Chapter 26
Warranties and
Other Product Liability Theories
Twomey, Business Law and the
Regulatory Environment (14th Ed.)
Cumulative Theories of Product Liability
[26-1]
When goods are defective and cause harm or loss,
the person harmed has a claim for product liability.
Guarantee
Strict
Tort
Liability
Implied
Warranty
Negligence
Not
Mutually
Exclusive
Fraud
Express
Warranty
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Warranties [26-2]
Type
Express
Creation
Affirmation of fact or
promise of performance
(includes samples, models,
descriptions)
Implied Warranty
of
Merchantability
Given in every sale of
goods by a merchant
(“fit or ordinary
purposes”)
Implied Warranty
of Fitness for a
Particular Purpose
Seller knows of
buyer’s reliance for a
particular use (buyer
is ignorant)
Title
Magnuson-Moss
(Federal Consumer
Product Warranty Law)
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Restriction
Given in every sale
Only a consumer
product of $15
or more
Must be part of the
basis of the margin
Disclaimer
Cannot make a
disclaimer
inconsistent with an
express warranty
Only given by
merchants
(1) Must use “merchantability”
or general disclaimer of “as
is” or “with all faults”
(2) If written, must be
conspicuous
Seller must have
knowledge
Buyer must rely
(1) Must be in writing
(2) Must be conspicuous
(3) Also disclaimed with
“as is” or “with all faults”
Does not apply in
circumstances where
apparent warranty
is not given
Must say, “There is
no warranty of title”
Must label “Full” or
“Limited”
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Chapter 26 Summary
There are five theories to protect parties from
loss caused by nonconforming goods. They
are (1) express warranty, (2) implied warranty,
(3) negligence, (4) fraud, and (5) strict tort
liability.
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Chapter 26 Summary [2]
Theories of product liability are not mutually
exclusive. A given set of facts may give rise to
liability under two or more theories.
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Chapter 26 Summary [3]
The requirement of privity of contract (that is,
the parties to the sales contract for warranty
liability) has been widely rejected. The law is
moving toward the conclusion that persons
harmed because of an improper product may
recover from anyone who is in any way
responsible.
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Chapter 26 Summary [4]
The requirement of privity has been abolished
by most states in cases where the plaintiff is a
member of the buyer’s family or household or is
a guest in the buyer’s home and has sustained
personal injury because of the product.
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Chapter 26 Summary [5]
Warranties may be express or implied. Both
have the same effect and operate as though the
defendant had made an express guarantee.
A warranty made after a sale does not require
consideration. It is regarded as a modification of
the sales contract.
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Chapter 26 Summary [6]
Express warranties are regulated by federal
statute and the FTC. These warranties must be
labeled as full or limited warranties and must
conform to certain standards. A distinction is
made between a merchant seller and a casual
seller. A merchant seller is responsible for a
greater range of warranties.
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Chapter 26 Summary [7]
A seller makes a warranty of good title unless
such warranty is excluded. Any description,
sample, or model made part of the basis of the
bargain creates an express warranty that the
goods will conform to the description, sample,
or model. Warranties of fitness for a particular
purpose and merchantability are implied
warranties.
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Chapter 26 Summary [8]
Warranties may be disclaimed by agreement of
the parties provided the disclaimer is not
unconscionable. A written disclaimer to exclude
warranties must be conspicuous. To disclaim the
implied warranty of merchantability, the term
merchantability or appropriate language, such as
“as is,” must be used. Post-sale disclaimers have
no effect on warranties that arose at the time of
the sale.
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Chapter 26 Summary [9]
The warranties of merchantability and fitness
exist under the CISG. However, disclaimers
under the CISG need not mention
merchantability, nor must the disclaimer be
conspicuous.
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Chapter 26 Summary [10]
The strict tort liability plaintiff must show there
was a defect in the product at the time it left the
control of the defendant. No negligence need be
established on the part of the defendant, nor is
the plaintiff’s contributory negligence a defense.
The defendant may show that the injured party
assumed the risk.
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