Products Liability - Warranties

Products Liability - umbrella rule

A manufacturer is strictly liable when he places a product in the market, knowing it will be used without inspection for defects, but which has a defect that causes injury to a human being.

Warranties - General Definition

The defendant is liable to the plaintiff for breach of warranty when the plaintiff purchases or is exposed to the defendant’s product and it fails to satisfy ordinary expectations, is dangerous, or both.

WARRANTIES MUST BE MADE BEFORE AT THE TIME OF SALE. NOT AFTER.

3 Types of Warranties

1. Express warranties

2. Implied Warranty of Merchantability

3. Implied Warranty of Fitness for a Particular Purpose

Express Warranty - Definition and Rule

Definition:

Anything the seller represents to a buyer about the product. Express warranties become part of the sales contract.

Rule:

The defendant is liable to the plaintiff for the breach of an express warranty when he makes to the public a misrepresentation of material fact about the product, and the plaintiff, in reasonable reliance on such misrepresentation, purchases the product and is proximately injured as a result.

Express Warranties - Elements

1. Seller makes a representation to buyer that the product contains certain qualities or characteristics.

   1. Representation must be of fact

   2. Cannot be exaggeration or mere puffery

   3. Factors demonstrate the D used promises to promote sales

      1. Factors such as:

         1. quality

         2. performance

         3. construction, or

         4. durability

2. Warranties can be given orally or in writing

   1. When not given orally or in writing, the law recognizes representations in models, pictures, or videos, etc.

3. MUST BE GIVEN BEFORE OR AT THE TIME OF SALE. STATEMENT DETERMINED TO BE EXPRESS WARRANTY MUST ACCOMPANY SALE

4. Most jurisdictions require plaintiff to prove reliance on the representation

5. Plaintiff must buy or be exposed to the product

6. Plaintiff must be proximately injured as a result

Is a specific and clear representation about safety or harmlessness an express warranty?

Yes.

What happens if a seller adopts the manufacturer’s warranty?

The seller is liable for breach of warranty

Express Warranty — PP

It would be unfair to say a product has the qualities that it does not have and then not make the manufacturer liable.

Liability still attaches even if the manufacturer cannot verify the truth of the representations he is making.

Seller’s use of word “warranty” or his intent to make one?

Seller does not need to use the word “warranty” or intend to create a warranty?

What must the defendant know about the plaintiff’s reliance on the warranty?

Defendant must know the plaintiff will rely on the warranty.

Promise of Safety - Express warranty

Promise of safety must be highly specific for warranty to attach

Consumer Protection Act

Enacted in many jurisdictions; their violation usually is pled along with violations of express warranty claims.

Caveat Emptor Rule

“Let buyer beware.”

This rule is unjust because it is unfair to allow a manufacturer to create a demand by representing their products possess qualities which they do not, and then, because their is no privity of contract existing between them and the consumer, deny the consumer the right to recover if damages result from the absence of such misrepresentations, where the absence is not readily noticeable.

Thus, an injured ultimate purchaser may sue a manufacturer or seller even if they have no privity of contract with them.

Implied Warranty of Merchantability - Definition and Rule

Definition:

An implied warranty of merchantability conveys that the goods are fit and can be safely used for their intended purpose.

Rule:

The defendant is liable to the plaintiff for a breach of implied warranty of merchantability when he:

(1) Sells a good in the ordinary course of trade, such that an implication arises that the good is fit for the ordinary purpose for which it is intended to be used; and

(2) During the plaintiff’s ordinary use of this good, it fails, thus injuring him.

IWM - Elements

1. Seller sells in the ordinary course of trade

   1. In placing the product on the self, it is deemed an offer

   2. When the consumer buys the good, this is an acceptance

   3. Warranty attaches on sale; IWM conveys the goods are fit and can be safely used for their intended purpose

2. The merchant is presumed to know the general purpose for which the products are commonly used

   1. Rule applies to goods with or without other warranties

3. The product must be fit for its ordinary purpose

   1. as well as foreseeable misuse

4. Failure of product must occur during ordinary use of product

   1. Merchant must anticipate extreme use, so merchant may be liable even under these circumstances

Is IWM based on express representations, or does it arise by operation of law?

Operation of law. The warranty attaches once the sale is made because the seller is selling in the ordinary course of trade and is thus conveying that the goods are fit for the general purpose for which they are made.

Cars - IWM

Under modern marketing conditions, when you place a new car into the stream of commerce, there’s an implied warranty that its reasonably suited for its purpose.

Defense - Disclaimer - IWM

• May be disclaimed by use of “as is”, “with all faults” or similar language that shows there is no implied warranty.

• May be communicated verbally

• If in writing, the term “merchantability” must be clear.

• If buyer fully examines, or they refuse to examine prior to purchase, then there’s no implied warranty for defects, bc the buyer ought to have seen the defect on inspection

Warranty claim might require timely notice of breach to seller.

IWM - Public Policy

If products which are defectively manufactured and endanger life and limb are put into the SOC, society’s interests can only be protected by eliminating privity of contract requirements.

Implied Warranty of Fitness for a Particular Purpose - Definition and Rule

Definition:

An implied promise by a seller that a product sold will meet the buyer’s needs.

A defendant is liable to the plaintiff for breach of an implied warranty of fitness for a particular purpose when he:

(1) Knows the particular purpose for which the goods are required;

(2) Knows the plaintiff is relying on his skill or judgment to select such suitable goods;

(3) The plaintiff, in relying on the defendant’s skill or judgment, purchases the good, and is injured as a result.

IWFFPP - Elements

1. Seller must know buyer’s purpose

2. seller must know buyer is relying on his skill or judgment

3. buyer relies on seller’s skill or judgment to furnish or select goods

4. buyer purchases product

5. buyer is injured

IWFFPP - Question of law or fact?

Question of fact.

Warranties overall - Lack of privity

Lack of privity does not prevent plaintiff from bringing a claim against defendant.

Vertical Privity - Definition

Concerned with the relationship between the parties in the chain of distribution of goods.

Who belongs in the chain of vertical privity?

1. Manufacturers

2. Distributors

3. Wholesalers

4. Retailers

5. Dealers

6. Purchasers

Horizontal Privity - Definition

The relationship between the parties outside the chain of distribution. Looks at 3rd party beneficiaries of either express or implied warranties and has 3 alternatives:

1. A

2. B

3. C

Horizontal Privity—parties outside the chain of distribution

1. Family members

2. Guests

3. Employers of the purchaser

4. Innocent bystanders

5. Othered injured third parties

3 Alternatives of Horizontal Privity - Alternative A

Narrow. Majority Position.

Extends to any natural person, family household, or guest.

1. Person does not include corporation

2. Includes family, household member

3. Guest in the home of purchase

   1. Anyone foreseeably injured by breach.

ONLY PERSONAL INJURY CAN BE COMPENSATED.

3 Alternatives of Horizontal Privity - Alternative B

Less narrow. Texas follows this.

Any natural person reasonably expected to use, consume, or be affected by the goods.

Less restrictive. Includes bystanders.

Only covers personal injury.

3 Alternatives of Horizontal Privity - Alternative C

Broadest.

Extends to any person who may be reasonably expected to use, consume, or be affected by the goods and who is injured by the BoW.

• Does not exclude any parties reasonably expected to be affected by the goods

• Most expansive

• Protects anyone, including entities

P can recover DAS for any personal injuries as well as other types of harm.

Defenses to Warranties

• Lack of privity

• Disclaimers

• Lack of warranty

• Buyer misused product in an unforeseeable way

• Buyer failed to provide sufficient notice of breach within reasoable time

IWFFPP - PP

The manufacturer/seller presumably makes the product and has specialized knowledge of the product’s inner workings. It should therefore be held liable for its failures when such failures lead to a consumer being injured by the product it makes/sells

Damages - Warranties

• Nominal damages — recoverable for recognition of technical damages resulting from breach

• Compensatory damages — for personal injury; no liability for purely economic loss unless jurisdiction follows Alternative C for horizontal privity

• Punitive damages - unavailable in solely BoW claim

Disclaimer - IWFFPP

Can be disclaimed by general language, but disclaimer must be in writing and be conspicuous