Lecture on Consumer Warranties and Product Liability

2. • What factors determine whether a
seller’s or lessor’s statement
constitutes an express warranty or
mere puffery?
• What implied warranties arise under
the UCC? 
2

3. • Can a manufacturer be held liable to
any person who suffers an injury
proximately caused by the
manufacturer’s negligently made
product?
• What are the elements of a cause of
action in strict product liability? 
3

4. • What defenses to liability can be raised
in a product liability lawsuit?
4

5. • A warranty is an assurance or
guarantee by the seller or lessor of
certain facts concerning the goods
being sold or leased.
• If seller breaches a warranty, buyer
can recover damages, or rescind the
contract.
5

6. • Warranties automatically arise in
most commercial sales transactions.
• Normally warranties can be
disclaimed or modified with specific
language in the contract. 
6

7. • Warranties of Title. UCC-312 can
creates three express warranties at
sale:
–Good Title.
–No Liens.
–No Infringements.
7

8. • Express Warranties.
–Representations concerning quality,
condition, description, or performance
potential of goods.
–Can be created by:
• Any Affirmation or Promise.
• Any Description.
• Any Sample or Model.
8

9. • Express Warranties (cont’d).
–Basis of the Bargain.
• Seller does not have to use the words
“guarantee” or “warranty.”
• Buyer must rely on warranty when he
enters into contract. 
9

10. • Express Warranties (cont’d).
–Statements of Opinion and Value. Only
statements of fact create express
warranties.
• Exception for Statements of Opinion by
Experts.
• Puffery versus Express Warranties.
10

11. • Implied Warranties.
–Inferred at law based on the
circumstances or nature of the
transaction.
–Implied Warranty of Merchantability.
• Automatically arises from merchants. 
11

12. • Implied Warranties (cont’d).
–Implied Warranty of Merchantability.
• Merchantable Goods:
–Goods are of average, fair, or mediumgrade.
–Adequately packaged and labeled.
–Conform to promises on label.
–Have a consistent quality and quantity
among the commercial units.
12

13. • Implied Warranties (cont’d).
–Implied Warranty of Merchantability.
–Knowledge of Defect Not Required: warranty
can be breached even if merchant did not
know or could not have discovered product
was defective.
• Merchantable Food.
–CASE 21.1 Webster v. Blue Ship Tea Room,
Inc. (1964). Was the soup fit to eat on the basis of
consumer expectations?
13

14. • Implied Warranties (cont’d).
–Implied Warranty of Fitness for a
Particular Purpose: arises by any seller
who:
• Knows the particular purpose for which the
goods are being bought; and
• Knows the buyer is relying on seller’s skill
and judgment to select suitable goods.
14

15. • Implied Warranties (cont’d).
–Implied Warranty of Fitness for a
Particular Purpose.
• Particular vs. Ordinary Purpose: Differs from
ordinary purpose of merchantability. Goods can
be merchantable but unfit for a particular
purpose.
• Knowledge and Reliance Requirements:
seller must have reason to know purpose, and
buyer must have relied on the recommendation.
15

16. • Implied Warranties (cont’d).
–Implied Warranty From Prior Dealings or
Trade Custom.
• Arises when both parties to a contract have
knowledge of a well-recognized trade
custom. Courts infer that both meant this
custom to apply to their transaction.
16

17. • Overlapping Warranties.
– Occurs when two or more warranties are made in
a single transaction:
• When Warranties are Consistent.
• When Warranties are Inconsistent:
– (1) Implied warrant of fitness for a particular purpose.
(2) Samples take precedence over inconsistent
descriptions. (3) Exact or technical specifications
displace inconsistent samples or descriptions.
17

18. • Warranty Disclaimers.
–Express Warranties can be disclaimed:
• If they were never made (evidentiary
matter).
• If a clear written disclaimer in contract
with specific, unambiguous language and
called to Buyer’s attention (BOLD CAPS
UNDERLINED).
18

19. • Warranty Disclaimers.
–Implied Warranties.
• Unless circumstances indicate otherwise,
warranties of fitness and merchantability
can be disclaimed with the words “As Is,”
“With All Faults.” 
19

20. • Warranty Disclaimers (cont’d).
–Implied Warranties.
• Disclaimer of the Implied Warranty of
Merchantability: must use the word
merchantability.
• Disclaimer of the Implied Warranty of
Fitness: must be in writing and
conspicuous.
20

21. • Warranty Disclaimers (cont’d).
–Implied Warranties.
• Buyer’s Examination or Refusal to Inspect.
Warranties are disclaimed as to defects
that could reasonably be found on
examination.
• Warranty Disclaimers and
Unconscionability.
21

22. • Warranty Disclaimers (cont’d).
–Magnuson-Moss Warranty Act.
• Modifies UCC for consumer sales. Does
not require a warranty.
• Only applies when written warranties are
made by Seller (including a service
contract).
–If goods > $25label “full” or “limited.”
–Full warranty provides free repair or
replacement.
22

23. • Coverage of Lemon Laws.
–Generally manufacturer is given limited
number opportunities (usually four) to
remedy the defect.
–If manufacturer fails, buyer is entitled
to new car, replacement of defective
parts, or return of all consideration.
• Arbitration is Typical Procedure.
23

24. • Product Liability is not a new tort.
• Liability can be based on:
–Negligence; 
–Misrepresentation; 
–Strict Liability; 
–Warranty Theory. 
24

25. • Negligence.
–Based on a manufacturer’s breach of
the reasonable standard of care and
failing to make a product safe.
–Due Care Must Be Exercised in: design,
selection of materials, using appropriate
production process, assembling and testing,
adequate warnings, inspection, and testing.

25

26. • Negligence (cont’d).
–Privity of Contract Not Required. No
privity of contract required between
Plaintiff and Manufacturer. Liability
extends to any person’s injuries caused
by a negligently made (defective)
product.
26

27. • Misrepresentation.
–Occurs when fraud committed against
consumer or user of product. Fraud
must have been made knowingly or
with reckless disregard for safety.
–Plaintiff does not have to show product
was defective.
27

28. • Strict Liability holds people liable for
results of their acts, regardless of
their intentions or exercise of
reasonable care. 
28

29. • Strict Liability and Public Policy.
–Consumers should be protected from
unsafe products;
–Manufacturers and distributors should
be liable to any user of the product;
–Manufacturers, sellers and distributors
can bear the costs of injuries.
29

30. • Requirements for Strict Liability:
1. Product must be in defective condition
when sold.
2. Defendant is in the business of selling
the product.
3. Product must be unreasonably
dangerous. 
30

31. • Requirements for Strict Liability:
4. Plaintiff must be physically harmed
5. Defective condition must be proximate
cause of injury.
6. Goods are in substantially same
condition.
31

32. • Requirements for Strict Liability
(cont’d).
–Proving a Defective Condition.
• Plaintiff does not need to show product
or in what manner the product become
defective.
• But plaintiff must show product was
defective and “unreasonably dangerous”
to the user. 
32

33. • Product Defects. Three types of
product defects:
–Manufacturing Defects. 
–Design Defects. 
–Warning Defects. 
33

34. • Product Defects (cont’d).
–Manufacturing Defects.
• Occurs when a product “departs from its
intended design even though all possible
care was exercised in the preparation and
marketing of the product.”
34

35. • Product Defects (cont’d).
–Design Defects.
• Product is manufactured correctly, but
defect is based on design.
• Test for Design Defects: plaintiff must
show defendant’s failure to use a
reasonable alternative design rendered
the product not reasonably safe.
35

36. • Product Defects (cont’d).
–Design Defects.
• Factors to be Considered.
–Magnitude and probability of foreseeable
risks.
–Relative advantages and disadvantages of
product.
–Most courts use “risk-utility” analysis.
36

37. • Product Defects (cont’d).
–Inadequate Warnings.
• A product may be defective because of
inadequate warnings or instructions.
• Liability based on foreseeability that
proper instructions/labels would have
made the product safe to use.
37

38. • Product Defects (cont’d).
–Inadequate Warnings.
• Obvious Risks. No duty to warn.
• Foreseeable Misuses. Seller must warn
about foreseeable misuse.
• CASE 21.2 Wyeth v. Levin (2009). Federal
law did not preempt state claim for
inadequate warning.
38

39. • Market Share Liability.
–Theory of liability when multiple
Defendants contributed to manufacture
of defective product.
–Liability of each Defendant is
proportionate to the share of the market
held by each respective Defendant.
• Other Applications: to bystanders.
39

40. • Assumption of Risk.
–CASE 21.3 Boles v. Sun Ergoline, Inc.
(2010). Why did court find the
exculpatory clause unenforceable?
• Product Misuse. Plaintiff does not
know the product is dangerous for a
particular use. 
40

41. • Comparative Negligence (Fault).
–Defendants may be able to limit
damages by apportioning fault.
• Commonly Known Dangers.
• Knowledgeable User.
41