Chapter 17: Warranties and Product
Liability
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Learning Objectives
• What factors determine whether a Seller’s
statement constitutes an express warranty or
mere “puffing”?
• What implied warranties arise under the UCC?
• Can a manufacturer be held liable to any
person who suffers an injury proximately
caused by the manufacturer’s negligently
made product?
• What are the elements of a cause of action in
strict product liability?
• What defenses to liability can be raised in a
product liability lawsuit?
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Warranties of Title
• Warranties of Title – automatic in most
sales contracts:
– Good Title.
– No Liens.
– No Infringements.
– Disclaimer of Title Warranty.
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Express Warranties
• Representations of fact about quality,
condition, description or performance.
• Goods must conform to model or
sample.
• Warranty must be Basis of the
Bargain.
• Statements of Opinion do not create
express warranties.
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Implied Warranty of Merchantability
• Merchantable Goods: reasonably fit for
ordinary purposes for which goods are
used.
Case 17.1 Shoop v. DaimlerChrysler,
Corp.
Breach of warranty of merchantability occurs when car
dealer unsuccessfully repairs or replaces defective parts.
• Merchantable Food: fit to eat.
Case 17.2 Webster v. Blue Ship Tea
Room, Inc.
Fish chowder with bones is NOT a breach of warranty
because the bones did not render the food unfit to eat.
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Implied Warranty of Fitness for a Particular
Purpose
• Arises when a seller (merchant or
nonmerchant):
– Knows the particular purpose for which the
buyer will use the good, and
– Knows that the buyer is relying on the
seller’s skill and judgment.
• Implied warranties can also rise (or be
excluded or modified) based on
previous dealings or trade usage.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Overlapping Warranties
• When two or more warranties are
made in a single transaction:
– UCC rule holds warranties as cumulative.
– If warranties are in conflict, courts determine
which warranty is most important as follows:
• Express warranties displace inconsistent implied
warranties (except for particular purpose).
• Samples take precedence over general
descriptions.
• Exact or technical specifications displace
inconsistent samples.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Warranty Disclaimers
• Disclaimer of Express Warranties:
– Courts view unfavorably.
– Must be conspicuous.
– Buyer must be aware of disclaimer at time of
sale.
• Implied Warranties:
– Disclaimer of Implied Warranty of
Merchantability.
– Disclaimer of the Implied Warranty of Fitness.
(“As Is” or “With All Faults”).
• Buyer’s Refusal to Inspect.
• Unconscionability.
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Magnuson-Moss Warranty Act
• Federal law to prevent deception in
warranties by making them easier to
understand.
• Enforced by Federal Trade
Commission.
– Full Warranty (free repair/replacement).
– Limited Warranty.
– Implied Warranties arise under UCC -- not
Magnuson-Moss.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Lemon Laws
• Cars that are “lemons” and cannot be
repaired properly. Lemon Laws:
– Provide remedies to consumers whose
automobiles under warranty fail to meet
value or performance.
– Seller has reasonable attempts to fix the
defect (usually 4). If not, buyer has remedy of
a new car, replacement of defective parts, or
return of all consideration paid.
• Arbitration is usual process.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Product Liability-Negligence
• Manufacturers, sellers and lessors of goods
can be liable for a defective good that causes
injury. Privity of contract not required.
• Manufacturers must exercise due care in:
designing the product, selecting materials,
production process, assembly, providing
adequate warning labels. Adequate warning
label for ordinary person.
• Misrepresentation.
– Intentional mislabeling or concealment.
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Strict Product Liability and Public Policy
• Liability without regard to fault or standard
of care.
• Injured party can be 3rd party (not the
buyer).
• Assumption that:
– Consumers should be protected against unsafe
products.
– Manufacturers and distributors should not escape
liability for defective products, and
– Manufacturers and sellers are in a better position to
bear the costs of injury.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Requirements for Strict Liability
• Product must be in a defective condition when
sold.
• Defendant must be engaged in selling that
product
• Product must be “unreasonably dangerous”:
product is dangerous beyond ordinary
expectation or less dangerous alternative not
used.
• Plaintiff must incur injury to self or property by
use or consumption of the product
• Defective condition must be cause
• Goods have not substantially changed from time
of sale.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Requirements for Strict Liability
• Proving a Defective Condition.
– Plaintiff does not need to show how product
became defective, but only prove that when it left
the seller it was “unreasonably dangerous” and
that condition hasn’t changed.
• ‘Unreasonably Dangerous’ Products.
– Products cannot be absolutely safe but courts
may determine product is unreasonably
dangerous if:
• Product is dangerous beyond ordinary consumer
expectations.
• Less dangerous alternative was economically feasible
for manufacturer who failed to produce it.
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Product Defects--Restatement (Third) of
Torts
• Manufacturing Defects.
• Design Defects.
– Plaintiff must show a reasonable alternative
design was available.
• Inadequate Warnings.
– Manufacturer must warn if foreseeable misuse will
cause injury.
– Factors: user groups, content of message.
Case 17.3 Wyeth v. Levine
Injured party can bring state-action product liability
claim based on inadequate warning approved by FDA.
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Strict Product Liability
• Market Share Liability.
– Multiple Defendants involved are liable
based on the share of the market.
• Other Applications.
– All courts extend liability of manufacturers
and other sellers to injured bystanders.
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a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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Defenses to Product Liability
• Assumption of Risk.
• Product Misuse.
– Severely limited.
• Comparative Negligence (Fault).
• Commonly Known Dangers.
– Sharp knives and guns.
• Knowledgeable User Defense.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in
a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
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