1. Agenda for 21th Class Handouts Slides Product Liability Handout
Lunch sign up
Wednesday, 4/3, Rm 106, 1-2PM
Restatement
Priest
Polinsky

2. Assignment for Next Class
Review any questions from today’s assignment that we don’t discuss in class
Read “Finders” packet
Questions to think about / Short papers
Everyone should be prepared to discuss all the questions on the last pages of the “Finders” handout
Mandatory writing
Group 1. Qs 1 & 5
Group 2. Qs 2 & 6
Group 3. Qs 3 & 7
Group 4. Qs 4 & 8
Optional writing -- All questions that are not mandatory

3. Levi and Escola
Levi
Describes traditional view of common law reasoning
Case by case, reasoning by example
Later court tries to formulate holding that explains all (or most of) prior cases
Law changes because
Later court is not bound to prior court’s reasoning and statement of holding
Later court uses its own view of justice and fairness to decide whether outcome in current case requires modification of rule
Policy reasoning is usually implicit
Escola
Court sees itself as deciding between negligence and strict liablity
Not just resolving one case, but setting rule for future cases
Explicit policy/economic reasoning
Strict liability will give manufacturers better incentives to develop safe products
Strict liability will spread risk and provides consumers with insurance
Reflects legal realism – judge as “interstitial legislator”
“legislates” when legislature is silent

4. Restatement Second of Torts, §402A
(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and
(b) it is expected to and does reach the consumer without substantial change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his product, and
(b) the user or consumer has not bought the product from or entered into any contractual relationship with the seller
Caveat:
The Instituted expresses no opinion as to whether the rules stated in this Section may not apply
(1) to harm to persons other than users or consumers;
(2) to the seller of a product expected to be processed or otherwise substantially changed before it reaches the user or consumer; or
(3) to the seller of a component part of a product to be assembled.

5. Questions
1. The Restatement expresses no opinion on the question of liability when there is “harm to persons other than users or consumers”? Do you think there should be liability in such cases? An example of harm to persons other than users or consumers would be a car that, because of a defect, spins out of control and injures a pedestrian.

6. Priest & Polinsky Priest
Strict liability does not reduce accidents, because it does not give consumers incentives to choose safe products, maintain them, and use them properly
Strict liability is not as good a way to provide insurance as first party insurance
Moral hazard
First party insurance has deductibles and co-insurance that give consumers incentives to be careful
First party insurance can vary premia by risk
Strict liability causes poor to subsidize rich
Negligence would be better
“Could this accident have been practically prevented prior to its occurrence”
Polinsky & Shavell
Don’t need product liability for widely sold product
Market forces and regulation ensure safety
Legal costs are very high

7. Questions
2. Which argument in the articles in this packet did you find most persuasive?
3. Which argument in the articles in this packet did you find least persuasive?
4. Do you agree with Priest that product liability should be restricted to situations where there was a “specific cost-effective action that the injurer … could have taken which would have prevented the accident”?
5. Do you agree with Polinsky & Shavell that product liability should be restricted to products that “are not widely sold.”