verdict? Pg 260 Pg 260 Licensing Licensing Who needs a license to operate? Who needs a license to operate? Who would you rather go to? Who would you rather go to?

Unsafe Products 1972 Consumer Product Safety Act 1972 Consumer Product Safety Act Created the Consumer Product Safety Commission (CPSC) Created the Consumer Product Safety Commission (CPSC) Law Brief pg 261 Law Brief pg 261 You can sue CPSC, to ensure they are doing their job You can sue CPSC, to ensure they are doing their job

Food, Drugs and Cosmetics Food and Drug Administration (FDA) Food and Drug Administration (FDA) Requires Food, Drugs and Cosmetics be clean Requires Food, Drugs and Cosmetics be clean Adulterated = does not meet standards Adulterated = does not meet standards Requires labeling Requires labeling Very cautious (praise and criticism) Very cautious (praise and criticism)

Weights and Measures Weights and Measures Division Weights and Measures Division Nat’l Institute of Standards and Technology Nat’l Institute of Standards and Technology Uniformity Uniformity Pound is a Pound, etc. Pound is a Pound, etc. Seals certify accuracy Seals certify accuracy

Protection Against Unfair Trade Practices WYV pg 263 WYV pg 263 Unfair Trade Practice: any method of business that is dishonest or fraudulent or that illegally limits fair competition. Unfair Trade Practice: any method of business that is dishonest or fraudulent or that illegally limits fair competition.

Unfair Trade Practices Price Fixing Price Fixing False / Misleading Advertising False / Misleading Advertising Bait and Switch Bait and Switch Federal Trade Commission Federal Trade Commission Corrective Advertising Corrective Advertising Cease and desist Cease and desist

Unfair Trade Practices Illegal Lotteries Illegal Lotteries Required Payment to participate Required Payment to participate Winner determined by chance not skill Winner determined by chance not skill A prize is won A prize is won Punishable by fine and or imprisonment Punishable by fine and or imprisonment What about Bingo? What about Bingo? Confidence Games Confidence Games Pyramid scheme (Madoff) Pyramid scheme (Madoff)

Unfair Trade Practices Unfair Pricing Unfair Pricing Free, artificial two for one, low estimates Free, artificial two for one, low estimates Mislabeled Goods Mislabeled Goods Others pg 265 Others pg 265

Product Liability WYV pg 266 WYV pg 266 Product Liability: Affixing of responsibility to compensate for injuries caused by a defective product. Product Liability: Affixing of responsibility to compensate for injuries caused by a defective product. Product Liability suit Product Liability suit Based on Breach of Warranty: an assurance the seller makes about quality Based on Breach of Warranty: an assurance the seller makes about quality

Expansion of Product Liability Warranty = Contract Warranty = Contract Parties involved Parties involved Privity of Contract : relationship that exists between buyer and seller Privity of Contract : relationship that exists between buyer and seller Wholesaler, Manufacturer, Bystander? Wholesaler, Manufacturer, Bystander? Legal focus – spoiled ham Legal focus – spoiled ham

Recovery for Tortious Conduct Product Liability suit can be based on Product Liability suit can be based on Breach of warranty Breach of warranty Fraud Fraud Negligence Negligence Strict Liability Strict Liability Has been expanded due to high burden of proof Has been expanded due to high burden of proof

Defenses to Liability Used for non-intended purpose Used for non-intended purpose Screwdriver Screwdriver Used for non-foreseeable purpose Used for non-foreseeable purpose Altered Product Altered Product Improper conduct Improper conduct Misusing Product Misusing Product

Warranties Express Warranty: An assurance of quality explicitly made by the seller. Express Warranty: An assurance of quality explicitly made by the seller. WYV pg 268 WYV pg 268 Can be made by Can be made by Oral or written Oral or written Conduct – show a sample Conduct – show a sample Breach of Warranty = Breach of Contract Breach of Warranty = Breach of Contract

Requirements of Express Warranties Magnuson Moss Magnuson Moss Lemon Laws Lemon Laws

Warranties Full Warranty: An express warranty that obligates the seller to repair or to replace a defective product without cost to the buyer, in a reasonable amount of time. Full Warranty: An express warranty that obligates the seller to repair or to replace a defective product without cost to the buyer, in a reasonable amount of time. Limited Warranty: Any warranty that provides less protection than a full warranty. Limited Warranty: Any warranty that provides less protection than a full warranty.

Opinions vs. Warranties Puffing: Exaggerated Seller’s talk. Puffing: Exaggerated Seller’s talk. Expert Opinions Expert Opinions May create warranties May create warranties Jeweler says a diamond is flawless Jeweler says a diamond is flawless

Implied Warranties Implied Warranty: An implicit warranty obligation imposed by law. Implied Warranty: An implicit warranty obligation imposed by law. Warranty of title Warranty of title You own what your selling You own what your selling Warranty against encumbrances Warranty against encumbrances There are no third party claims There are no third party claims Warranty of Fitness for a Particular Purpose Warranty of Fitness for a Particular Purpose Pg 270 Pg 270 Those 3 are made by all sellers Those 3 are made by all sellers

Implied Warranties Given Only by Merchants Warranty against infringement Warranty against infringement Free of third party’s claims Free of third party’s claims Trademark, copyright, patent, etc. Trademark, copyright, patent, etc. Warranty of merchantability Warranty of merchantability Fit for ordinary purposes Fit for ordinary purposes Quality and safety Quality and safety May be disclaimed May be disclaimed

Exclusion of Warranties Disclaimer: a notice of exclusion Disclaimer: a notice of exclusion Conspicuous and in writing Conspicuous and in writing Ex: “With All Faults”, “As Is”, “There are no warranties of merchantability or fitness that extend beyond the description on the label.” Ex: “With All Faults”, “As Is”, “There are no warranties of merchantability or fitness that extend beyond the description on the label.”