Project Help
Week 3:
Overview: Tort Law - Product Liability
Read/Watch:
Instructor Notes - very important to read!
Review assigned materials in Week 2
Products Liability
Manufacturing Defect v. Design Defect
Warranties and Product Liability
Product Liability**
Product liability, sometimes called strict product liability refers to cases in which a person is injured by a product, or use of a product because the product is defective in some way. When a product is defective it may become abnormally dangerous although the product, when not defective, may be safe.
Definitions of a Defective Product in Product Liability
Products may become defective because of:
1) defective manufacture (so the product is "broken", not perfectly made, i.e., a product is manufactured so that the electric wiring is improperly made/attached, etc. and may cause a fire or cause electric shock, or burn the user, etc.
2) failure to adequately warn of how to properly use a product, or potential dangers from misuse, i.e., a warning to not use an electric hair dryer in the shower,
3) defective design, i.e., an electric lawn mower on which the blade is not covered so that it can easily cut a foot when in use,
4) defective packaging, i.e., packaging for food that can be easily tampered with, and
5) breach of warranty of merchantability so that a product does not function for the purpose for which it was intended, i.e., a car that does not operate/drive (breach of warranty of merchantability does not always cause harm, except perhaps economic harm because a user paid for a product that does not work as intended).
A product can be simultaneously defective in several ways. For example, a car that does not operate/drive is not merchantable for its intended purpose but is also defectively manufactured in some way so that it does not operate.
Everyone in the chain of distribution (from manufacturer to consumer) may be liable for harm caused by a defective product. The chain of distribution includes manufacturers, suppliers to manufacturers, lessors of a product, distributors of products from manufacturers to wholesalers, distributors to other middle-persons (such as vending machine product distributors, shippers, distribution to retailers and other sellers, consumers, and innocent bystanders who may be injured by another's use of a defective product.
All parties in the chain of distribution may be sued for the injuries caused by a product, but not all these parties will necessarily be found liable. For example, assume a toaster catches fire and burns a consumer who attempts to make toast. Clearly, the toaster is defective because toasters should not catch fire. An injured consumer could sue all in the chain of distribution, but probably only the manufacturer will be held liable. The defect is likely due to faulty wiring inside the toaster, and this defect is not reasonably discoverable by others in the chain of distribution.
Parties Who Can Recover for Product Liability – Anyone injured by a product, including a product user, and usually an innocent third party bystander, can sue under product liability. An injured party does not have to have a contractual relationship with anyone in the chain of distribution to sue for injuries. For example, assume a consumer is properly using his new gas grill at a tailgate party when the grill spontaneously explodes. The consumer and two friends standing nearby are injured. Only the consumer has a contractual relationship (a sales contract created to purchase the grill from a retailer) with either the manufacturer or retailer, but all three injured parties may sue. All will likely recover damages for injuries received from the defective grill.
Damages Recoverable for Product Liability – Typically, injured parties may collect damages to compensate for their personal injuries, such as medical costs. Property owners may also collect damages to compensate for harm to their property, such as costs to repair a garage door damaged in a fire caused by a defective lawn mower. So-called punitive damages, over and above actual compensation damages, may be awarded in some very serious cases to “punish” the manufacturer or others in the chain of distribution. Punitive damages tend to be arbitrary and the trend in the courts is to limit punitive damages to only the most extreme cases.
Typically, consumers return defective products to the seller and a monetary refund for the product, rather than collecting the cost of the product in court.
Types of Product Defects:
1. Defect in Manufacture
When the manufacturer fails to properly assemble, test, or check quality of a product, there may be a defect in manufacture.
For example, a cup of coffee containing a piece of metal is defective and abnormally dangerous as the metal could injure an unsuspected consumer drinking the coffee. Or, an electric food processor is defective and abnormally dangerous if the top and blade fly off when the mixer is turned on.
2. Defect in Design
When a product is designed so that faulty design causes the product to become dangerous, the product is defective.
For example, a power table saw is designed so a safety guard surrounding the blade can be removed and the saw will still operate. This becomes abnormally dangerous and likely to injure users. The safer design would have been for the saw to lock and not operate with the safety guard removed.
3. Failure to adequately Warn
Most products carry warnings, so the key word is "adequately". A warning can be included but may not adequately warn of risks for various reasons:
1) a warning may not be reasonably accessible or easily visible to consumers;
2) a warning may not clearly or adequately describe the risks;
3) a warning may not include all possible dangers.
Manufacturers and sellers of products are, by law, required to provide certain warnings on most products. Products that are inherently dangerous, such as knives, power tools, etc., must warn of these dangerous propensities. If an electric knife does not carry a warning, it becomes abnormally dangerous with potential to serious injure a user.
4. Defect in Packaging
Manufacturers owe a duty to design and provide safe tamperproof packaging. Failure to meet this duty may make a product abnormally dangerous and defective. For example, an over-the-counter medication for which the packaging can be opened and re-closed without notice by consumers, is potentially abnormally dangerous. The packaging could be opened, the medication poisoned or contaminated, without being visible to a consumer.
Possible Defenses to Product Liability
Defenses to claims of strict product liability may minimize damages or result in a favorable ruling for a defendant, but this is not a given. Defenses often fail in product liability cases as the liability is so broad.
Defenses are raised only by defendants.
Possible Defenses:
Generally Known Dangers –If the product is known to the general population to be inherently dangerous, such as guns, sellers typically may not be held strictly liable for failure to adequately warn.
Assumption of Risk – A defendant who claims this defense must show that the plaintiff knew and understood the risk, and then voluntarily assumed it anyway, and carelessly.
Misuse of Product – Defendants using this defense will not be held liable if the plaintiff ’s misuse was unforeseeable and gross misuse. For example, if a consumer puts wet in a microwave to dry them, and the microwave explodes, this is unforeseeable, gross misuse and any injuries are the fault of the consumer.
Correction of a Product Defect – Manufacturers that become aware of a product’s defect must make reasonable efforts to notify purchasers and users and correct the defect. Failure on the part of a user to have the defect corrected, after notice, may be raised as a defense in an action brought against the manufacturer. This will not always absolve the manufacturer of liability, but may mitigate damages or result in a ruling for the defendant, depending on circumstances and type of defect.
Supervening Event – If a product has been materially modified or altered by a consumer, and the modification alteration is the direct cause of the injuries, the defendant(s) may not be held liable. The modification or alteration is considered an event that occurred after manufacturing and before injury.
**Strict product liability is often confused with the separate common law tort of strict liability, sometimes referred to as “liability without fault”. Strict liability applies only to a small category of abnormally dangerous activities, such as use of explosives, fireworks, and stunt flying. Regardless of how careful these activities are handled, there is a high risk of accident and injury. If there is injury to a third party resulting from one of these activities, the "actor" responsible for these activities will be liable for any injuries. The injured party only must show the injury occurred from the dangerous activity and does not have to prove that the defendant was at fault by acting carelessly.
Warranties and Products Liability Case Example:
Following is a court opinion for a product liability case that will illustrate application of product liability law.
Liriano v. Hobart Corp. 92 N.Y.2d 232 (1998) Court of Appeals of the State of New York (failure to adequately warn, defective and negligent design)
Facts:
In 1961, Liriano, a 17 year-old employee in the meat department at Super Associated grocery store (Super), was injured on the job while feeding meat into a commercial meat grinder whose safety guard had been removed. His right hand and lower forearm were amputated.
The meat grinder was manufactured and sold by Hobart Corporation (Hobart) with an affixed safety guard that prevented the user's hands from coming into contact with the grinder. No warnings were on the machine or otherwise provided to state it was dangerous to operate the machine without the safety guard in place. Subsequently, Hobart became aware that a significant number of purchasers of its meat grinders had removed the safety guards; in 1962, Hobart began issuing warnings on its meat grinders concerning removal of the safety guard.
At trial, Super conceded the safety guard was intact at the time it acquired the grinder and that the guard was removed while in its possession. It is further conceded that Hobart actually knew, before the accident, that removals of this sort were occurring and that use of the machine without the safety guard was highly dangerous.
Liriano sued Hobart for negligence and strict product liability for defective product design and failure to warn. The case was removed to the United States District Court for the Southern District of New York, and Super was impleaded as a third-party defendant, seeking indemnification and/or contribution.
The District Court dismissed all of Liriano's claims except those based on failure to warn. The trial court ruled failure to warn was the proximate cause of Liriano's injuries and apportioned liability 5% to Hobart and 95% to Super. On partial retrial, Liriano was assigned 33 1/3% of the responsibility.
Hobart and Super appealed, arguing that they had no duty to warn, as a matter of law, and that the case should have been decided in their favor.
Opinion:
The appellate court agreed, essentially, with the rationale of the lower courts on the issues of Hobart’s and Super’s liability.
The Court discussed the responsibility to warn of inherent dangers. The Court declared, “A manufacturer who places a defective product on the market that causes injury may be liable for the ensuing injuries.***A product may be defective when it contains a manufacturing flaw, is defectively designed or is not accompanied by adequate warnings for the use of the product.***A manufacturer has a duty to warn against latent dangers resulting from foreseeable uses of its product of which it knew or should have known.***A manufacturer also has a duty to warn of the danger of unintended uses of a product provided these uses are reasonably foreseeable.”
The Court further reasoned, “A manufacturer is not liable for injuries caused by substantial alterations to the product by a third party that render the product defective or unsafe.***Where, however, a product is purposefully manufactured to permit its use without a safety feature, a plaintiff may recover for injuries suffered as a result of removing the safety feature.”
Furthermore, the Court stated, “…Unlike design decisions that involve the consideration of many interdependent factors, the inquiry in a duty to warn case is much more limited, focusing principally on the foreseeability of the risk and the adequacy and effectiveness of any warning. The burden of placing a warning on a product is less costly than designing a perfectly safe, tamper-resistant product. Thus, although it is virtually impossible to design a product to forestall all future risk-enhancing modifications that could occur after the sale, it is neither infeasible nor onerous, in some cases, to warn of the dangers of foreseeable modifications that pose the risk of injury.”
Manufacturer liability may exist under a failure-to-warn theory in cases in which the substantial modification defense would preclude liability under a design defect theory.
Strict Liability for Abnormally Dangerous Activities Case Example:
Following is a court opinion for a common law strict liability case that will illustrate application of strict liability law regarding abnormally dangerous activities. Please note: this is NOT a strict product case.
Klein v. Pyrodyne Corporation 817 P.2d 1359 (strict liability)
Supreme Court of Washington
Facts:
The plaintiffs in this case are persons injured when an aerial shell at a public fireworks exhibition went astray and exploded near them. The defendant is the pyrotechnic company, Pyrodyne Corp., hired to set up and discharge the fireworks. All operators of the fireworks display were Pyrodyne employees acting within the scope of their employment duties at the time of the accident.
During the fireworks display, a 5-inch mortar was knocked into a horizontal position so that an aerial shell inside was ignited and discharged. The shell flew 500 feet and exploded near the crowd of onlookers. Plaintiffs Danny and Marion Klein were injured by the explosion.
The issue before this court is whether Pyrodyne is strictly liable for damages caused by fireworks displays.
Kleins contend that strict liability is the appropriate standard to determine the culpability of Pyrodyne because Pyrodyne was participating in an abnormally dangerous activity.
Pyrodene moved for summary judgment which the court denied.
Opinion:
The Court reasoned, “Section 520 of the Restatement lists six factors that are to be considered in determining whether an activity is "abnormally dangerous". The factors are as follows: (a) existence of a high degree of risk of some harm to the person, land or chattels of others; (b) likelihood that the harm that results from it will be great; (c) inability to eliminate the risk by the exercise of reasonable care; (d) extent to which the activity is not a matter of common usage; (e) inappropriateness of the activity to the place where it is carried on; and (f) extent to which its value to the community is outweighed by its dangerous attributes.”
The Court also considered who should bear the loss when an innocent person is injured through the nonculpable but abnormally dangerous activities of another. The Court concluded that in the case of fireworks displays, it is most fair for the pyrotechnicians who present the displays to bear the loss rather than the injured parties.
Pyrodyne argued that even if there is strict liability for fireworks, it is not liable under the facts of this case because of the manufacturer's negligence in producing the fireworks. According to Pyrodyne, a shell detonated without leaving the mortar box because it was negligently manufactured.
The Court argued, “…intervening acts of third persons serve to relieve the defendant from strict liability for abnormally dangerous activities only if those acts were unforeseeable in relation to the extraordinary risk created by the activity.” Given the nature of fireworks, it is foreseeable an accident could occur.
Pyrodyne Corporation is strictly liable for all damages suffered by plaintiff as a result of the fireworks display. Detonating fireworks displays constitutes an abnormally dangerous activity warranting strict liability. Public policy also supports this conclusion.
Affirmed.
Week 4:
In Week 4, you will need to use what you’ve learned in weeks 1-3 to complete Project #1.
In addition, this week you will learn more about contracts – defenses, when it’s required to be in writing, and what happens when a contract is breached.
Overview: Contracts: Nature, Classification, Agreement, Consideration, E-Contracts
Read/Watch:
Instructor Notes
Saylor: Business Law and Legal Environment
Chapters 8,9,10,11,12:
Introduction to Contract Law
The Agreement
Real Assent
Consideration
Legality
Electronic Contracts
Resources for creating Power Point are included in Project 1 instructions below.
Case Examples: Lucy v Zehmer; Hamer v Sidway;
Jones v Star Credit Corp. (Links provided below in Case Examples.)
Week 5:
For Week 5, we will delve deeper into the rules governing contracts. After a contract has been validly formed, it is important to know whether the contract can be enforced and what you can do if the other party has not fulfilled their contractual obligations.
This week’s material will cover contract defenses; when contracts are required to be in writing; and what happens when a contract is breached.
Overview: Statute of Frauds: Writing Requirements and Electronic Records; Performance, Discharge; Remedies
Read/Watch:
Instructor Notes
Law for Entrepreneurs, Saylor Academy, 2012
Chapters 13, 15.1, 16.3
Statute of Frauds
Performance and Discharge of Contract Duties
Damages for Breach of Contract
Week 6:
The CISG is often misunderstood. Please review the link in Overview, "CISG: Guide for Business Managers and Attorneys in Applying CISG" to clearly review when CISG applies to contracts - and when it does not apply. Please note that CISG may attach to an international contract, or can have a clause to exclude it in international contracts.
Overview: Sales and Lease Contracts
Read/Watch:
Instructor Notes
Saylor: Advanced Business Law and the Legal Environment
Chapters 8,9,10,11
Introduction to Sales and Lease Contracts, Uniform Commercial Code, Contracts for International Sale of Goods (CISG)
Title of Goods and Risk of Loss
Performance of Duties and Remedies for Breach
Products Liability and Sales Contacts
CISG: Guide for Business Managers and Attorneys in Applying CISG
Week 7:
In today’s busy world, both individuals and businesses often need to rely on third party to act on their behalf for a variety of reasons. This week’s material will cover principals and agents and employers and employees so that we can understand when and if a party will be responsible for the actions of a third party.
Overview: Agency Law
Read/Watch:
Instructor Notes
Law for Entrepreneurs, Saylor Academy, 2012
Chapter 20, 21
Principal and Agent Relationships
Overview: Business Structures
Concepts:
forms of business ownership
comparison of business structures
liabilities associated with business structures
Read/Watch:
Instructor Notes
Choosing a Business Structure
Partnerships
General Corporation
Limited Liability Company