1. © 2007 by West Legal Studies in Business / A Division of Thomson Learning CHAPTER 5 Torts, Cyber Torts, and Product Liability

2. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 2 Basis of Tort Law A tort is a civil, legal injury to a person or property caused by a breach of a legal duty. Plaintiff (the injured party) sues the Defendant (the Tortfeasor) for damages. Three Torts: –Intentional. –Unintentional (negligence-no fault). –Strict Liability (absolute liability).

3. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 3 Intentional Torts Against Persons Assault and Battery. –Assault: the reasonable apprehension or fear of immediate contact. –Battery: completion (contact) of the assault. –Defenses: Consent. Self-Defense and Others. Defense of Property.

4. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 4 False Imprisonment. –Confinement or restraint of another person’s activities without justification. –Merchants can detain a suspected shoplifter as long as there is probable cause. Infliction of Emotional Distress. –Extreme and outrageous conduct. –Some courts require physical symptoms. Intentional Torts Against Persons

5. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 5 Defamation. –Publication of a false statement (oral or written) that injures a person’s good reputation. Publication: third party must hear or see statement. Statements made on the internet may be actionable. An individual who re-publishes the statement will be liable. –Statement must hold someone up to contempt, ridicule or hatred in the community. Intentional Torts Against Persons

6. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 6 Defamation (cont’d): –Slander per se (no proof of damages is required): Loathsome communicable disease. Professional impropriety. Imprisonment for a serious crime. Unmarried woman is unchaste. Intentional Torts Against Persons

7. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 7 Defamation (cont’d). –Defenses: Truth is normally an absolute defense. Statement was Privileged: –Absolute: judicial and legislative proceedings. –Qualified: good faith, limited. Public Figures: plaintiff must show statement made with “actual malice.” Intentional Torts Against Persons

8. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 8 Invasion of the Right to Privacy. –Person has the right to solitude. Breach of that duty is a tort. –Appropriation. –False Light. –Public Disclosure of Private Facts. –Rights of Internet users? Intentional Torts Against Persons

9. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 9 Misrepresentation (Fraud). –Intentionally deceive another to believe in a condition that is different from the condition that already exists. Knowing misrepresentation of fact. Intent to induce innocent party to rely. Justifiable reliance by innocent party. Causation and Damages. –Contrast: “puffery” or statements of opinion. Intentional Torts Against Persons

10. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 10 Wrongful Interference with Contractual Relationship. –Valid, enforceable contract exists between two parties. –Third party knows about contract. –Third party intentionally causes either party to breach the original contract. Case 5.1 Mathis v. Liu (2002). Wrongful Interference

11. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 11 Wrongful Interference with Business Relationship. –Distinguish competition vs. predatory behavior. Predatory behavior is unlawfully driving competitors out of market. –To prevail, Plaintiff must show Defendant targeted only Plaintiff’s customers and product. Defenses: Interference is justifiable or permissible. Wrongful Interference

12. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 12 Trespass to Land. Trespass to Personal Property. –Case 5.2 Register.com v. Verio, Inc. (2004). Conversion. Disparagement of Property. –Slander of Quality. –Slander of Title. Intentional Torts Against Property

13. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 13Negligence Negligence is an unintentional tort. Occurs when someone suffers injury because of the defendant’s failure to comply with a legal duty. Defendant (tortfeasor) creates foreseeable risk of injury.

14. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 14Negligence--Analysis Did the Defendant owe the Plaintiff a legal duty of care? Did the Defendant breach that duty? Did the Plaintiff suffer a legal injury? Did the Defendant’s breach of duty cause the Plaintiff’s injury?

15. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 15 Negligence- Duty Duty of Care and Breach –Duty is based on reasonable person standard. –How would a reasonable person have acted under the circumstances? –Duty of Landowners to business invitees and tenants to keep common areas safe. –Duty of Professionals to clients (attorneys, CPA’s, doctors).

16. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 16Negligence-Causation Injury Requirement and Damages. –Plaintiff must suffer a legally recognizable injury. –Not all injuries can be compensated. Causation. –Causation in Fact (“but for” test). –Proximate Cause (a foreseeably strong connection).

17. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 17Negligence-Defenses Defenses. –Assumption of the Risk. –Superceding Intervening Cause. Event must be unforeseeable.

18. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 18Negligence-Defenses Defenses: –Contributory Negligence (few jurisdictions). Plaintiff recovers nothing if he is at fault. –Comparative Negligence (more common). As long as Plaintiff is less than 50% at fault he can recover a pro-rata share of the verdict.

19. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 19Negligence-Special Special Negligence Doctrines. –Res Ipsa Loquitur. –Negligence Per Se. Violation of law is legal breach of duty. Plaintiff must show: Defendant broke a law/statute. Plaintiff is in special class to be protected; and Statute designed to prevent injury to Plaintiff. –“Danger Invites Rescue” doctrine. –Dram Shop Acts.

20. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 20 Cyber Torts Can a person be liable for a tort committed in cyberspace? Defamation Online. –Liability of ISP’s? Piercing the Veil of Anonymity: Should an ISP be liable for the actions of its subscriber? Who should be liable for “spam” and computer viruses that cause injury?

21. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 21 Strict Liability Does not require fault, intent or breach of duty. Usually involves ‘abnormally dangerous’ activities and risk cannot be prevented. –Dangerous Animals. Product Liability—manufacturers and sellers of harmful or defective products.

22. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 22 Product Liability: Warranty Under the Uniform Commercial Code, certain warranties can arise in a contract for sale of goods. Consumers and others can recover from any seller for losses resulting from a breach of express or implied warranty.

23. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 23 Express Warranties Those made by oral or written representations concerning the goods. –Quality, condition, description or performance potential of goods. –Buyer relies on the representation. –Can be made in advertising or salesperson.

24. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 24 Implied Warranties Warranty of Merchantability: A merchant warrants goods are “reasonably fit for the ordinary purposes for which such goods are used.” Applies only to merchants! Warranty of Fitness for a Particular Purpose: Arises when any seller knows of the particular purpose for which a buyer will use the goods and knows the buyer is relying on the seller to select suitable goods.

25. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 25 Liability for Breach of Warranty The legal liability of manufacturers, sellers, and lessors of goods to consumers, users, and bystanders for injuries or damages that are caused by the goods. Product liability claims are most often based on: –Warranty Law. –Negligence. –Misrepresentation. –Strict Liability.

26. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 26 Product Liability Based on Negligence In order to prevent claims of negligence, due care must be used by the manufacturer in: –Designing the product. –Selecting materials. –Using the appropriate production process. –Assembling and testing the product. –Placing adequate warnings on the label or product.

27. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 27 Product Liability Based on Misrepresentation Fraudulent misrepresentation of a product may result in product liability based on the tort of fraud. Examples include: –Intentional mislabeling of packaged cosmetics –Intentional concealment of a product’s defects

28. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 28 Product Liability Based on Strict Liability Under the doctrine of strict liability, people may be liable for the results of their acts regardless of their intentions or their exercise of reasonable care. If a child is injured by a toy, should the manufacturer be held liable regardless of the circumstances?

29. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 29 Product Defects: Section 402A of the Restatement (Second) of Torts 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 user or consumer without substantial change in the condition in which it is sold. Requirements for Strict Liability

30. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 30 Product Defects: Section 402A of the Restatement (Second) of Torts 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 relation with the seller. Requirements for Strict Liability

31. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 31 Six Requirements for Strict Liability The defendant must sell the product in a defective condition. The defendant must normally be engaged in the business of selling that product. The product must be unreasonably dangerous to the user or consumer because of its defective condition (in most states). A court may consider a product so defective as to be unreasonably dangerous if either (a) the product was dangerous beyond the expectation of the ordinary consumer or (b) a less dangerous alternative was economically feasible for the manufacturer, but the manufacturer failed to produce it. The plaintiff must incur physical harm to self or property by use or consumption of the product. The defective condition must be the proximate cause of the injury or damage. The goods must not have been substantially changed from the time the product was sold to the time the injury was sustained.

32. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 32 “Unreasonably Dangerous” Products Claims that a product is so defective as to be unreasonably dangerous generally allege that the product is unreasonably dangerous for one of the following reasons: –Because of a flaw in the manufacturing process. –Because of a design defect. –Because the manufacturer failed to warn adequately of harms associated with the product’s use. –Obvious Risks.

33. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 33 Restatement (3 rd ) Torts Manufacturing Defects: –Product “departs from its intended design.” –Liabilty on manufacturer and retailer. Design Defects: –When “foreseeable risks could have been avoided with…alternative design”

34. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 34 Restatement (3 rd ) Torts Test for Design Defect: –Focuses on actual design, and –Whether it was reasonable. Plaintiff must show a reasonable alternative design (at the time the product was designed).

35. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 35 Inadequate Warnings Reasonableness test applies. Defective when foreseeable risks could have been reduced or avoided with instructions, and the omission of instructions renders the product unsafe.

36. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 36 Inadequate Warnings There is NO DUTY to warn about obvious or commonly known risks. Should manufacturers be able to assume that warnings will be read? –Case 5.3 Crosswhite v. Jumpking, Inc. (2006).

37. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 37 Defenses to Product Liability There are several defenses that manufacturers, sellers, or lessors can raise to avoid liability for harms caused by their products. Assumption of RiskComparative NegligenceOther DefensesCommonly Known DangersProduct Misuse

38. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 38 Assumption of Risk: –The user or consumer knew of the risk of harm and voluntarily assumed it. Product Misuse: –The user or consumer misused the product in a way unforeseeable by the manufacturer. Defenses to Product Liability

39. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 39 Comparative Negligence –Liability may be distributed between plaintiff and defendant under the doctrine of comparative negligence. Commonly Known Dangers –If a defendant succeeds in convincing the court that a plaintiff’s injury resulted from a commonly known danger, such as the danger associated with using a sharp knife, the defendant will not be liable. Defenses to Product Liability

40. THE LEGAL ENVIRONMENT TODAY Miller Cross 5 th Ed. © 2007 by West Legal Studies in Business / A Division of Thomson Learning 40 Other Defenses Lack of Required Elements –A defendant can also defend against a products liability claim by showing that there is no basis for the plaintiff’s claim (that the plaintiff has not met the requirements for an action in negligence or strict liability).