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Chapter 20 - Product Liability
CHAPTER 20
PRODUCT LIABILITY
I. OBJECTIVES:
This chapter is designed to acquaint students with the main theories of product liability recovery
and the various collateral problems those theories present. After finishing with the material in
this chapter, the student should: 1) understand the basic theories of product liability recovery; and
2) know how related problems such as damages, the no-privity defense, disclaimers, and defenses
are handled under each theory. The chapter organization reflects this statement of aims. First, the
theories of recovery and their elements are discussed in a buyer-seller context without the
introduction of extraneous issues. Then, the problems that cut across each theory are discussed
one-by-one. (See also the Learning Objectives that appear near the beginning of the chapter.)
II. ANSWERS TO INTRODUCTORY PROBLEM:
A. Negligence and strict liability.
B. Negligence elements: duty; breach of duty; and causation of injury. Strict liability
elements: seller engaged in business of selling product; product both defective and
unreasonably dangerous; injury to user of product. Note that in the second Vioxx
case to go to trial (in the fall of 2005), the jury ruled in favor of Merck and against a
plaintiff who had used Vioxx for only a short period of time. Merck also prevailed in
a number of the next several cases. Eventually, however, as the introductory problem
points out, Merck rethought its strategy and decided to set up a settlement fund rather
than litigating case after case.
C. Punitive damages aren't routinely awarded on top of compensatory damages in
product liability cases. When punitive damages are awarded, however, they
sometimes help make the case more likely to be reported on by the media. In order
for punitive damages to have been assessed against Merck in the Ernst case, the
plaintiff would have had to prove that Merck displayed a conscious disregard for the
safety of Vioxx users (i.e., a different and greater showing than would have been
necessary to sustain an award of compensatory damages on negligence or strict
liability grounds).
D. Perhaps utilitarians, with their focus on the greatest good for the greatest number,
would be less inclined than a rights theorist to say that the manufacturer has an
ethical duty to warn in the circumstances asked about in the introductory problem.
III. SUGGESTIONS FOR LECTURE PREPARATION:
A. Introduction
1. The chapter's introductory paragraph is intended to show that product liability can be a
controversial area and that one's views about the subject often depend on where one sits.
It also shows that product liability is not just a consumer matter.
2. Make sure that students understand what this chapter is about: civil recoveries for
defective goods (and not direct state or federal product safety regulation).
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Chapter 20 - Product Liability
3. The text's description of how social and economic conditions help account for the great
changes that have occurred in the product liability area might be discussed in a
broad-brush fashion, or even assigned as reading. Emphasize, however, that these
changes didn't just happen. Also, emphasize the modern socialization-of-risk strategy
and the problems it has come to create. Note that some observers attribute the "crisis" to
the product liability explosion, whereas others primarily blame it on the insurance
industry.
4. Note that in response to the perceived crisis, some states have begun to limit product
liability recoveries in various ways. The main examples discussed later are caps on
noneconomic losses, limits on punitive damages, statutes of repose, and useful safe life
defenses. Note also the continued failure of reform efforts at the federal level. You
might speculate about the political reasons for this failure, and about recent indications
that the prevailing political winds may be showing signs of shifting.
5. Emphasize how the chapter is organized. The main reason for this organization is to
facilitate theory-by-theory comparisons regarding subjects such as damages, privity,
disclaimers, and the like.
B. Express Warranty
1. Before getting into express warranties, you probably should define the term "warranty,"
state that warranties may be express or implied, and emphasize that in warranty cases the
buyer sues for breach of the seller's express or implied contractual promise.
2. Describe the three ways that a seller--any seller, merchant or not--may create an express
warranty. Give examples of each of the three. (Note that the first and second categories
almost certainly overlap.) Briefly observe that technical words are no longer required,
and no specific intention to make a warranty is needed. You also might note that of the
warranty theories, the express warranty most resembles our ordinary notion of contractual
liability. Here, though, the definition of the term "express" extends beyond promises
made in words, because § 2-313 allows an express warranty to be created by giving a
sample or model. Problems #1 and #2 deal with express warranty creation issues.
3. Discuss the general rule that statements of value, opinion, or sales talk are not express
warranties. Why does this rule exist? The possibilities include: 1) that no reasonable
buyer should rely on such utterances; 2) that such statements make it difficult to
determine whether a breach has occurred or what damages should be awarded; 3) that the
rule is just a concession to the interests of sellers, who use such statements to induce sales
but have no desire to be bound on them; and 4) the flood of litigation that might ensue if
such statements create express warranties. Also, emphasize that the line between such
statements and express warranties is unclear, and discuss the factors courts use to resolve
close cases.
4. Discuss the ambiguous "basis of the bargain" test. Note that by now some courts have
said that it imposes no causation requirement. The other two versions of the test probably
disagree only about the degree of causation they require. The test matters principally in
cases where the buyer read or heard an advertisement or other express statement well
before the sale, and it is thus unclear whether the warranty was a factor in inducing the
sale. Also, the test blocks at least some claims based on warranties made after the sale.
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Chapter 20 - Product Liability
5. The material on multiple express warranties can be deleted by instructors with time
problems. In addition to §§ 2-317(a) and (b), the content of which receive discussion in
the text, § 2-317(c) says that express warranties displace inconsistent implied warranties
other than the implied warranty of fitness for a particular purpose. We have omitted this
part of §2-317 because of the confusion it generates. In particular, it is unclear how this
provision interacts with the implied warranty disclaimer provisions in § 2-316.
6. Royal Indemnity Co. v. Tyco Fire Products, LP (p. 553): The Supreme Court of Virginia
holds that a description of a product in a technical data sheet did not constitute an express
warranty as to future performance.
Points for Discussion: Why was the plaintiff so eager to have the court conclude that
there was an express warranty as to future performance? (Because there was a statute of
limitations problem unless any express warranty in the case extended to future
performance.) Why didn’t the technical data sheet create an express warranty as to future
performance? (Because all it did was describe the sprinkler head and how it worked. It
said nothing about performance into the future. Plus, the court noted that it was not clear
that anything in the data sheet became part of the basis of the bargain. Finally, the court
noted that a separate provision set forth a one-year express warranty against defects in
materials and workmanship. It would be illogical, therefore, to conclude that the data
sheet somehow created a broader future performance warranty of an unlimited duration. )
Could the data sheet have created some sort of express warranty? (Sure. For instance, an
express warranty that the sprinkler heads would have the parts represented, etc. But that’s
different from a warranty of future performance, which wasn’t present here.)
C. Implied Warranty of Merchantability
1. Emphasize that implied warranties are created by operation of law, are not based on the
seller's genuine assent, and are not especially "contractual" in the traditional sense of the
term. Rather, they are imposed to protect buyers, and reflect the decline of nineteenth
century notions of contract.
2. Emphasize that our first implied warranty, the implied warranty of merchantability,
applies only when the seller is a merchant. Also, as the hardware store owner example in
the text suggests, the defendant must be a merchant with respect to goods of the kind at
issue in the case.
3. In defining merchantability, emphasize the key requirement: that the goods be fit for the
ordinary purposes for which such goods are used. This generally boils down to a
"reasonable consumer expectations" test. Stress that such a broad and flexible test is
inevitable given the wide range of products sold today and the wide range of defects they
can present.
4. Emphasize that the goods need not be perfect to be merchantable. Examples: Problem #3
and the Crowe case (commented on below). See also Problem #5.
5. Provide examples of the merchantability standard's application, using scenarios similar to
those in the text. Note that courts sometimes compare the product at issue to other
products in the trade or consider state and federal product safety regulations when trying
to pump some content into the merchantability standard. Problems #4 and #14 involve the
warranty's application in the contaminated food context. For still other implied warranty
of merchantability examples not already noted, see Problems #9 and #10.
Margaret Oakes v. Carrabba’s Italian Grill, LLC, 10 WL 2696631 (D. Nev. 2010)
(p.555). Plaintiff sustained an injury while eating mussels at Carrabba’s in May of 2007.
Plaintiff, while eating the mussels, swallowed a shell fragment and sustained injuries that
required two separate surgeries to remediate. She filed suit for (i) negligence (ii) breach
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Chapter 20 - Product Liability
of the implied warranty of merchantability and (iii) strict liability. Carrabba’s moved for a
summary judgment; the court denied the motion on all three causes of action.
Points for Discussion: The court discussed the summary judgment motion in terms of
each cause of action.
For the negligence claim, the court stated that whether or Carrabba’s was
negligent in removing the shell fragment was a factual question, thereby denying the
summary judgment motion.
The breach of implied warranty of merchantability was analyzed under three
potential tests: (a) the foreign natural test, (b) the consumer’s expectation test, and (c) the
hybrid test. The foreign natural test determines what is “merchantable” by holding a
restaurant liable for serving food that contains a substance foreign to the type of food. For
the consumer’s expectation test, if it is unreasonable for the consumer to expect the
substance to be in the dish, the restaurant will be held liable. Lastly, the hybrid test
incorporates both the foreign natural and consumer’s expectation tests: if the substance is
foreign to the food served, then the trier of fact must subsequently decide whether the
presence of the substance (i) could be reasonably expected by the average consumer and
(ii) the substance rendered the food unfit for human consumption. The court held that,
regardless of the test used, the presence of a shell fragment which allegedly made the dish
unmerchantable is an issue of fact, thereby denying the summary judgment motion.
The prima facie case for strict liability is that the injuries were sustained due to a
defect in the product and that defect existed when the product left the defendant’s control.
The tests for “defect” were identical to the three proposed for the implied warranty of
merchantability. Therefore, the question was that of fact, which vitiated the summary
judgment motion.
D. Implied Warranty of Fitness for a Particular Purpose
1. Discuss §2-315's requirements. Examples: Problems #5 and #10.
2. Unlike the implied warranty of merchantability, any seller may make this implied
warranty if the necessary requirements are met. Also, note that the two implied
warranties can overlap in situations where the goods are fit neither for the buyer's
particular purpose nor for their ordinary purpose. Sleeping bags (buyer requests bag be
good down to minus 20 degrees) and hiking boots (novice mountain climber requests
suitable boots) are other possible examples to complement the hammock example in the
text.
3. Moss v. Batesville Casket Co. (p. 557): The Mississippi Supreme Court affirmed the
lower court's judgment that the partial decomposition of an interred casket did not violate
the implied warranties of merchantability and fitness for a particular purpose.
Points for Discussion: Suppose that the bottom of the casket had fallen out as it was
being exhumed, and that plaintiffs had seen the decomposed body hit the ground. Would
that give rise to a better claim? No. The parties still would not have established any
particular purpose to be fulfilled, and the ordinary purpose would still be for the casket to
hold together up to the point of burial. As there was no contractual obligation to keep the
casket together when it was exhumed two years later, the additional emotional trauma to
plaintiffs would have been beside the point. Suppose, though, plaintiffs had sued on a
negligent design theory. The result is probably the same, but why? One argument, which
tracks the warranty argument pretty closely, is that the exhumation of the casket was
unforeseeable, and that the casket company therefore no longer owed a duty at that point.
But given that exhumations are not so uncommon, non-foreseeability is arguable.
Another argument for Batesville Casket is that even if the exhumation were foreseeable,
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Chapter 20 - Product Liability
the benefits of a less-expensive design would have outweighed the risks of decomposition
upon exhumation. Finally, Batesville Casket could argue that the injury to plaintiffs was
merely emotional, and that the requisite “impact” required for an emotional distress claim
had not occurred (to which plaintiffs could argue, spuriously, that they had been
“bystanders” to the “injury” of a third party; see Atlantic Coast Airlines v. Cook, a
Chapter 7 text case).
E. Negligence
1. Begin by listing all the possible ways in which there may have been a breach of duty for
purposes of a product liability claim based on negligence. Negligence per se is also a
possibility if the seller violates, for instance, a product safety or pure food statute or
regulation.
2. Regarding the manufacturer's improper construction or inspection, you might note that
the product's failure to conform to the manufacturer's own specifications will often be
useful to plaintiffs.
3. Go through the general rules regarding the middleman's duty to inspect. Note how
burdensome to retailers a tougher duty standard might be in this context. Note the more
stringent duty standard to which those who prepare, install, or repair goods are subject.
Often, the relevant duty is a duty to spot those defects that would be reasonably apparent
given the preparation, installation, or repair work the seller actually does. Example: a
new car dealer might be expected to spot a brake problem that is reasonably apparent
from the "dealer prep" dealers supposedly perform, but not to spot a serious latent defect
in the brakes. (By the way, those who sell used goods are usually subject to a tougher
test--often, a general duty to spot reasonably apparent defects. For an example, see Wilke
v. Woodhouse Ford, Inc., a text case discussed in the later section dealing with
disclaimers. )
4. Failure-to-warn cases present many and various issues, issues that can only be discussed
summarily in a text such as this one. Tell students that: 1) the area is complex; 2) it is
important to distinguish between the question of whether a warning is required and the
question regarding the kind of warning necessary; 3) courts consider various factors in
these cases; and 4) this discussion generally carries over into the 402A context. Discuss
the factors considered in failure-to-warn cases.
5. Most of what was said above regarding failure-to-warn cases also applies to design defect
cases. Note that such cases often involve a more or less conscious cost-benefit analysis.
Problems #7, #8, and #10 are examples. For a case in which the plaintiff unsuccessfully
brought negligent failure-to-warn and negligent design claims, see Problem #6. In
addressing that case, ask whether the court’s analysis might have been different if the
injured party had been a small child. You might note, also, that the safety feature whose
absence gave rise to the plaintiff’s unsuccessful complaint in that case is now a common
feature in automobiles. Finally, see the later discussion of Green, a text case that appears
in the section on comparative fault in the product liability setting. That case includes
consideration of “crashworthiness” issues in regard to motor vehicle design.
6. Wilson v. Hewlett-Packard Co., 668 F.3d 1136 (9th Cir. 2012) (p. 560). Through a myriad
of amended complaints within the district court and appellate court, the Plaintiffs filed a
class action lawsuit alleging that HP concealed a design defect in its laptops that occurred
after the expiration of the warranty and violated California’s Consumers Legal Remedies
Act (“CLRA”) and Unfair Competition Law (“UCL”). The district court denied the
claims due to Plaintiff’s failure to sufficiently allege HP’s knowledge. The appellate court
affirmed.
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Chapter 20 - Product Liability
Points for Discussion: The UCL makes it unlawful for a person to engage in “unfair
competition,” which is defined as “any unlawful, unfair, or fraudulent business practice . .
. .” Plaintiffs argue that HP’s omission [i.e., failure to warn] of the potentiality of laptop
failure was common law fraud. Although Plaintiffs did not address the unfair or
fraudulent prongs, the court went on to address them. The CLRA prohibits persons from
misrepresenting the quality or standard of the products.
The court applied the duty to disclose in the context of both the UCL and CLRA.
The court stated that there is a general reluctance to require employer’s to disclose
beyond the statements made in the express warranty’s and stated that the policies
underlying this tendency uphold the viability of express warranty’s. That, if courts
required broad disclosure by company’s, express warranty’s would no longer have any
effect, saying “[u]nder a contrary rule . . . the ‘[f]ailure of a product to last forever would
become a “defect” . . . .’”
The court stated that because Plaintiffs were alleging a concealed defect, that
they were required to allege that the defect caused an unreasonable hazard. The court held
that the claim lacked a requisite causal nexus between the alleged defect and the
unreasonable hazard. Furthermore, the plaintiffs failed to prove that HP had knowledge of
the defect. Therefore, the appellate court affirmed the judgment of the district court.
7. See Problems #8 and #9, which address both negligent design and strict liability issues.
F. Strict Liability
1. Although there are other versions of strict liability in the product liability area, our
discussion is mainly limited to § 402A.
2. Discuss the policies underlying the rise of strict liability in the product liability context.
You might refer back to the general discussion at the beginning of the chapter.
3. Emphasize the obvious point that § 402A is a strict liability theory and what this means:
no need to prove a breach of duty or some other kind of fault.
4. Stress that 402A applies only to merchant-like sellers regularly selling goods of the kind
at issue in the case.
5. Note that 402A's "defective condition" requirement resembles the general test for
non-merchantability. Also note how 402A's requirement of unreasonably dangerousness
narrows 402A liability (as compared with, for example, implied warranty of
merchantability liability).
6. Note the text's brief discussion of comment k to §402A. Add that a warning provided by
a "learned intermediary" such as a physician normally will satisfy comment k.
7. Mention the problem 402A poses for middlemen, referring back to the negligence rules
governing the middleman's duty to inspect, and also note that some states have addressed
the problem. One possibility is to let the middleman off the hook in cases where the
manufacturer is subject to service of process in the plaintiff's home state and any
judgment against the manufacturer would be reasonably certain of being satisfied.
8. Emphasize that failure-to-warn and design defect cases can be brought under 402A and
that the factors considered in those cases often resemble those considered in negligence
cases (despite 402A's technical status as a strict liability provision). Examples: Problems
#8, #9, and #10.
9. Note the European Union’s use of a strict liability approach in appropriate cases. See the
Global Business Environment box at p. 565.
G. The Restatement (Third)
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Chapter 20 - Product Liability
1. How widely has the new Restatement been adopted? Our perception is that even though
it is quoted quite a bit and courts often decide in accordance with its provisions, relatively
few courts have come out and said (in effect): "we really like this new Restatement
(Third) rule and we specifically adopt it in this state, just as we did for 402A." It seems
fairly likely that courts will increasingly fold Restatement (Third) concepts into the
existing negligence and strict liability models, rather than announce a formal scrapping of
the old labels. The Branham case, discussed below, furnishes an example. What should
you do with the new Restatement? You may want to assign it as reading material, with
little in-class coverage, or you may wish to treat it in class just as you would negligence
and 402A.
3. The Restatement (Third) can't be regarded as solely a "strict liability" body of rules. For
example, its focus on reasonableness and foreseeability in design defect and failure-to-
warn cases comes close to calling for the use of negligence principles (even though the
Restatement (Third)’s rules do not use the term “negligence”).
4. Go through the new Restatement's basic rule (section 1). Note that it applies only to
merchant-type sellers and that it drops 402A's requirement of unreasonable
dangerousness. The latter change, however, probably only matters in manufacturing
defect cases.
5. Section 2 of the new Restatement fleshes out section 1 by defining three different kinds
of defects. Section 2’s rules for manufacturing defects seem to contemplate what is
basically a strict liability approach, but without the requirement of unreasonable
dangerousness. In failure-to-warn cases, foreseeable risks of harm must be taken into
account when liability (or lack thereof) is determined. Such cases therefore may, under
section 2, resemble negligence cases. Section 2 requires that in design defect cases, the
plaintiff must show that a reasonable alternative design was possible at the time of the
sale. What is a reasonable design? This question (and the question of the product's
safety without such a design) requires consideration of many of the same factors
discussed earlier.
6. Branham v. Ford Motor Co. (p. 567): The Supreme Court of South Carolina holds that
the risk-utility test is the controlling one in defective design cases, whether brought on
negligence grounds or on strict liability (402A) grounds. In so holding, the court borrows
from the approach set forth in the Restatement (Third). The court also holds that post-
distribution evidence should not have been admitted at the trial, because the focus in
design defect cases is on information known as of the time the product was released into
the stream of commerce.
Points for Discussion: Have a student summarize the basic facts of this dispute over the
design of the Bronco II. Note that the edited version of the court’s opinion includes
extensive discussion of the expert testimony that was offered. A considerable amount of
detail was included in the edited version in order to give students a feel for what is
actually presented at trial in product liability cases. In concluding that the risk-utility test
controls in defective design cases, what test did the court reject? (The reasonable
expectations of the consumer test, which the court finds far less helpful than the risk-
utility test.) Why does the court adopt the risk-utility test? (Its balancing of relevant
considerations and its requirement that a reasonable alternative design be shown do a
better job of getting to the heart of design defect cases.) What else influences the court in
that regard? (The Restatement(Third) approach, from which the court borrows even
though it is deciding the case under 402A and under negligence principles. Thus, the
court doesn’t reject 402A in favor of the Restatement (Third). Rather, the court uses the
Restatement (Third) as a way of informing the 402A analysis.) Finally, ask the students
why the court concludes that post-distribution evidence should not have been allowed.
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Chapter 20 - Product Liability
7. The Ethics in Action box at p. 572 addresses various legal issues that arise in lawsuits
against tobacco companies, as well as ethical issues that may attend the production and
sale of products that may harm users’ health. The questions set forth in that box should
provide fodder for spirited class discussion.
H. Other Theories of Recovery. The material in this section is optional and can probably be
omitted by instructors with limited time. Note that except for one reference to Magnuson-
Moss, these theories are not mentioned in the remainder of the chapter. Other aspects of
Magnuson-Moss are discussed in Chapter 48. The misrepresentation material comes from the
Restatement (Third). Because of the subject's inherent complexity, uncertainty, and
susceptibility to change, the "industry-wide liability" discussion was deliberately left very
general.
I. Timing Problems.
1. Briefly explain the Code and tort statutes of limitations and how they operate. State why
the tort statute of limitations is likely to be more advantageous for the plaintiff. Also,
UCC § 2-725 states that the statute begins to run when the defect is discovered or should
have been discovered if the warranty explicitly extends to future performance of the
goods, and discovery of the breach must await the time of such performance. It isn't clear
just when this provision applies; perhaps the giving of a "lifetime" warranty is an
example.
2. Briefly run through the various other timing limitations noted in the text. For instructors
with time problems, this is an obvious place to cut.
J. Damages
1. In its discussion of Code damages, this section necessarily anticipates the privity
discussion that follows shortly. Of course, privity was introduced at a general level
earlier in the chapter.
2. Basis of the Bargain Damages
a. Note that these involve the "lost value" the plaintiff did not receive because of the
defect, and that their aim is to put the plaintiff in the economic position he would
have occupied had the product not been defective. Which product liability theories
do and don’t permit recovery for such economic losses? That question lies at the
decision in Giddings & Lewis, a text case discussed below.
b. Identify the theories under which such damages are recoverable. Note that they
usually are not obtainable in Code cases outside privity, but also note the express
warranty exception stated in the text. Note also that damages questions will recur in
the next section's discussion of UCC § 2-318.
c. Giddings & Lewis, Inc. v. Industrial Risk Insurers (p. 574): The Supreme Court of
Kentucky holds that the economic loss rule bars recovery of damages for harm to the
defective product itself if the plaintiff is using on a tort (negligence or strict liability)
theory. Such damages are recoverable only on a breach of warranty theory. In
product liability cases brought on a tort theory, the relevant damages are for personal
injury and property damage (meaning damage to other property, as opposed to
damage to the malfunctioning goods themselves).
Points for Discussion: Have a student summarize the basic facts. Note what we have
here: a defective product (the system) that damages itself when it malfunctions,
making costly repairs necessary. As what damages the plaintiff seeks and doesn’t
seek (economic loss damages to allow for the fact that the precut was defective, as
opposed to personal injury damages or damages for harm to other property). Why
does the plaintiff hope to convince the court that economic loss damages should be
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Chapter 20 - Product Liability
allowed even when the case is brought on a tort theory? (Because the statute of
limitations on breach of warranty claims has expired. If restricted to warranty claims,
the plaintiff will therefore lose.) Why does the court adopt the economic loss rule,
which holds that such damages aren’t recoverable under tort theories? (Because tort
theories are designed for other sorts of damages; because economic loss damages
typically arise out of a contract; because the warranty theories are contract-based
theories designed to deal with economic loss; because allowing economic loss
recoveries under tort theories would undermine contract/warranty principles; and
because most jurisdictions have adopted the economic loss rule.
3. Consequential Damages
a. Describe the various kinds of consequential damages, all of which are somewhat
more remote consequences of the defect than basis of the bargain damages. Note that
noneconomic loss is here considered an aspect of personal injury. Note also that
some states are limiting noneconomic loss recoveries by capping them.
b. Following the text, state the theories under which each kind of consequential
damages is recoverable. Note that under the Code the nonprivity plaintiff is likely to
recover for personal injury, fairly likely to recover for property damage, and very
unlikely to recover for indirect economic loss. Also note, however, the possibility
that a plaintiff lacking privity may not be able to recover anything under the UCC,
even if she suffered personal injury. This possibility exists because of the language
of § 2-318 and the factors stated in the next section. Indirect economic loss
recoveries are also unlikely in negligence and strict liability, although personal injury
and property damage normally are recoverable under these theories.
4. Punitive Damages
a. Describe punitive damages and note their two main rationales: deterrence and the
simple desire to enact retributive punishment on defendants whose behavior was
especially outrageous. Note the general tests used to determine their availability.
The states, of course, have been busy regulating punitive damages over the past two
decades. The details are largely beyond the scope of this text.
b. Identify the theories under which punitive damages are awarded--mainly, of course,
tort theories.
5. You might conclude by noting that potentially all the types of damages discussed could
be present in one claim. For example: after buying some defective chemicals for use in
his business, the owner of the business is injured and suffers pain and suffering after the
chemicals explode, watches the explosion cause damage to property used in the business,
and loses profits because the business is shut down for a time. Of course, punitive
damages might also be recoverable under the conditions stated in the text.
K. The No-Privity Defense
1. In discussing this material, it is probably useful to refer to an illustrative distributional
chain. Be sure to include both vertical and horizontal parties.
2. Begin by restating the traditional defense and noting its gradual demise. You also may
want to refer back to the beginning of the chapter and suggest the social and economic
factors that help account for the demise.
3. Note that the traditional defense has no vitality in 402A and (because reasonable
foreseeability tends to be broadly construed) negligence cases. The Restatement (Third)
seems not to have a privity provision, and its causation rule just kicks us to general tort
principles, which probably means reasonable foreseeability.
4. Privity, however, continues to be a problem under the UCC.
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Chapter 20 - Product Liability
a. Note that § 2-318 is supposedly the controlling provision and (if you have time) work
through its three versions.
b. Emphasize, however, that for the reasons stated in the text, it is doubtful how often
the literal language of 2-318 controls.
c. Next, suggest that out of the confusion generated by the many decisions on the
subject, three factors help explain the courts' results: (1) the foreseeability that harm
will result from the particular defect (2-318 says much the same thing); (2) the status
of the plaintiff (consumers tend to be protected and alternatives A and B only protect
natural persons); and (3) the type of damages sought. Regarding the last factor, the
hierarchy is: (1) personal injury, (2) property damage, (3) basis of the bargain
damages, and (4) indirect economic loss. As noted above, however, the other two
factors may prevent any recovery at all in some cases.
Then, you might use some simple examples of polar cases to illustrate how these
factors can work: e.g., large corporation suffering unforeseeable indirect economic
loss versus consumer suffering highly foreseeable personal injury. See Problem #15.
d. Finally, you might note that as the damages discussion suggests, the plaintiff may be
more likely to recover outside privity in express warranty cases of the types described
in the text. But this whole area is sufficiently confusing to make this additional detail
of questionable usefulness.
e. Jamison v. Summer Infant (USA), INC, 778 F.Supp.2d 900 (N.D. Ill. 2011) (p. 578).
Plaintiffs alleged a violation of the Magnuson–Moss Warranty Act through a breach
of implied warranty of merchantability due to the fact that her baby monitor was
broadcasting live video from her child’s bedroom.
Points for Discussion: The Plaintiffs first argued that the monitors were not fit for
their ordinary purpose, thereby rendering them unmerchantable. To be merchantable,
the goods must “ ‘pass without objection in the trade under the contract description’;
‘[be] fit for the ordinary purposes for which such goods are used’; and ‘conform to
the promises or affirmations of fact made on the container or label if any.’” The court
held that plaintiffs’ claim was sufficient, thereby vitiating a 12(b)(6) motion.
The Defendants correctly argued that the plaintiffs lacked the requisite
privity. Although state law is applied under the Magnuson–Moss Act, and although
Illinois allows broad application of privity concepts, the court held that the plaintiffs
were not privy to Summer Infant. The court held that although Summer Infant made
an express warranty, it was not the immediate seller to the plaintiffs. Furthermore, the
court rejected an agency argument, which attempted to create privity through an
agency relationship between Toys R’ Us and Summer Infant.
L. Disclaimers and Remedy Limitations
1. First, distinguish between disclaimers and remedy limitations. Note that this distinction
may make a difference in Code cases because different Code sections govern each type of
limitation. The court in Problem #11, however, wasn't much concerned with this
distinction in making its unconscionability determination.
2. Discuss the policies for and against the enforcement of disclaimers and remedy
limitations. The point that products sold with such clauses are apt to be cheaper than
other goods can be made by saying that the choice is between products sold with or
without an "insurance policy" (the recovery right the disclaimer could block). Suggest
that the arguments for enforcing disclaimers and limitations are stronger where genuine
bargaining and genuine buyer choice occur, and that these are generally absent in
consumer cases. Ask the class how often they try to read disclaimers or bargain over
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Chapter 20 - Product Liability
them. Does anybody do this?
3. Implied Warranty Disclaimers
a. Spend some time on the basic (and usually fairly mechanical) tests set by UCC §§
2-316(2),(3), and (4). Note that §§ 2-316(3) and (4) basically supplement §2-316(2)
by providing additional ways to disclaim.
b. Then note that, taken as a whole, these tests seem to make it fairly easy for sellers to
disclaim implied warranty liability. But then emphasize that this picture is
misleading, because: 1) courts sometimes declare implied warranty disclaimers
unconscionable (especially in consumer cases involving personal injury), and 2) the
Magnuson-Moss Act generally restricts implied warranty disclaimers in consumer
cases where the seller has given a written warranty. On the unconscionability point,
everything depends on the facts of the case, but the generalizations in the text should
hold up much of the time. (Chapter 15 provides a bit more detail on the factors courts
consider.) See, however, Wilke (a text case discussed below).
c. The Magnuson-Moss Act severely limits the enforceability of implied warranty
disclaimers where the seller of consumer goods to a consumer gives a written
warranty on a consumer product.
d. Problem #11 provides a general review of much of the material regarding implied
warranty disclaimers.
e. Wilke v. Woodhouse Ford, Inc. (p. 581): The Supreme Court of Nebraska holds that
an implied warranty of merchantability disclaimer that is consistent with the statutory
language set forth in the UCC is enforceable does not offend public policy, even in a
case involving a safety defect and personal injury to a plaintiff. However, the court
also holds that used car dealers have a duty to conduct a reasonable inspection of
used vehicles they offer for sale (even on an “as-is” basis) and that such dealers may
face negligent inspection liability in appropriate cases
Points for Discussion: Ask a student to summarize the basic facts of this case in
which one of the plaintiffs sustains significant physical injuries very shortly after the
plaintiffs purchased a used car that, unbeknownst to them, had a defective gearshift.
What are the legal theories on which the plaintiffs seek to rely? What is the key
obstacle to their ability to win a breach of implied warranty of merchantability claim
against the used car dealer? (The disclaimer.) Did the disclaimer satisfy the relevant
UCC language? (Yes. ) How so? (Said “as is” and did so conspicuously. Also said
no implied warranties and specifically mentioned merchantability.) What do the
plaintiffs argue in response? (That disclaimer offends public policy in case involving
safety defect and personal injury—effectively an argument that it is unconscionable.)
Why does the court reject this argument? Statutory language clear. Disclaimer here
complied with it. No safety exception in the statutory language. Recognizing
plaintiffs’ argument could make statutory language meaningless in too many cases.)
Was the court also thinking it had something else in its back pocket to give to the
plaintiffs? (Maybe so—the duty to inspect and the possibility of a negligent
inspection cause of action.) Why does the court conclude that used car dealers have a
duty to conduct a reasonable inspection of the vehicles they sell, even on an “as-is”
basis? (Public safety concerns; dealer in better position than buyer to assess many
defects; buyers may logically assume dealer has at least looked vehicle over for
safety problems, etc.) What does the duty to inspect contemplate? (Reasonable
inspection for patent defects that should be apparent in the exercise of reasonable
care.) What doesn’t the duty require? (Discovery of latent defects or ones that would
require disassembly of vehicle.)
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Chapter 20 - Product Liability
4. Discuss the rules for disclaimers of express warranty, negligence, 402A, and Restatement
(Third) liability. In each case, disclaimers frequently are ineffective. Wilke so indicates.
In addition, Wilke makes clear that an effective disclaimer of the implied warranty of
merchantability has no effect on any negligence claim that might be available.
5. Regarding remedy limitations:
a. Note that in negligence and 402A cases, remedy limitations should be effective only
when a disclaimer would be effective.
b. Discuss UCC § 2-719(3), which applies in express and implied warranty cases. Note
that some courts have incorrectly used 2-719(3) as a basis for knocking out an
implied warranty disclaimer in personal injury cases involving ordinary consumers.
The reasons for this "mistake" apparently are sympathy for the consumer and a belief
(now largely rejected by the courts) that § 2-302 can't apply to a valid 2-316
disclaimer. Stress that courts now are increasingly prone to deal with such situations
by simply declaring the disclaimer unconscionable under section 2-302.
c. Because Problem #11 involves a remedy limitation, you might want to discuss it here
rather than earlier, even though the court didn’t discuss § 2-719(3). In this context,
though, the omission probably made little or no difference. Is there any reason to
treat these two kinds of clauses differently for unconscionability purposes?
d. For discussion of disclaimers and remedy limitations in “shrinkwrap” and
“clickwrap” contexts, see the Cyberlaw in Action box at p. 586.
M. Defenses
1. Begin by noting that many of the doctrines discussed earlier can be regarded as defenses
to a product liability claim. Here, though, we are primarily concerned with defenses that
involve the plaintiff's behavior. Note also that with the introduction of comparative
negligence and comparative fault, this area of the law has changed considerably during
recent decades. Note that we don't try to discuss state laws apportioning fault among
more than two parties, or the Restatement (Third) rule on that subject.
2. The Traditional Scheme
a. Discuss product misuse, assumption of risk, and contributory negligence, and give
examples of each.
b. Note that these defenses overlap in that the same behavior can give rise to all three
defenses. Contributory negligence and assumption of risk can overlap where the
plaintiff knowingly and voluntarily assumes an unreasonable risk.
c. Point out that assumption of risk and product misuse are across-the-board defenses,
whereas contributory negligence has the more limited application described in the
text.
3. The Emergence of Comparative Principles
a. Probably the best way to introduce this subject is to note the problems caused by the
all-or-nothing scheme of recovery the traditional defenses create, and the way
comparative negligence arose for similar reasons in the negligence context. Then,
describe how comparative principles operate.
b. Note the uncertainties that attend this area. First, do all the states that have adopted
comparative negligence really adopt a true comparative fault approach in the sense
that they make all forms of plaintiff fault part of the percentage calculation? Some
state statutes are explicit about this, but some aren't. In any event, a significant
number of states have adopted a statute specifically referring to comparative fault or
comparative responsibility. Second, comparative principles may operate in either the
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Chapter 20 - Product Liability
"pure" or the "mixed" fashions described in Chapter 7. Third, it is not always clear
whether comparative principles apply to all theories of recovery or all types of
damage claims.
c. Comparative fault examples: Green (discussed below); Problem #13.
d. Green v. Ford Motor Co. (p. 587): The Supreme Court of Indiana holds that in a case
in which the plaintiff alleges that the defendant motor vehicle manufacturer
negligently failed to provide a “crashworthy” vehicle, Indiana’s comparative fault
law requires that evidence of the plaintiff’s own fault, which allegedly contributed to
either the causation of the accident or to the severity of his injuries, is to be compared
against the defendant’s degree of fault.
Points for Discussion: Ask what the crashworthiness doctrine contemplates and why
many jurisdictions have recognized it. (Because it is foreseeable that the vehicles
they produce may become involved in accidents, manufacturers should be expected
to take reasonable design steps to lessen the severity of injuries in those foreseeable
crashes.) Note that crashworthiness claims are really enhanced injury claims because
the plaintiffs who bring them are not arguing that the manufacturer’s defective design
caused the accident. Rather, the plaintiffs are arguing that once the accident
occurred, they experienced more severe injuries than they otherwise would have
suffered if the manufacturer had adopted a crashworthy design. In this case, how dis
the plaintiff’s own behavior enter in? (He may have been negligent in operating the
vehicle. Thus, he may have caused, or helped to cause, the accident. Obviously, he
would not have been injured at all, let alone more severely than he supposedly should
have been, if the accident hadn’t occurred.) Why does the court reject the plaintiff’s
argument that his behavior shouldn’t be compared against that of the defendant?
(Because the Indiana statute set forth a clear policy of comparing degrees of fault as
between plaintiffs and defendants, and was broad enough to contemplate, in
crashworthiness cases, plaintiffs’ behavior that either helped to cause the collision or
otherwise helped to increase the severity of the injuries experienced.)
4. Preemption and Regulatory Compliance
a. This was a new section added for the 14th edition. The 15th and 16th editions then
expanded the section with discussion of other relevant Supreme Court decisions (Riegel,
Wyeth, and Pliva; see below). the comparative merits of the preemption and regulatory
compliance defenses. Preemption, importantly, is conclusive: a plaintiff’s claim ends
completely if it is preempted. But whether preemption applies depends on the relevant
statute and its history. The regulatory compliance defense, meanwhile, is always
available to a compliant manufacturer. However, it is less likely to end a claim, and more
likely simply to weigh against it.
b. Note the text’s discussion of Levine, in which the Supreme Court held that FDA approval
of a drug does not automatically bar negligence claims based on defective design.
Emphasize how the statutory sections at issue in Riegel, the text case discussed below,
differed from those at issue in Levine. (There was a preemption provision in the former,
but not in the latter.) But then, as the text notes, the Court decided Pliva. Was Pliva, as
critics have alleged, simply an attempt to cut back on the effect of Levine?
c. Riegel v. Medtronic, Inc. (p. 590): The Supreme Court affirmed the lower courts'
holdings that the preemption provisions in the Medical Device Amendments (MDA) to
the Food, Drug, and Cosmetic Act barred state common-law product liability claims
regarding medical devices.
Points for Discussion: Justice Scalia says Congress would not have given a state jury
greater power than a state legislature or regulatory authority. But is that really where the
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Chapter 20 - Product Liability
power lies when a jury grants common-law relief? Isn't the jury just the fact-finder?
After all, the jury doesn't make rules---courts do, assuming the common law controls the
case. And is it really true that common law disrupts the federal regulatory scheme in the
same way that state regulation would? Common law behaves differently from state
regulations. State regulations can establish highly specific “across-the-board”
requirements for market clearance; common law, on the other hand, merely applies a set
of highly generalized concepts borrowed from general tort law---foreseeability,
unreasonableness, and so on. It is easy to imagine the state of New York adopting its own
FDA and effectively making policy for the whole country, but harder to imagine New
York hijacking the country by means of its common law.
IV. RECOMMENDED REFERENCES:
A. PROSSER AND KEETON ON THE LAW OF TORTS.
B. J. WHITE & R. SUMMERS, UNIFORM COMMERCIAL CODE: SALES.
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