Chapter%2026%20%20Warranties%20and%20Other%20Product%20Liability%20Theories

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Chapter 26Warranties and Other Product
Liability Theories

• Twomey, Business Law and the Regulatory
  Environment (14th Ed.)

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Cumulative Theories of Product Liability 26-1
When goods are defective and cause harm or loss,
the person harmed has a claim for product
liability.
Guarantee
Strict Tort Liability
Negligence
Not Mutually Exclusive
Implied Warranty
Fraud
ExpressWarranty
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Warranties 26-2
Type
Creation
Restriction
Disclaimer
Affirmation of fact or promise of
performance (includes samples, models, description
s)
Must be part of the basis of the margin
Cannot make a disclaimer inconsistent with an
express warranty
Express
Implied Warranty of Merchantability
Given in every sale of goods by a merchant (fit
or ordinary purposes)
(1) Must use merchantability or general
disclaimer of as is or with all faults (2) If
written, must be conspicuous
Only given by merchants
Implied Warranty of Fitness for a Particular
Purpose
Seller knows of buyers reliance for a
particular use (buyer is ignorant)
Seller must have knowledge Buyer must rely
(1) Must be in writing (2) Must be
conspicuous (3) Also disclaimed with as is or
with all faults
Does not apply in circumstances where apparent
warranty is not given
Title
Given in every sale
Must say, There is no warranty of title
Magnuson-Moss (Federal Consumer Product Warranty
Law)
Only a consumer product of 15 or more
Must label Full or Limited
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Chapter 26 Summary

• There are five theories to protect parties from
  loss caused by nonconforming goods. They are (1)
  express warranty, (2) implied warranty, (3)
  negligence, (4) fraud, and (5) strict tort
  liability.

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Chapter 26 Summary 2

• Theories of product liability are not mutually
  exclusive. A given set of facts may give rise to
  liability under two or more theories.

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Chapter 26 Summary 3

• The requirement of privity of contract (that is,
  the parties to the sales contract for warranty
  liability) has been widely rejected. The law is
  moving toward the conclusion that persons harmed
  because of an improper product may recover from
  anyone who is in any way responsible.

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Chapter 26 Summary 4

• The requirement of privity has been abolished by
  most states in cases where the plaintiff is a
  member of the buyers family or household or is a
  guest in the buyers home and has sustained
  personal injury because of the product.

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Chapter 26 Summary 5

• Warranties may be express or implied. Both have
  the same effect and operate as though the
  defendant had made an express guarantee.
• A warranty made after a sale does not require
  consideration. It is regarded as a modification
  of the sales contract.

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Chapter 26 Summary 6

• Express warranties are regulated by federal
  statute and the FTC. These warranties must be
  labeled as full or limited warranties and must
  conform to certain standards. A distinction is
  made between a merchant seller and a casual
  seller. A merchant seller is responsible for a
  greater range of warranties.

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Chapter 26 Summary 7

• A seller makes a warranty of good title unless
  such warranty is excluded. Any description,
  sample, or model made part of the basis of the
  bargain creates an express warranty that the
  goods will conform to the description, sample, or
  model. Warranties of fitness for a particular
  purpose and merchantability are implied
  warranties.

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Chapter 26 Summary 8

• Warranties may be disclaimed by agreement of the
  parties provided the disclaimer is not
  unconscionable. A written disclaimer to exclude
  warranties must be conspicuous. To disclaim the
  implied warranty of merchantability, the term
  merchantability or appropriate language, such as
  as is, must be used. Post-sale disclaimers have
  no effect on warranties that arose at the time of
  the sale.

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Chapter 26 Summary 9

• The warranties of merchantability and fitness
  exist under the CISG. However, disclaimers under
  the CISG need not mention merchantability, nor
  must the disclaimer be conspicuous.

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Chapter 26 Summary 10

• The strict tort liability plaintiff must show
  there was a defect in the product at the time it
  left the control of the defendant. No negligence
  need be established on the part of the defendant,
  nor is the plaintiffs contributory negligence a
  defense. The defendant may show that the injured
  party assumed the risk.