Business Law: Torts, Product Liability, and Contracts

Comprehensive vocabulary flashcards reviewing legal principles and key cases in torts, negligence, strict liability, warranties, product liability, and contract law.

Harm (Negligence)

An essential element of a negligence claim requiring that the defendant's negligence actually caused harm to an interest protected by law; without proof of harm, there is no case.

Negligent Infliction of Emotional Distress

A tort claim where a person experiences severe emotional distress caused by another party's negligence that produces actual physical harm (such as a heart attack); also applies when witnessing severe injury to a close family member.

Contributory Negligence

A common law defense providing that if the plaintiff was also careless and contributed to their own injury, they recover $0$ if even $1\%$ at fault, subject to the "last clear chance" exception.

Pure Comparative Negligence

A defense rule where damages are allocated strictly according to fault percentage; for example, if the defendant is $75\%$ at fault, the plaintiff recovers $75\%$ of total damages.

Modified Comparative Negligence

A comparative fault system where damages are split proportionally until the plaintiff's fault reaches a specific threshold (such as $51\%$ in Pennsylvania), at or above which the plaintiff recovers nothing.

Tort Reform

Statutory enactments that cap or restrict the monetary amount of damages a plaintiff can be awarded in civil lawsuits.

Assumption of Risk

A defense barring recovery when a plaintiff knew of a risk and voluntarily chose to proceed anyway; can be express (agreed to in writing or spoken words, such as a waiver) or implied (proceeding with knowledge of danger without formal agreement).

Strict Liability

Legal responsibility imposed on an actor for harm caused by an activity regardless of whether they acted with carelessness or intent, holding them liable even if full care was exercised.

Abnormally Dangerous Activities

Uncommon or unusual activities that carry inherent, high risks of serious harm even when performed with utmost care, such as blasting, fireworks, crop dusting, and storing explosives.

Dram Shop Acts

Statutes imposing strict liability on bars and taverns for injuries caused by an intoxicated patron who was served alcohol when already intoxicated.

Trespassing Animals Rule

A strict liability rule holding the keeper of animals (excluding dogs and cats) strictly liable for any harm caused if the animals enter another person's property.

Wild Animals Rule

A strict liability rule holding keepers of wild animals liable for resulting harm under all circumstances, regardless of whether the animal was trespassing or how carefully it was restrained.

Domestic Animals Rule

A rule imposing liability on owners of domestic animals only if the owner knew or had reason to know of the animal's unusually dangerous tendencies, and that specific tendency caused the harm.

Warranty

A seller's promise that goods satisfy specific standards of quality or condition; to recover, the buyer must prove the warranty existed, was broken, caused damages, and that the seller was notified.

Warranty of Title

A promise by the seller that they legally own the good, possess the legal right to transfer it, and that the property is conveyed free of undisclosed liens or encumbrances.

Express Warranty

An explicit oral or written promise made by a seller concerning goods—arising from statements, descriptions, samples, or models—distinguished from mere puffery or statements of opinion.

Implied Warranty of Merchantability

A legal warranty arising solely when the seller is a merchant of that type of good, guaranteeing that the product is fit for its ordinary purpose, is of average quality, and is adequately packaged.

Implied Warranty of Fitness for Particular Purpose

A warranty applying to any seller when the seller knows the buyer's unique, non-ordinary purpose and the buyer relies upon the seller's judgment or expertise to select appropriate goods.

Disclaimer of Warranties

Clear and conspicuous contract language used by a seller to eliminate or limit warranty liability; disclaiming merchantability requires explicit inclusion of the term "merchantability."

Notice of Breach of Warranty

The requirement that a buyer promptly alert the seller about a broken warranty within a reasonable time, on pain of forfeiting the right to legal recovery.

Strict Liability in Tort (Products)

A legal doctrine holding commercial sellers strictly liable for physical injuries caused by defective, unreasonably dangerous products, evaluated based on the condition of the item rather than the conduct of the seller.

Manufacturing Defect

A flaw occurring when a single product unit departs from its intended design specifications during production, creating an isolated defective item within an otherwise standard batch.

Design Defect

A defect where a product is manufactured precisely to specifications, but the overall design itself contains foreseeable risks of harm making it unreasonably dangerous (evaluated by technology known at the time).

Failure to Warn

A basis for product liability where a manufacturer fails to provide adequate warnings or instructions for non-obvious hazards associated with using the product.

Unreasonably Dangerous

A standard describing a product that is dangerous beyond the expectations of an ordinary consumer purchasing it, such as whiskey contaminated with gasoline.

Voluntary Assumption of Risk (Product Liability)

An affirmative defense establishing that the plaintiff recognized the specific defect and danger of a product and unreasonably chose to expose themselves to that danger.

Misuse or Abuse of Product

A product liability defense applicable when a plaintiff uses a product in an unforeseeable manner; if the unintended use is foreseeable, the manufacturer retains a duty to warn.

Statute of Repose

A statutory time limit (typically $6\text{--}12$ years) barring product liability lawsuits after a set period from manufacture or sale, shielding sellers from indefinite liability even if later injury occurs.

Contract

A legally enforceable promise or set of promises for the breach of which the law provides a remedy; all contracts are promises, but not all promises are contracts.

Elements of a Contract

The core legal prerequisites necessary to form an enforceable agreement: mutual assent (offer and acceptance), consideration, legality of purpose, and contractual capacity.

Express Contract

An agreement formed wherein the parties state the terms and manifest their assent explicitly in spoken or written words.

Implied-in-Fact Contract

A contract inferred entirely from the conduct and actions of the parties rather than direct spoken or written promises, carrying equal enforceability to an express agreement.

Bilateral Contract

A contract formed by an exchange of reciprocal promises, wherein each party acts as both a promisor and a promisee.

Unilateral Contract

A contract wherein only one party makes a promise, and acceptance occurs solely through actual completion of requested performance rather than a return promise.

Void Contract

An agreement that lacks an essential legal element from inception, possessing no legal effect or enforceability.

Voidable Contract

A contract that is valid and enforceable on its face, but permits one party to avoid or disaffirm their legal obligations due to a defect like fraud, undue influence, or duress.

Unenforceable Contract

An otherwise valid agreement that the legal system will not enforce due to a procedural or statutory bar, such as the Statute of Frauds.

Executed Contract

A contract whose contractual duties and promises have been fully performed by all parties.

Executory Contract

A contract in which one or more obligations remain unperformed by either or both parties.

Promissory Estoppel

An equitable doctrine enforcing a promise lacking consideration when the promisor should reasonably expect detrimental reliance, the promisee relies, and injustice can only be avoided by enforcement.

Quasi-Contract (Implied in Law)

An obligation created by courts in the absence of a contract to prevent unjust enrichment, requiring a party who knowingly retained a benefit to pay its reasonable value.

Offer

A definite proposal communicating a willingness to enter into a contract, creating the legal power in the offeree to conclude a bargain by acceptance.

Advertisements (Contract Law)

Commercial notices generally treated as invitations to make offers rather than binding offers, unless the terms are definite, specific, and directed to an identified party or class.

Definiteness

The requirement that the material terms of an offer (parties, subject matter, price, quantity, quality, and time of performance) be sufficiently certain to enable a court to determine a breach and formulate a remedy.

Output Contract

An enforceable agreement in which a buyer commits to purchase the entire production output of a seller, bound by the statutory duty of good faith.

Requirements Contract

An enforceable agreement in which a seller commits to supply all the goods a buyer needs for their business operations, bound by the statutory duty of good faith.

Revocation

The withdrawal or cancellation of an offer by the offeror prior to acceptance, taking legal effect only once received by or communicated to the offeree.

Option Contract

A common law contract where the offeror binds themselves to keep an offer open for a specified period in exchange for distinct consideration paid by the offeree.

Firm Offer (UCC)

A signed, written assurance by a merchant to hold an offer to buy or sell goods open without requiring consideration, enforceable for the time stated or up to a maximum of $3$ months.

Rejection

A manifestation of refusal by an offeree to accept an offer, terminating the offer upon receipt by the offeror.

Counteroffer

A new proposal by an offeree that changes or supplements the original terms, simultaneously terminating the original offer and creating a new one.

Mailbox Rule

A contract rule providing that an acceptance becomes legally effective the moment it is dispatched or placed in the mail, unlike offers and rejections which are effective only upon receipt.

Mirror Image Rule

A common law principle requiring that an acceptance match the exact terms of the offer without modification, treating any variance as a counteroffer.

Battle of the Forms (UCC)

A Uniform Commercial Code rule under which offerees can form contracts despite including additional or differing terms; between merchants, non-material additional terms automatically become part of the agreement unless timely objected to.

Physical Duress

Physical force applied to compel a party into manifesting apparent agreement, rendering the resulting transaction completely void.

Duress by Improper Threat

The use of wrongful or unlawful threats that leave the victim with no reasonable alternative but to consent, rendering the resulting contract voidable at the victim's election.

Undue Influence

Unfair persuasion exercised by a dominant party over a dependent party in a confidential or fiduciary relationship, making the agreement voidable by the influenced party.

Fraud in the Execution

A misrepresentation that deceives a person as to the very character or nature of the document they are signing, rendering the contract void.

Fraud in the Inducement

A knowing false statement of material fact that misleads a party into willingly consenting to a contract, making the contract voidable by the defrauded party.

Materiality (Fraud)

The requirement that a misrepresentation must be significant enough to substantially affect or alter a reasonable person's decision-making process when entering a contract.

Nonfraudulent Misrepresentation

A false statement of material fact made without fraudulent intent—either negligently (carelessly without verification) or innocently (with honest belief)—making the contract voidable.

Mutual Mistake

An erroneous belief held by both contracting parties regarding the same material fact at the time of agreement, rendering the contract voidable by the adversely affected party.

Unilateral Mistake

An erroneous assumption made by only one party, which generally yields no legal relief unless the non-mistaken party knew or should have known of the error.

Consideration

The bargained-for exchange of legal value—consisting of an act, a forbearance, or a return promise—required to make a promise legally enforceable, distinguishing it from an unenforceable gift.

Legal Sufficiency of Consideration

The requirement that consideration involve either a legal detriment to the promisee or a legal benefit to the promisor; courts assess its presence rather than the financial adequacy of the exchange.

Illusory Promise

A statement cast in promissory language that fails to obligate or bind the promisor to any definitive performance (e.g., "I may sell you my car"), failing to serve as valid consideration.

Preexisting Duty Rule

A common law rule stating that doing or promising to perform an action one is already legally required to do does not constitute valid consideration for a new promise.

Regulatory License

A governmental license designed to safeguard public safety and competency (such as for physicians, lawyers, and building contractors); contracts formed by an unlicensed practitioner are typically unenforceable.

Revenue License

A licensing measure instituted primarily to generate tax revenue rather than regulate professional competence; contracts made by unlicensed persons under revenue measures remain fully enforceable.

Usury Statutes

Laws establishing the maximum annual percentage rate of interest that lenders may legally charge on monetary loans.

Covenant Not to Compete

An agreement restricting a party from engaging in a competing business, enforceable only if it protects a legitimate business interest and is reasonable in duration and geographic scope.

Exculpatory Clause

A contractual provision excusing a party in advance from liability for their own ordinary negligence; cannot excuse intentional, reckless, or gross misconduct.

Unconscionable Contract

A contract so egregiously unfair that courts decline to enforce it, divided into procedural unconscionability (unfair bargaining, hidden terms) and substantive unconscionability (oppressive terms).

Adhesion Contract

A standard-form "take-it-or-leave-it" contract drafted exclusively by the dominant party, subjecting its provisions to greater judicial scrutiny for fairness.

Petition of Kinsman Transit Co. (1964)

A landmark tort case establishing that a negligent party is liable for the foreseeable type of damage caused by their conduct, even if the ultimate extent and chain of damages was extraordinary.

Liebeck v. McDonald's Restaurants (1994)

A product liability and tort case involving severe third-degree burns from scalding coffee, demonstrating how compensatory damages operate alongside punitive damages awarded for corporate indifference to known hazards.

Klein v. Pyrodyne Corporation (1991)

A case ruling that conducting a public fireworks display constitutes an abnormally dangerous activity, subjecting the operator to strict liability regardless of the degree of care exercised.

Palumbo v. Nikirk (2009)

A case affirming that strict liability for injuries inflicted by domestic animals requires evidence that the owner knew or had reason to know of the animal's prior vicious propensities.

Belden Inc. v. American Electronic Components, Inc. (2008)

A commercial dispute establishing that adhering to explicit technical product specifications and continuous past course of dealing gives rise to binding express warranties.

In RE L.B. Trucking Inc. (1994)

A commercial warranty case establishing that a seller's bad recommendation of herbicide simultaneously breached an express warranty, the implied warranty of merchantability, and the implied warranty of fitness for a particular purpose.

Kelso v. Bayer Corporation (2005)

A failure-to-warn case establishing that clear, conspicuous, and adequate warning labels shield a manufacturer from liability when a consumer misuses the product in defiance of instructions.

Steinberg v. Chicago Medical School (1976)

A contract formation case holding that submitting an application and fee constitutes acceptance of an offer, creating an enforceable contract requiring the institution to evaluate applicants by its published criteria.

Montz v. Pilgrim Films & Television Inc. (2011)

An entertainment law decision demonstrating that pitching a proprietary concept in confidence can create an enforceable implied-in-fact contract against unauthorized exploitation without compensation.

Bouton v. Byers (2014)

A case where the doctrine of promissory estoppel was applied to enforce an unwritten promise to bequeath real property after the promisee reasonably relied on the promise by abandoning a career.

Sherrod v. Kidd (2007)

A case illustrating that an offer lapses automatically after the expiration of a reasonable duration, particularly once the dispute proceeds through a binding alternative process like arbitration.

Osprey LLC v. Kelley-Moore Paint Co. Inc. (1999)

A contract interpretation case holding that where an agreement states a party "may" deliver notice by a particular method, alternative reasonable methods of communication (such as facsimile) are legally valid.

Neugebauer v. Neugebauer (2011)

A case demonstrating undue influence where a dependent parent sold farmland to a son for far below fair market value, rendering the lopsided contract voidable at the election of the mother.

Maroun v. Wireless Systems Inc. (2005)

A fraud case establishing that fraudulent misrepresentation requires knowing falsity regarding past or existing facts, rather than unfulfilled future projections or failed business ventures.

Reed v. King (1983)

A real property case ruling that sellers have a duty to disclose material, non-obvious facts that significantly depress a property's market value (such as a history of multiple homicides), though not adopted in Pennsylvania.

Hamer v. Sidway (1891)

A foundational contract case establishing that the abandonment or forbearance of a legal right (such as refraining from drinking, smoking, and gambling until age $21$) constitutes valid consideration.

Vanegas v. American Energy Services (2009)

A case establishing that an employer's conditional promise to pay employees $5\%$ of sale proceeds constituted an enforceable unilateral contract once the workers completed performance.

Denny v. Reppert (1968)

A preexisting duty case holding that an off-duty deputy making an arrest outside his jurisdiction was entitled to a reward because he acted outside the scope of his official legal obligations.

New England Rock Services Inc. v. Empire Paving Inc. (1999)

A contract modification case recognizing the "fair and equitable" modification exception to the preexisting duty rule when unforeseen and burdensome conditions justify price adjustments.

Alcoa Concrete & Masonry v. Stalker Bros. (2010)

A licensing decision ruling that regulatory licensing requirements designed to protect ordinary consumers do not automatically invalidate payment rights between commercial contractors and subcontractors.

Payroll Advance Inc. v. Yates (2008)

A restrictive covenant case holding that an employment non-compete clause spanning $2$ years and a $50$-mile radius was unreasonably broad and therefore unenforceable.

Anderson v. McOskar Enterprises Inc. (2006)

A tort defense case establishing that an exculpatory liability waiver clearly releasing a fitness center from ordinary negligence claims is legally enforceable despite unequal bargaining leverage.