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Warranties and Product Liability

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Warranties and Product Liability

  1. 1. Warranty- contractual promise by the seller regarding the quality, character, or suitability of goods he has sold
  2. 2.   The seller, through words or behavior, makes promises about a good   Statements by the seller may be interpreted as an express warranty if the buyer has no knowledge or does not deal in the goods the seller deals in   Statements by the seller may be interpreted as an opinion if the buyer as knowledge of the good
  3. 3.   Facts: ◦  Randall Bobholz purchased 1998 Glastron ski boat from John Banaszak for $12,500 ◦  Boat was listed “in perfect condition” on eBay ◦  2 weeks later while Randall was working on boat, engine “just died”   Issue: Did the statement in the advertisement constitute an express warranty?   Decision: Yes, there was an “affirmation” of fact relating to the good becoming part of the “basis of bargain”
  4. 4.   Arise by operation of law and exist without any intention of the seller to create it   A conclusion or inference of law, pronounced by the court, on facts admitted or proved before the jury
  5. 5.   Implied warranty that the goods are merchantable- fit for their ordinary purpose   Imposed by law in the contract of sale   Under Code, applies to the selling of food or drink   Defense- the warranty was effectively disclaimed or limited   Disclaimers possible as long as not unconscionable
  6. 6.   The goods will be fit for that particular purpose for which the buyer needs the goods; seller knows that the buyer is relying on the seller to select goods suitable for that purpose   Can be told by buyer or implied from circumstances   Defenses- seller exercised reasonable care, buyer assumed rick, buyer was contributory negligent   Disclaimers not generally effective
  7. 7.   Protects the buyer in his ownership of the goods bought   In any contract for sale of goods, seller warrant to the buyer that he has the right to sell them
  8. 8. Under Code- parties to a contract have, within certain limits, the right to agree to relieve the seller from all or part of the liability for express or implied warranties
  9. 9.   In order to not be liable for express warranties, the seller should try to avoid making any (difficult because seller likely to make statements about the goods)   Including a disclaimer clause in not likely to succeed as it may be disregarded on the ground that it is inconsistent with the express warranty
  10. 10.   To exclude Implied Warranty of Merchantability, seller must specifically mention “merchantability” in exclusion   To exclude Implied Warranty of Fitness, must be in writing and must be conspicuous   Can be excluded by circumstances of sale (ex. “as is” or “with all faults”)
  11. 11.   Court has authority to refuse to enforce a particular clause or entire contract if it finds it unconscionable   Most likely unconscionable in case of personally injured consumer   Least likely unconscionable where plaintiff is merchant trying to recover for property or economic loss
  12. 12.   Sellersmay try to limit their liability for breach of warranty   May be enforced unless it is unconscionable or if the limitation causes warranty to fail of its essential purpose
  13. 13.   Whenthe product is defective and injures someone, the question is whether the injured person can benefit from the warranty and recover from the seller or manufacturer for breach of warranty
  14. 14.   Inthe past, injured purchasers could not recover directly from the manufacturer, however today an injured purchaser can recover from both the immediate seller and the manufacturer
  15. 15.   The code extends warranty protection to: ◦  He who is in the household of the purchaser, is reasonably expected to use, consume, or be affected by the good, and is injured by breach of warranty ◦  He who is a bystander or employee of the purchaser, is reasonably expected to be affected by the good, and was injured by breach of warranty
  16. 16.   Facts: ◦  1997 Carolyn Bryant was being treated for cardiac problems, prescribed drug Betapace (samples given to her by her doctor from Hoffman-La Roche) ◦  A couple weeks after an increased dosage, she died ◦  Bryant’s husband tried to sue Hoffman-La Roche   Issue: Was Mrs. Bryant barred from claiming benefit of implied warranties of merchantability and fitness on grounds there was no privity b/w her and Hoffman-La Roche since she did not purchase directly from them   Decision: Yes
  17. 17. Magnuson-Moss Warranty Act (1975)
  18. 18.   Provide minimum warranty protection for consumers   Increase consumer understanding of warranties   Ensure warranty performance by providing useful remedies   Encourage better product reliability by allowing consumers to choose among products based only likely reliability
  19. 19.   Warranty must be enforceable   A clear description of what is covered and what is not   Statement of what the maker will do and what will be paid for (or not) if product is defective, malfunctions, or does not conform to warranty   Time warranty begins and its duration   How to obtain warranty service and info about any informal dispute settlement mechanisms   Any limitations on implied warranties, any exclusions or limitations on relief, explanation when those may not be allowed   Statement that consumer has certain legal rights under the warranty
  20. 20.   Warrantor will fix/replace any defective product   Not limited in time   Does not either exclude or limit payment for consequential damages unless conspicuously printed on warranty   If irreparable or has not been repaired after reasonable number of efforts, consumer may choose between a refund and a replacement   Warrantor cannot impose unreasonable duties on consumer or a duty not to modify the product   Warrantor is not required to fulfill warranty terms if problem was caused by damage to the product through unreasonable use   Does not have to cover whole product
  21. 21.   Anyother warranty covered by the act that does not meet the standards for a full warranty
  22. 22.   Act requires the seller to make the written warranty terms available to the prospective buyer before the sale
  23. 23.   FTC enforces the disclosure provisions of the warranty act and regulations   Consumers have right to sue maker for failure to fulfill terms of warranty   Consumer can sue manufacturer if manufacturer offers the warranty, or the retailer if the retailer grants the warranty
  24. 24. Product Liability in General- seller is liable for breach of warranty, negligence, and strict liability
  25. 25.   Failure to inspect   Improperly manufacturing goods   Failing to disclose known defects, adequately warn about known dangers, or instruct about proper use   Failing to use due care in designing goods
  26. 26.   Middlemen have no duty to inspect new prepackaged goods   Obvious danger- one factor to be considered regarding liability
  27. 27.   Manufacturer’s duty extends to anyone who may foreseeably be injured if manufacturer does not exercise its duty of care
  28. 28. Liability without fault imposed on manufacturers and seller of unreasonable dangerous products
  29. 29.   Persons injured by defective produts were not always able to recover for injuries under negligence or breach of warranty
  30. 30.   Plaintiff must show ◦  A product has been sold in a defective condition that makes it unreasonably dangerous to user/ consumer ◦  The seller engaged in the business of selling such a product ◦  The product is expected to and does reach consumer w/o substantial change in condition in which it is sold ◦  Consumer or other person sustains physical harm or property damage because of defective condition
  31. 31.   Whether anything else could have been done to make the product safer, given the practical and technological limitations of the time in determining whether a product is inherently dangerous or defectively designed
  32. 32.   Facts: Roberto Martinez was injured while installing a Goodrich tire. Despite a prominent warning label, he attempted to mount it on a 16.5 inch rim. He sued Goodrich under strict liability.   Issue: Is a manufacturer strictly liable for injuries caused by plaintiff’s failure to follow a suitable warning if the manufacturer knows of a safer alternative product design?   Decision: Yes, a claimant must establish that the defendant could have provided safer alternative design (section 402A of the Restatement (Third) of Torts).
  33. 33.   Product has been substantially changed since it left manufacturer or seller   Buyer was adequately warned about the unreasonable danger   Product was state of the art when designed of manufactured   Buyer used product in an unintended or unforeseen manner   Buyer assumed all obvious risk of injury
  34. 34.   Designed to take the risk of product- related injuries off the consumer and place them on the manufacturer   Created because increasing number of people were being injured by standardized products whose manufacturers could not be identified
  35. 35.   Laws limiting sellers’ liability ◦  Defining what is state of the art ◦  Protecting a manufacturer if its products meet government safety standards ◦  Protecting subsequent sellers from suit if the manufacturer is available ◦  Using comparative fault to reduce a damage award if the plaintiff contributed to his or her own injury
  36. 36.   Bars the bringing of a tort-based product liability suit after a certain number of years (usually 10) from the date the product is first sold to a user