LS311: Business Law Week 3 - Strict Liability, Product Liability and ALTERNATIVE DISPUTE RESOLUTION Torts & Cybertorts Negligence A person injured by a defective product may sue by alleging and proving: The defendant breached a duty of due care to the plaintiff that caused the plaintiff’s injuries. In a negligence lawsuit, only a party who was actually negligent is liable to the plaintiff. Negligence Consumers can recover damages from the manufacturer of the product even though (s)he was only in privity of contract with the retailer Tort Liability - Misrepresentation Failure to exercise due care includes: Failing to assemble the product carefully. Negligent product design. Negligent inspection or testing of the product. Negligent packaging. Failure to warn of the dangerous propensities of the product. Seller or lessor fraudulently misrepresents the quality of a product, or conceals a defect in it Recovery limited to persons injured because they relied on the misrepresentation. Strict Liability Defendant’s liability is without regard to: Fault. Foreseeability. Standard of Care. Causation. Liability is based on creation of extraordinary risk. Defendants will be held strictly liable for an “abnormally dangerous activity” if: Activity involves serious potential harm; Activity involves high degree of risk that cannot be made safe; and Activity is not commonly performed in the community or area. Abnormally Dangerous Activities 6 Wild Animals Persons who keep wild animals are strictly liable for injuries caused by the creatures. Persons who keep domestic animals are liable if the owner knew or should have known that animal was dangerous. 7 Product Liability Product Liability is not a new tort. Liability can be based on: Negligence; Misrepresentation; or Strict Liability; Warranty Theory. 8 Product Liability (Negligence) Negligence-based product liability is based on a manufacturer’s breach of the reasonable standard of care and failing to make a product safe. 9 Product Liability (Negligence) Manufacturer must exercise “due care” in: Designing products; Manufacturing and Assembling Products; Inspecting and Testing Products; and Placing adequate warning labels. 10 Product Liability (Negligence) Manufacturers who violate state or federal law in the manufacture or labeling of a product, may be negligent per se. No privity of contract required between Plaintiff and Manufacturer. Liability extends to any person’s injuries caused by a negligently made (defective) product. 11 Product Liability (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. 12 Strict Product Liability Manufacturers liable without regard to fault based on public policy: Consumers must be protected from unsafe products; Manuf ...

1. LS311: Business Law
Week 3 - Strict Liability, Product Liability and ALTERNATIVE
DISPUTE RESOLUTION
Torts & Cybertorts
Negligence
A person injured by a defective product may sue by alleging and
proving:
The defendant breached a duty of due care to the plaintiff that
caused the plaintiff’s injuries.
In a negligence lawsuit, only a party who was actually negligent
is liable to the plaintiff.
Negligence
Consumers can recover damages from the manufacturer of the
product even though (s)he was only in privity of contract with
the retailer

2. Tort Liability - Misrepresentation
Failure to exercise due care includes:
Failing to assemble the product carefully.
Negligent product design.
Negligent inspection or testing of the product.
Negligent packaging.
Failure to warn of the dangerous propensities of the product.
Seller or lessor fraudulently misrepresents the quality of a
product, or conceals a defect in it
Recovery limited to persons injured because they relied on the
misrepresentation.
Strict Liability
Defendant’s liability is without regard to:
Fault.
Foreseeability.
Standard of Care.
Causation.
Liability is based on creation of extraordinary risk.

3. Defendants will be held strictly liable for an “abnormally
dangerous activity” if:
Activity involves serious potential harm;
Activity involves high degree of risk that cannot be made safe;
and
Activity is not commonly performed in the community or area.
Abnormally Dangerous Activities
6
Wild Animals
Persons who keep wild animals are strictly liable for injuries
caused by the creatures.
Persons who keep domestic animals are liable if the owner knew
or should have known that animal was dangerous.
7
Product Liability
Product Liability is not a new tort.

4. Liability can be based on:
Negligence;
Misrepresentation; or
Strict Liability;
Warranty Theory.
8
Product Liability (Negligence)
Negligence-based product liability is based on a manufacturer’s
breach of the reasonable standard of care and failing to make a
product safe.
9
Product Liability (Negligence)
Manufacturer must exercise “due care” in:
Designing products;
Manufacturing and Assembling Products;
Inspecting and Testing Products; and
Placing adequate warning labels.

5. 10
Product Liability (Negligence)
Manufacturers who violate state or federal law in the
manufacture or labeling of a product, may be negligent per se.
No privity of contract required between Plaintiff and
Manufacturer.
Liability extends to any person’s injuries caused by a
negligently made (defective) product.
11
Product Liability (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.

6. 12
Strict Product Liability
Manufacturers liable without regard to fault based on public
policy:
Consumers must be protected from unsafe products;
Manufacturers should be liable to any user of the product;
Manufacturers, sellers and distributors can bear the costs of
injuries.
Strict Product Liability
Requirements for strict liability:
Product is unreasonably dangerous when sold Defendant sells
the product;
Plaintiff injured by use or consumption of product and defective
condition is the proximate cause of injury.
Greenmanv.Yuba Power Products (1962).
14
Strict Product Liability Requirements
Plaintiff must show product was so “defective” it was

7. “unreasonably dangerous”:
Product must be in defective condition when sold.
Defendant is in the business of selling the product.
Product must be unreasonably dangerous.
Plaintiff must be physically harmed
Defective condition must be proximate cause of injury.
Goods are in substantially same condition.
15
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.
Sindell v. Abbott Laboratories
16
Liability of Suppliers
Suppliers of Component Parts may be liable if:
Component is defective at the time of sale/distribution;

8. Supplier “substantially participates” in the design and
integration of defective product.
Liability of Suppliers
Manufacturers, distributors, suppliers, sellers liable to an
injured bystander who did not purchase, use or consumer the
product.
Injuries to bystanders from defective products are reasonably
foreseeable.
Strict Liability—
Restatement (3rd) of Torts
The terms “unreasonably dangerous” and “defective” are used
interchangeably and subject to differing definitions by different
courts.
Restatement defines three different types of defects:
manufacturing, design and warning defects.
Three types of product defects:
Manufacturing defects.
Design defects.
Warning Defects

9. To recover under strict liability, the injured party must first
show that the product that caused the injury was somehow
defective.
Plaintiffs can allege multiple product defects in one lawsuit.
Product Defects
Defect that occurs when the manufacturer fails to:
Properly assemble a product
Properly test a product, or
Adequately check the quality of a product
Occurs when a product “departs from its intended design even
though all possible care was exercised in the preparation and
marketing of the product.”
Manufacturing Defects
Defect that occurs when a product is improperly designed.
Design defects include:
Toys designed with removable parts that could be swallowed by
children.
Machines and appliances designed without proper safeguards.
Trucks designed without a backup warning device.
Occurs when the “foreseeable risks of harm posed by the
product could have been reduced or avoided by the adoption of
a reasonable alternative . . . and the omission of the alternative
design renders the product not reasonably safe.”
Design Defects

10. Defect in Design: Risk-Utility Analysis
Gravity of the danger posed by the design
Likelihood that injury will occur
Availability and cost of producing a safer design
Social utility of the product
E.g.: automobile manufacturers are under a duty to design
automobiles taking into account the possibility of harm from a
person’s body striking something inside the automobile in the
case of a car accident.
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.
Proper and conspicuous warning insulates all in chain of
distribution
Liriano v. Hobart Co. (1999).
whether a manufacturer can be liable under a failure-to-warn
theory in a case in which the substantial modification defense
would preclude liability under a design defect theory
Warning Defects

11. There is no duty to warn about obvious or commonly known
risks.
Seller must also warn about injury due to product misuse. Key
is whether misuse was foreseeable.
Warning Defects
Packaging Defect
Defect occurs when a product has been placed in packaging that
is insufficiently tamperproof.
Manufacturers owe a duty to design and provide safe packages
for their products.
Failure to meet this duty subjects the manufacturer and others in
the chain of distribution of the product to strict liability.
Other Product Defects
Failure to provide adequate instructions
Inadequate testing of products
Inadequate selection of component parts or materials
Improper certification of the safety of a product

12. Assumption of Risk.
Product Misuse (Plaintiff does not know the product is
dangerous for a particular use).
Contributory/Comparative Negligence.
Commonly known dangers.
Statutes of Limitation.
Supervening event.
Defenses to Product Liability
Defenses: Generally Known Dangers
Certain products are inherently dangerous
Products are known to the general population to be so
Sellers are not strictly liable for failing to warn of generally
known dangers.
Government Contractor Defense
Contractor who was provided specifications by the government
is not liable for any defect in the product that occurs as a result
of those specifications
Product must conform to specifications

13. Contractor must have warned of known defects or dangers
Assumption of Risk
Defendant must prove plaintiff knew and appreciated the risk
the plaintiff voluntarily assumed the risk
Product Misuse
Relieves the seller of product liability if the user abnormally
misused the product.
Products must be designed to protect against foreseeable
misuse.
Product Defect Correction
Manufacturer must notify purchasers and users
Must correct defect
Usually achieved through recall and repair or replacement
Supervening Event

14. Alteration or modification of a product by a party that absolves
seller from strict liability
Modification must be made after it leaves seller’s possession
Alteration must cause injury
Statute of Limitations
Statute that requires an injured person to bring an action within
a certain number of years from the time that he or she was
injured by the defective product
Limitation period set by each state
Defendant relieved of liability if action not brought within
limitation period
Chapter 7.72 RCW
PRODUCT LIABILITY
ACTIONS7.72.010Definitions.7.72.020Scope.7.72.030Liability
of manufacturer.7.72.040Liability of product seller other than
manufacturer -- Exception.7.72.050Relevance of industry
custom, technological feasibility, and nongovernmental,
legislative or administrative regulatory
standards.7.72.060Length of time product sellers are subject to
liability.7.72.070Food and beverage consumption.

15. Statute of Repose
Limits the seller’s liability to a certain number of years from
the date when the product was first sold
Varies from state to state
4.16.180Statute tolled by absence from state, concealment,
etc.4.16.190Statute tolled by personal disability.4.16.200Statute
tolled by death.4.16.210Statute tolled -- By war as to enemy
alien.4.16.220Statute tolled -- As to person in military service
of United States.4.16.230Statute tolled by judicial proceedings.
Contributory Negligence
Person who is injured by a defective product
Injured party has been negligent
contributed to his or her own injuries
Cannot recover from the defendant.
Comparative Negligence
Plaintiff is contributorily negligent for his or her injuries
Responsible for a proportional share of the damages
Damages proportioned between plaintiff and defendant

16. FACTS:
A piece of wood flew out of the lathe attachment of a Shopsmith
(a consumer power tool) while Greenman was using it, causing
serious injuries.
Greenman sued the retailer and the manufacturer for breach of
warranties and negligence.
The jury ruled in favor of Greenman, and the Defendants
appealed.
Greenman v. Yuba Power Products
(Strict Product Liability)
HELD: AFFIRMED. FOR GREENMAN.
Greenman proved that the design and construction of the
Shopsmith were defective and that his injuries were caused by
the defects.
“A manufacturer is strictly liable in tort when an article he
places on the market, knowing that it is to be used without
inspection for defects, proves to have a defect that causes injury
to a human being.”
Purpose of liability is for manufacturers to bear the costs.
Greenman v. Yuba Power Products
FACTS:
Embs was buying groceries at Stamper’s Cash Market.
A carton of 7-Up was sitting on the floor at the edge of the

17. produce counter about one foot from where she was standing.
Several of the 7-Up bottles exploded severely injuring Embs.
Embs sued Pepsi but the court ruled against her and dismissed
her case.
Embs appealed.
Embs v. Pepsi-Cola
(Strict Product Liability)
HELD: REVERSED. FOR EMBS.
The appellate court extended the protection of the Restatement
(Second) of Torts, Section 402A “to bystanders whose injury
from the defect is reasonably foreseeable.”
The court based this extension on the policy that “the loss for
injuries resulting from defective products should be placed on
those members of the marketing chain best able to pay the loss,
who can then distribute such risk among themselves by means
of insurance and indemnity agreements.”
Embs v. Pepsi-Cola
FACTS:
Super Associated store bought a Hobart Corp. meat grinder that
had no warning that it should be operated only with the safety
guard.
Liriano, a SA employee, removed the guard and was severely
injured when his hand was caught in the grinder. (Liriano was
seventeen years old, a recent immigrant, and on the job only a
week. He had not been told how to operate the grinder.)
He sued Hobart claiming that the lack of a warning about the

18. safety guard was negligence. The jury returned a verdict for
Liriano.
Hobart appealed, arguing that the danger was so obvious no
warning was needed.
Liriano v. Hobart Co.
(Warning Defects)
HELD: AFFIRMED. FOR LIRIANO.
A manufacturer can be liable for failing to warn about
alterations, such as the removal of a safety guard, that would
make its product unsafe.
It doesn’t matter how obvious the danger is.
“Even if most ordinary users may * * * know of the risk of
using a guardless meat grinder, it does not follow that a
sufficient number of them will . . ..”
Liriano v. Hobart Co.
Smith v. Ingersoll-Rand
(Comparative Negligence)
FACTS: Smith injured attempting to start a diesel engine for
Ingersoll-Rand Company compressor.
Smith, a mechanic, not wearing hard hat when he was
dispatched to start engine. Door had to be propped open.
Smith started engine and door fell from open position and
hit his head causing severe injury. Smith sued.
Ingersoll-Rand defended that Smith’s failure to wear a

19. hard hat and his propping the door open in an unsafe manner
constituted contributory negligence.
Smith v. Ingersoll-Rand
HELD: FOR INGERSOLL.
The court recognized that under a “system of comparative fault .
. . , a plaintiff would still be able to recover if he was
comparatively at fault for his injuries, but his recovery would
be reduced in proportion to his percentage of fault.”
© 2006 Prentice Hall, Business Law, sixth edition, Henry R.
Cheeseman
Defective product causes injury
Negligence
lawsuit
lawsuit
Strict liability
Consumer
Retailer
Distributor

20. Manufacturer (negligent)
Defective product
Defendant
Defendant
Defendant
Defendant
All in the chain of distribution are liable
Negligent party is liable
Doctrines of Negligence and Strict Liability Compared