Warranties and Product Liability

1. Warranties and Product Liability OBE 118, Section 3, Fall 2004 Professor McKinsey

2. Warranties • A contractual theory of responsibility for sellers for how a good performs • Often the UCC is involved • Two Categories of warranties: 3 ways to create: 3 types: Statement of fact Description of goods Samples or models

3. Express Warranties • Opinions and Puffing are not warranty • Statement of fact that a product will meet a standard or do a specific thing. Examples (yes or no?) This blade will last for over 100 hours Will kill any weed you spray it on I think this car is the best I think this car will last another 100,000 miles without any major maintenance This is the best product on the market

4. Implied Warranties • Title Warranties – with nearly all sales of goods • Implied Warranty of Merchantability – only possible when merchant seller • Implied Warranty of Fitness for a Particular Purpose – certain circumstances

5. Implied Title Warranties Three types: • Good Title – sellers owns the goods • No Liens – good is free of claims by others • No Infringements – good is free from Intellectual Property(IP) claims

6. Implied Warranty of Merchantability • When a merchant sells a good, it is warranted to be fit for use in general purpose “ ” • Goods must be reasonably fit for the ordinary purposes for which such goods are used, meet label expectations and be safe • Victim must have harm caused by the breach of warranty

7. Implied Warranty of Fitness for a Particular Purpose Arises when any seller recommends goods to the buyer for a particular purpose: 1) Seller aware of particular use 2) Buyer relies on seller’s knowledge or skill 3) Seller aware of buyer’s reliance 4) Seller recommends goods for particular use

8. Handling Warranties A warranty creates terms in the contract Warranty failure is a potential breach of contract The act of ensuring no warranties is called “disclaiming” Warranty disclaimers often have to meet requirements to be effective

9. Disclaiming Warranties • Merchantability Conspicuous disclaimer with “ ” in it • Fitness for a Particular Purpose Use the words: “” and “”

10. Product Liability • Contractual theory- using warranties (express and implied) within a contract • Negligence theory- was product negligently made or sold? • Strict liability theory – does product fall under the strict liability doctrine

11. Product Liability using Negligence • To prove negligence the part must show a breach of the duty of care. • Proximate cause may limit the number of people in the chain of commerce that can be held liable • Key part is finding a “smoking gun” or other evidence showing fault.

12. PL based on Strict Liability 1. D sold product in defective condition 2. D normally in business of selling product 3. Product unreasonably dangerous* 4. P suffers physical harm through use of product 5. Defective condition is proximate cause 6. No substantial changes to product since sold

13. PL using Strict Liability Theory • Advantages: lots of possible parties to sue, no need to show fault • Disadvantages: has to meet one of three types of “defective products”