Copyright © 2004 by Prentice-Hall. All rights reserved. PowerPoint Slides to Accompany BUSINESS LAW E-Commerce and Digital Law International Law and Ethics 5 th Edition by Henry R. Cheeseman Slides developed by Les Wiletzky Wiletzky and Associates, Puyallup, WA Chapter 5 Product and Strict Liability Chapter 5 Product and Strict Liability

5 - 2Copyright © 2004 by Prentice-Hall. All rights reserved. Products Liability The liability of manufacturers, sellers, and others for the injuries caused by defective products.

5 - 3Copyright © 2004 by Prentice-Hall. All rights reserved. Tort Liability Based on Fault Negligence Intentional Misrepresentation

5 - 4Copyright © 2004 by Prentice-Hall. All rights reserved. Tort Liability Based on Fault (continued)  Negligence A tort related to defective products. A tort related to defective products. The plaintiff must prove that the defendant breached a duty of due care to the plaintiff that caused the plaintiff’s injuries. The plaintiff must prove that the defendant breached a duty of due care to the plaintiff that caused the plaintiff’s injuries. In a negligence lawsuit, only a party who was actually negligent is liable to the plaintiff. In a negligence lawsuit, only a party who was actually negligent is liable to the plaintiff.

5 - 5Copyright © 2004 by Prentice-Hall. All rights reserved. Landmark Law  In MacPherson v. Buick Motor Co., the court held that an injured consumer could recover damages from the manufacturer of the product even though he or she was only in privity of contract with the retailer from whom he or she had purchased the product.

5 - 6Copyright © 2004 by Prentice-Hall. All rights reserved. Tort Liability Based on Fault (continued)  Negligence (continued) Failure to exercise due care includes: Failing to assemble the product carefully. Failing to assemble the product carefully. Negligent product design. Negligent product design. Negligent inspection or testing of the product. Negligent inspection or testing of the product. Negligent packaging. Negligent packaging. Failure to warn of the dangerous propensities of the product. Failure to warn of the dangerous propensities of the product.

5 - 7Copyright © 2004 by Prentice-Hall. All rights reserved. Tort Liability Based on Fault (continued)  Intentional Misrepresentation When a seller or lessor (1) fraudulently misrepresents the quality of a product, or (2) conceals a defect in it, and a buyer is injured thereby. When a seller or lessor (1) fraudulently misrepresents the quality of a product, or (2) conceals a defect in it, and a buyer is injured thereby.

5 - 8Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Strict Liability  In Greenmun v. Yuba Power Products, Inc., the California Supreme Court adopted the doctrine of strict liability in tort as a basis for product liability actions.

5 - 9Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Strict Liability (continued)  Liability Without Fault Unlike negligence, strict liability does not require the injured person to prove that the defendant breached a duty of care. Unlike negligence, strict liability does not require the injured person to prove that the defendant breached a duty of care. Strict liability is imposed irrespective of fault on manufacturers, sellers, and lessors who make and distribute defective products that cause injury to users and others. Strict liability is imposed irrespective of fault on manufacturers, sellers, and lessors who make and distribute defective products that cause injury to users and others.

5 - 10Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Strict Liability (continued)  Chain of Distribution All parties in the chain of distribution of a defective product are strictly liable for the injuries caused by that product. All parties in the chain of distribution of a defective product are strictly liable for the injuries caused by that product. All manufacturers, distributors, wholesalers, retailers, lessors, and subcomponent manufacturers may be sued under this doctrine. (doctrine of strict liability in tort) All manufacturers, distributors, wholesalers, retailers, lessors, and subcomponent manufacturers may be sued under this doctrine. (doctrine of strict liability in tort)

5 - 11Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Strict Liability (continued)  Privity of contract is not required for a plaintiff to sue for strict liability.  The doctrine applies even if the injured party had no contractual relations with the defendant.  The damages recoverable in a strict liability action vary by jurisdiction.

5 - 12Copyright © 2004 by Prentice-Hall. All rights reserved. The Doctrine of Strict Liability (continued)  Punitive damages are often awarded in strict liability lawsuits if the plaintiff proves that the defendant either: Intentionally injured him or her; or Intentionally injured him or her; or Acted with reckless disregard for his or her safety. Acted with reckless disregard for his or her safety.

5 - 13Copyright © 2004 by Prentice-Hall. All rights reserved. Defective product causes injury Negligence lawsuit Strict liability Consumer Retailer Distributor Manufacturer (negligent) Defective product Defendant All in the chain of distribution are liable Negligent party is liable Doctrines of Negligence and Strict Liability Compared

5 - 14Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect  To recover for strict liability, the injured party must first show that the product that caused the injury was somehow defective.  Plaintiffs can allege multiple product defects in one lawsuit.

5 - 15Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued) The most common types of defects: Manufacture Design Packaging Failure to Warn

5 - 16Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Defect in Manufacture – a defect that occurs when the manufacturer fails to: 1. Properly assemble a product 2. Properly test a product, or 3. Adequately check the quality of a product

5 - 17Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Defect in Design – a defect that occurs when a product is improperly designed. Design defects include: 1. Toys designed with removable parts that could be swallowed by children. 2. Machines and appliances designed without proper safeguards. 3. Trucks designed without a backup warning device.

5 - 18Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Defect in Design (continued) In evaluating the adequacy of a product’s design, the courts apply a risk-utility analysis and consider the: Gravity of the danger posed by the design Gravity of the danger posed by the design Likelihood that injury will occur Likelihood that injury will occur Availability and cost of producing a safer design Availability and cost of producing a safer design Social utility of the product Social utility of the product

5 - 19Copyright © 2004 by Prentice-Hall. All rights reserved. Crashworthiness Doctrine The courts have held that automobile manufacturers are under a duty to design automobiles so they take into account the possibility of harm from a person’s body striking something inside the automobile in the case of a car accident.

5 - 20Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Defect in Packaging – a defect that occurs when a product has been placed in packaging that is insufficiently tamperproof. Manufacturers owe a duty to design and provide safe packages for their products. Manufacturers owe a duty to design and provide safe packages for their products. Failure to meet this duty subjects the manufacturer and others in the chain of distribution of the product to strict liability. Failure to meet this duty subjects the manufacturer and others in the chain of distribution of the product to strict liability.

5 - 21Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Failure to Warn – a defect that occurs when a manufacturer does not place a warning on the packaging of products that could cause injury if the danger is unknown.

5 - 22Copyright © 2004 by Prentice-Hall. All rights reserved. The Concept of Defect (continued)  Other Product Defects Failure to provide adequate instructions Failure to provide adequate instructions Inadequate testing of products Inadequate testing of products Inadequate selection of component parts or materials Inadequate selection of component parts or materials Improper certification of the safety of a product Improper certification of the safety of a product

5 - 23Copyright © 2004 by Prentice-Hall. All rights reserved. Generally Known Dangers Supervening Event Assumption of the Risk Misuse of the Product Statute of Limitations Government Contractor Defense Contributory & Comparative Negligence Defenses to Product Liability

5 - 24Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Supervening Event – an alteration or modification of a product by a party in the chain of distribution that absolves all prior sellers from strict liability.

5 - 25Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Generally Known Dangers – a defense that acknowledges that certain products are inherently dangerous and are known to the general population to be so. Sellers are not strictly liable for failing to warn of generally known dangers. Sellers are not strictly liable for failing to warn of generally known dangers.

5 - 26Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Government Contractor Defense – a defense that says a contractor who was provided specifications by the government is not liable for any defect in the product that occurs as a result of those specifications.

5 - 27Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Assumption of Risk – a defense in which the defendant must prove that: 1. The plaintiff knew and appreciated the risk, and 2. The plaintiff voluntarily assumed the risk.

5 - 28Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Misuse of the Product – a defense that relieves the seller of product liability if the user abnormally misused the product. Products must be designed to protect against foreseeable misuse. Products must be designed to protect against foreseeable misuse.

5 - 29Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Statute of Limitations and Statute of Repose Statute of Limitations: a statute that requires an injured person to bring an action within a certain number of years from the time that he or she was injured by the defective product. Statute of Limitations: a statute that requires an injured person to bring an action within a certain number of years from the time that he or she was injured by the defective product.

5 - 30Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Statute of Limitations and Statute of Repose (continued) Statute of Repose: a statute that limits the seller’s ability to a certain number of years from the date when the product was first sold. Statute of Repose: a statute that limits the seller’s ability to a certain number of years from the date when the product was first sold.

5 - 31Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Contributory and Comparative Negligence Contributory Negligence: a defense that says a person who is injured by a defective product but has been negligent and has contributed to his or her own injuries, cannot recover from the defendant. Contributory Negligence: a defense that says a person who is injured by a defective product but has been negligent and has contributed to his or her own injuries, cannot recover from the defendant.

5 - 32Copyright © 2004 by Prentice-Hall. All rights reserved. Defenses to Product Liability (continued)  Contributory and Comparative Negligence (continued) Comparative Negligence: a doctrine that applies to strict liability actions that says a plaintiff who is contributorily negligent for his or her injuries is responsible for a proportional share of the damages. Comparative Negligence: a doctrine that applies to strict liability actions that says a plaintiff who is contributorily negligent for his or her injuries is responsible for a proportional share of the damages.

5 - 33Copyright © 2004 by Prentice-Hall. All rights reserved. International Law: Product Liability in Japan Product liability claims are rare in Japan for several reasons: 1. The plaintiff has the difficult burden of proving that the company was negligent 2. Japanese courts do not allow discovery 3. Claimants must pay a percentage of any damages requested (not won) as court fees

5 - 34Copyright © 2004 by Prentice-Hall. All rights reserved. International Law: Product Liability in Japan (continued) 4. Awards granted by courts are small (by U.S. standards) 5. Punitive damages are not available