Chapter 9
Torts and
Product
Liability
McGraw-Hill/Irwin
Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
SOURCES OF TORT LAW

For the most part, tort law is governed by
state common law principles.

Courts also look to rules articulated by the
American Law Institute (ALI) for guidance on
applying common law legal principles. (The
Restatement of Torts)
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CATEGORIES OF TORTS

Torts fall into one of three general categories:

intentional
negligence
strict liability


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Defamation

Defamatory statement

Dissemination to a third party

Specificity

Damages
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Trade Libel and Product Disparagement

(1) clear and specific reference to the
disparaged party or product,

(2) knowledge the statement was false, or
reckless disregard for the truth,

(3) communicated to a third party.
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Fraudulent Misrepresentation

(1) the misrepresentation was a material fact known
to be false by the tortfeasor (or reckless disregard
for the truth);

(2) the tortfeasor intended to persuade the innocent
party to rely on the statement and the innocent party
did, in fact, rely on it; and

(3) damages were suffered by the innocent party.
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False Imprisonment

In the business context, a merchant most commonly
encounters these circumstances in cases of
suspected retail theft.

While the merchant has the right to briefly detain a
suspected shoplifter-must be cautious about giving
rise to a false imprisonment claim when detaining an
individual.
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Business Competition Torts

Tortious Interference with Existing
Contractual Relationship



(1) had specific knowledge of the contract,
(2) actively interfered with the contract,
(3) caused some identifiable damages
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NEGLIGENCE

When party fails to act reasonably,

Even though that party does not intend for
harm to occur,

The party is still liable for any injuries or
damages suffered by another party as a
result of the unreasonable conduct.
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Elements of Negligence

Duty: Did the tortfeasor owe a duty of care to the injured party?

Breach of duty: Did the tortfeasor fail to exercise reasonable
care?

Cause in fact: Except for the breach of duty by the tortfeasor,
would the injured party have suffered damages?

Proximate (legal) cause: Was there a link between the breach of
duty and the damages suffered by the injured party?

Actual damages: Did the injured party suffer harm?
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STRICT LIABILITY TORTS

Strict liability is a concept rooted in the notion
that the general public benefits when liability
is imposed on those who engaged in certain
activities that result in harm to another party,
even if the activities were undertaken in the
most careful manner possible (without
negligence)
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PRODUCTS LIABILITY

In a products liability case, the injured party
may pursue a legal remedy against the seller
under one of three theories:

(1) negligence,
(2) warranty, or
(3) strict liability.


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learning outcomes checklist

9 - 1 Articulate a basic definition of a tort and
identify the source of law governing various
types of torts.

9- 2 Give specific examples of how tort law
applies in the business environment.

9- 3 Determine the classification of tort based
on the conduct of the wrongdoer.
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learning outcomes checklist

9- 4 Apply the elements and defenses of the
torts of defamation, trade libel, and product
disparagement, and discuss its applicability
to the business environment.

9- 5 Identify the differences in terms of
liability for traditional print defamation and
defamation in cyberspace.
9-14
learning outcomes checklist

9- 6 Distinguish business competition torts from
other intentional torts and understand their
applicability in commercial relationships.

9- 7 Recognize conduct that is classified as
negligent and identify any potential defenses.

9- 8 Provide alternate theories of liability and
defenses when a product is the cause of an injury.
9-15