MGMT 311: Ch 7 Terms - Strict Liability and Product Liability

Strict Liability

Liability WITHOUT regard to fault; automatic. Focuses on the nature of the situation. Applied first in American law to abnormally dangerous activities (Rylands v. Fletcher).

Abnormally Dangerous Activities

All three AND: potential degree of serious harm; high risk not fully guarded against by reasonable care; not commonly performed in the community. You will always be liable.

Keeping Wild Animals

Lions, tigers, bears — the keeper is always liable if something happens, whatever precautions were taken.

Keeping Domestic Animals

QUALIFIED — strictly liable only if you know or SHOULD know the animal is dangerous (it has attacked before, or is a 'dangerous breed').

Quid Pro Quo Sexual Harassment

'This for that' — a sexual favor for a promotion. Employers are held liable if it is present; training and policies do not matter.

Product Liability

Suits involving a company selling or making a product that caused the plaintiff's injuries. The plaintiff can sue the ENTIRE CHAIN — manufacturer, distributor, wholesaler, retailer.

Product Liability Based on Negligence

Failing to exercise 'due care' to make a product safe. Due care required in 6 areas — design, production, assembling, testing, warnings. Needs the full 4-part negligence case.

Privity of Contract

A private contract between buyer and seller. It is NOT required for product liability — you don't have to be the buyer to sue in tort. (MacPherson v. Buick.)

Product Liability Based on Misrepresentation

Fraud — misrepresentation of a material fact about quality, nature or use, made knowingly or recklessly; injury results; and the buyer relied on it.

Strict Product Liability

Absolute liability without regard to fault for a defective product. Justified because consumers need protection, privity should not shield makers, and sellers best bear the cost.

Requirements for Strict Product Liability

§402A, SIX elements, ALL required: defective when sold; defendant in the business of selling; unreasonably dangerous; physical harm to self or property; defect is proximate cause; goods not substantially changed.

Unreasonably Dangerous Products

Dangerous beyond the ordinary consumer's expectation, OR a less dangerous alternative was economically feasible and not produced. IN TEXAS you must prove BOTH.

Safer Alternative Design

SAD — a less dangerous alternative was ECONOMICALLY FEASIBLE but the manufacturer failed to produce it. Risk-utility is a separate test, NOT part of SAD.

Risk-Utility Analysis

Used in most states for design defects — the risk outweighs the usefulness. In Texas you must prove this AND safer alternative design.

Products Defects

Three types; the plaintiff must have ONE of the three: manufacturing defect, design defect, warning defect.

Manufacturing Defects

The product departs from its intended design even though all possible care was exercised. The defect is in this UNIT, not the design.

Design Defect

The foreseeable risk could have been reduced by a reasonable alternative design. A gun that fires and kills is NOT defective — it did what it was designed to do.

Warning Defects

The risk could have been reduced by reasonable instructions or warnings. No duty to warn of obvious risks; the seller MUST warn of foreseeable misuses.

Market Share Liability

If the plaintiff cannot prove which manufacturer made the product, ALL manufacturers are liable in proportion to their share of the market.

Assumption of the Risk (Product Liability)

The plaintiff knew the risk created by the product AND voluntarily assumed it by using the product. A signed release may still be unenforceable (Boles v. Sun Ergoline).

Product Misuse

The product was used in a way not intended. Limited to uses that are NOT FORESEEABLE — if reasonably foreseeable, the manufacturer must warn.

Commonly Known Dangers

No warning necessary for dangers everyone should know about — a knife will cut you, a hammer will crush your thumb.

Knowledgeable User

Narrower than commonly known dangers — only SOME people would know (electricians). Pelman v. McDonald's: a knowledgeable user knows it isn't healthy.

Statutes of Limitations

Time limits on filing — 2 YEARS from DISCOVERY of the defect (when injured, or before).

Statutes of Repose

10 YEARS from the DATE OF MANUFACTURE, because age means normal wear and tear may be at play. Can cut off a claim before the 2-year clock runs out.