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Chapter 20 - Product Liability
20-1
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:
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
liability grounds).
D. Perhaps utilitarians, with their focus on the greatest good for the greatest number,
III. SUGGESTIONS FOR LECTURE PREPARATION:
A. Introduction
1. The chapter's introductory paragraph is intended to show that product liability can be a
2. Make sure that students understand what this chapter is about: civil recoveries for
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3. The text's description of how social and economic conditions help account for the great
and the problems it has come to create. Note that some observers attribute the "crisis" to
industry.
4. Note that in response to the perceived crisis, some states have begun to limit product
might speculate about the political reasons for this failure, and about recent indications
5. Emphasize how the chapter is organized. The main reason for this organization is to
B. Express Warranty
1. Before getting into express warranties, you probably should define the term "warranty,"
2. Describe the three ways that a seller--any seller, merchant or not--may create an express
warranty theories, the express warranty most resembles our ordinary notion of
issues.
3. Discuss the general rule that statements of value, opinion, or sales talk are not express
rule is just a concession to the interests of sellers, who use such statements to induce
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
after the sale.
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5. The material on multiple express warranties can be deleted by instructors with time
part of §2-317 because of the confusion it generates. In particular, it is unclear how this
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.
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
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
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
century notions of contract.
2. Emphasize that our first implied warranty, the implied warranty of merchantability,
issue in the case.
3. In defining merchantability, emphasize the key requirement: that the goods be fit for the
can present.
4. Emphasize that the goods need not be perfect to be merchantable. Examples: Problem #3
5. Provide examples of the merchantability standard's application, using scenarios similar to
to pump some content into the merchantability standard. Problems #4 and #14 involve
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Margaret Oakes v. Carrabba’s Italian Grill, LLC, 10 WL 2696631 (D. Nev. 2010)
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.
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,
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
good down to minus 20 degrees) and hiking boots (novice mountain climber requests
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.
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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,
the benefits of a less-expensive design would have outweighed the risks of
decomposition upon exhumation. Finally, Batesville Casket could argue that the injury
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
regulation.
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
disclaimers. )
4. Failure-to-warn cases present many and various issues, issues that can only be discussed
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
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
Chapter 20 - Product Liability
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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
appellate court affirmed.
fraudulent prongs, the court went on to address them. The CLRA prohibits persons from
misrepresenting the quality or standard of the products.
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” . . . .’”
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
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.
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.
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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
#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)
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
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
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
defect cases.
5. Section 2 of the new Restatement fleshes out section 1 by defining three different kinds
dangerousness. In failure-to-warn cases, foreseeable risks of harm must be taken into
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
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
Chapter 20 - Product Liability
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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
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-
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
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
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
the next section's discussion of UCC § 2-318.
Chapter 20 - Product Liability
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
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
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
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.
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
tort theories.
5. You might conclude by noting that potentially all the types of damages discussed could
Chapter 20 - Product Liability
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and loses profits because the business is shut down for a time. Of course, punitive
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.
principles, which probably means reasonable foreseeability.
4. Privity, however, continues to be a problem under the UCC.
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.
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
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.
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
