Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 33 Product Liability
LESSON OVERVIEW
While the previous chapter dealt extensively with employment law, Chapter 33 deals with the concept
of product liability. This chapter describes product liability and the tort upon which it is based,
describes the several bases of claims often used against manufacturers and sellers in product liability
lawsuits, identifies the kinds of businesses that can be charged with product liability, and explains the
legal reasoning behind the concept of strict liability. Additionally, the chapter elucidates three ways in
which the federal and state governments reduce unreasonable risk of injury and death associated with
consumer products. The chapter also summarizes the testing procedure required by the Food and Drug
Administration in order to gain approval to sell a drug, giving examples of consumer products
regulated by the Consumer Product Safety Commission. Furthermore, the chapter describes how
federal and state statutes regulate tobacco products, explaining some of the provisions of the Master
Settlement Agreement. Students will also learn how the National Highway Traffic Safety
Administration is responsible for the safety of automobiles sold in the United States. Finally, students’
understanding of the topics is evaluated through objective-type questions, discussion questions, and
case scenarios. Students are encouraged to conduct their own research through the use of the Internet
and other sources.
CHAPTER OUTLINE
A. PRODUCT LIABILITY AND TORT LAW (p. 552)
B. BASES FOR PRODUCT LIABILITY INJURY CLAIMS (pp. 552-553)
1. Product Flaw (p. 552)
2. Failure to Warn (p. 553)
3. Design Defect (p. 553)
C. WHO CAN BE HELD LIABLE FOR PRODUCT-RELATED INJURIES? (p. 553)
D. STRICT LIABILITY (p. 554)
E. PRODUCT SAFETY (p. 554-555)
F. DRUGS (p. 555)
G. CONSUMER PRODUCTS (p. 556)
H. TOBACCO (p. 557)
I. AUTOMOBILES (pp. 557-558)
J. CHAPTER SUMMARY (pp. 558-559)
K. CHAPTER ASSESSMENT (pp. 559-565)
1. Matching Legal Terms (pp. 559-560)
2. True/False Quiz (p. 560-561)
3. Discussion Questions (p. 561)
4. Thinking Critically About the Law (p. 562)
5. Case Questions (pp. 562-563)
6. Case Analysis (pp. 563-565)
7. Legal Research (p. 565)
KEY TERMS
Key terms are listed at the beginning of each chapter, posted in the student textbook margins, and
placed in bold in the copy. They are listed here for your quick reference.
§ product liability (p. 552)
§ product flaw (p. 552)
§ failure to warn (p. 553)
§ design defect (p. 553)
§ strict liability (p. 554)
§ Food and Drug Administration (FDA) (p. 555)
§ Consumer Product Safety Commission (CPSC) (p. 556)
§ Master Settlement Agreement (p. 557)
§ National Highway Traffic Safety Administration (NHTSA) (p. 557)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 33 when you begin the study of the chapter and discuss each Learning
Outcomes. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 33. The corresponding
text page numbers and PPT slides are listed next to each outcome. These slides should be used to
reinforce the main points of the lecture.
After completing this chapter, the students will be able to:
1. Describe product liability and the tort upon which it is based. (p. 552, PPT slides 2-3)
2. Discuss several bases of claims often used against manufacturers and sellers in product liability
lawsuits. (pp. 552-553, PPT slides 4-6)
3. Identify the kinds of businesses that can be charged with product liability. (p. 553, PPT slide 7)
4. Explain the legal reasoning behind the concept of strict liability. (p. 554, PPT slides 8-10)
5. Describe three ways in which the federal and state governments reduce unreasonable risk of
injury and death associated with consumer products. (pp. 554-555, PPT slide 11)
6. Summarize the testing procedure required by the Food and Drug Administration in order to gain
approval to sell a drug. (p. 555, PPT slides 12-14)
7. Identify examples of consumer products regulated by the Consumer Product Safety Commission.
(p. 556, PPT slides 15-16)
8. Describe how federal and state statutes regulate tobacco products, and explain some provisions of
the Master Settlement Agreement. (p. 557, PPT slides 17-20)
9. Describe how the National Highway Traffic Safety Administration is responsible for the safety of
automobiles sold in the United States. (pp. 557-558, PPT slides 21-22)
LECTURE OUTLINE
A. PRODUCT LIABILITY AND TORT LAW
The liability of a manufacturer or seller for injury to purchasers, users, and third parties is known as
product liability.
B. BASES FOR PRODUCT LIABILITY INJURY CLAIMS
Certain product characteristics often become the bases of claims against manufacturers and sellers.
1. Product Flaw
A product flaw is an abnormality or a condition that was not intended and that makes a
product more dangerous than it would have been had it been as intended.
2. Failure to Warn
Manufacturers and sellers have a duty to advise purchasers and users of dangers inherent
in a product. A failure to warn is a dereliction of this duty.
3. Design Defect
Manufacturers have a duty to design products in a manner that is not negligent. A design
defect is a fault in a product that creates a hazardous condition that causes injury. A
design defect is a hazardous condition that exists throughout an entire product line, as
opposed to a product flaw, which is an abnormality or condition in a single unit of the
product.
C. WHO CAN BE HELD LIABLE FOR PRODUCT-RELATED INJURIES?
In a product liability case, the most obvious target of an injured party is the manufacturer of the
defective product. However, others in the distribution channel also may be found liable, including
retailers, wholesalers, manufacturers of component parts, assemblers of products, endorsers of
products, licensors of trademarks, and licensors of patents.
D. STRICT LIABILITY
Courts in some states have held that it should not be necessary for an injured person to prove
negligence on the part of the manufacturer. They have expressed the notion that the producer is in a
better position than the user of a product to prevent injuries, because the company has the opportunity
and expertise to design safe products. Also, they believe that the manufacturer is in a position to pay for
the damages suffered by a user of a product, regardless of whether the firm was in fact negligent,
because the manufacturer can buy insurance that pays the injured party. The company can then pass on
the cost of insurance to all users of the product. This legal reasoning has given rise to the doctrine of
strict liability, that is, liability without the necessity of proving fault.
E. PRODUCT SAFETY
The federal and state governments enact numerous statutes and rules to reduce unreasonable risk of
injury and death associated with consumer products. This is achieved by governments’ providing safety
information to the public, developing voluntary and mandatory standards, and pursuing recalls of
dangerous products.
F. DRUGS
The federal agency responsible for the safety of food and drugs sold in the United States is the Food
and Drug Administration (FDA). The FDA requires that all drugs sold be thoroughly tested to ensure
that they are both safe and effective.
G. CONSUMER PRODUCTS
The federal agency responsible for the safety of consumer products sold in the United States is the
Consumer Product Safety Commission (CPSC). Examples of products that are regulated by CPSC
include clothing, hazardous household cleaners and substances, electronic devices, appliances,
furnishings, building materials, toys, and other juvenile products.
H. TOBACCO
Numerous federal and state statutes strictly regulate cigarettes and other tobacco products. Federal law
disallows advertising of these products on television and radio, and FTC regulations require disclosure
of tar and nicotine levels on cigarette packages. In 1997, the major cigarette manufacturers in the
United States entered into a contract, referred to as the Master Settlement Agreement, in which the
companies agreed not to engage in certain advertising strategies.
I. AUTOMOBILES
The federal agency responsible for the safety of automobiles sold in the United States is the National
Highway Traffic Safety Administration (NHTSA). The NHTSA requires that automobiles contain
appropriate safety features, such as airbags, seat belts, and so forth. Consumer requests to disconnect
safety features are evaluated by the NHTSA.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 33. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Describe product liability and the tort upon which it is based.
Product defects that cause injury and property loss are often the result of negligence, a tort. The
liability of a manufacturer or seller for injury to purchasers, users, and third parties is known as product
liability. The four elements that a plaintiff must generally prove in order to be successful in proving the
defendant’s negligence in a product liability lawsuit are duty, breach, proximate cause, and damages.
Text Pages: 552
PowerPoint: Slides 2-3
Discussion Questions: 21
LO2. Discuss several bases of claims often used against manufacturers and sellers in product
liability lawsuits.
A product flaw is an abnormality or a condition that was not intended and that makes a product
more dangerous than it would have been had it been as intended. A failure to warn is a dereliction of a
duty to advise purchasers and users of dangers inherent in a product. A design defect is a fault in a
product that creates a hazardous condition that causes injury.
Text Pages: 552-553
PowerPoint: Slides 4-6
Thinking Critically About the Law: 27
Case Questions: 33, 35
Case Analysis: 36, 38
LO3. Identify the kinds of businesses that can be charged with product liability.
Manufacturers, retailers, wholesalers, manufacturers of component parts, assemblers of products,
endorsers of products, licensors of trademarks, and licensors of patents are the kinds of businesses that
can be charged with product liability.
Text Pages: 553
PowerPoint: Slide 7
Discussion Questions: 22
Thinking Critically About the Law: 28
Case Questions: 34
LO4. Explain the legal reasoning behind the concept of strict liability.
The doctrine of strict liability arose because courts believe that the manufacturer is in a better position
than the user of a product to prevent injuries and that the manufacturer is in a position to pay for the
damages suffered by a user of a product, regardless of whether the firm was in fact negligent, because
the manufacturer can buy insurance that pays the injured party.
Text Pages: 554
PowerPoint: Slides 8-10
Discussion Questions: 23
Thinking Critically About the Law: 29
LO5. Describe three ways in which the federal and state governments reduce unreasonable risk of
injury and death associated with consumer products.
The federal and state governments enact numerous statutes and rules to reduce unreasonable risk of
injury and death associated with consumer products. This is achieved by governments’ providing safety
information to the public, developing voluntary and mandatory standards, and pursuing recalls of
dangerous products.
Text Pages: 554-555
PowerPoint: Slide 11
LO6. Summarize the testing procedure required by the Food and Drug Administration in order to
gain approval to sell a drug.
The FDA requires that, after experimentation in the laboratory and animal studies, pharmaceutical
companies subject drugs to four phases of testing: (a) Phase I, during which a small number of people
are tested to determine safety and dosage and to identify side effects that result from taking the drug;
(b) Phase II, during which the effectiveness of the drug is measured by comparing subjects who receive
the drug to those who receive a placebo; (c) Phase III, during which the safety and effectiveness of the
drug are evaluated in trials involving a great number of people; and (d) Phase IV, continued testing that
occurs subsequent to FDA approval of the drug.
Text Pages: 555
PowerPoint: Slides 12-14
Discussion Questions: 24
Thinking Critically About the Law: 30
LO7. Identify examples of consumer products regulated by the Consumer Product Safety
Commission.
Examples of consumer products regulated by the CPSC include wool products, fur products, and textile
fiber products; flammable products; hazardous substances; children’s toys; paint; and radiation-emitting
products.
Text Pages: 556
PowerPoint: Slides 15-16
Discussion Questions: 25
LO8. Describe how federal and state statutes regulate tobacco products, and explain some
provisions of the Master Settlement Agreement.
Numerous federal and state statutes strictly regulate cigarettes and other tobacco products. Federal law
disallows advertising of these products on television and radio, and FTC regulations require disclosure
of tar and nicotine levels on cigarette packages. In addition, all cigarette packages must contain a
warning from the surgeon general regarding the dangers of smoking. In the Master Settlement
Agreement, the major cigarette manufacturers in the United States agreed not to advertise using cartoon
characters; not to place advertising on billboards or stadium signs; not to pay for product inclusion in
films and television shows; not to provide free caps, t-shirts, and so forth; not to distribute free samples
of cigarettes; not to target youth markets by sponsoring concerts, athletic events, and so on; and to
support a foundation that provides education regarding the dangers of addiction to tobacco products.
Text Pages: 557
PowerPoint: Slides 17-20
Discussion Questions: 26
Thinking Critically About the Law: 31
Case Analysis: 37
LO9. Describe how the National Highway Traffic Safety Administration is responsible for the
safety of automobiles sold in the United States.
The NHTSA requires that automobiles contain appropriate safety features, such as airbags, seat belts,
and so on. Consumer requests to disconnect safety features are evaluated by the NHTSA.
Text Pages: 557-558
PowerPoint: Slides 21-22