Business Law Chapter 24 Homework Products Liability warranties And Strict Liability Torti

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Chapter 24

PRODUCTS LIABILITY:

WARRANTIES AND STRICT LIABILITY IN TORT

I. Warranties

A. Types of Warranties

1. Warranty of Title

2. Express Warranties

a. Creation

b. Basis of Bargain

3. Implied Warranties

a. Merchantability

b. Fitness for Particular Purpose

B. Obstacles to Warranty Actions

1. Disclaimer of Warranties

a. Express Exclusions

b. Buyer’s Examination or Refusal

to Examine

c. Federal Legislation Relating to

Warranties of Consumer Goods

2. Limitation or Modification of Warranties

3. Privity of Contract

4. Notice of Breach of Warranty

5. Plaintiff’s Conduct

II. Strict Liability in Tort

A. Requirements of Strict Liability

1. Merchant Sellers

2. Defective Condition

a. Manufacturing Defect

b. Design Defect

c. Failure to Warn

3. Unreasonably Dangerous

B. Obstacles to Recovery

1. Disclaimers and Notice

2. Privity

3. Plaintiff’s Conduct

a. Contributory Negligence

b. Comparative Negligence

c. Voluntary Assumption of Risk

d. Misuse or Abuse of the Product

4. Subsequent Alteration

5. Statute of Repose

6. Limitations on Damages

C. Restatement of Torts (Third): Products Liability

1. Manufacturing Defect

2. Design Defect

3. Failure to Warn

Cases in This Chapter

Belden, Inc. v. American Electronic Components, Inc.

In re L.B. Trucking, Inc.

Womco, Inc. v. Navistar International Corporation

O’Neil v. Crane Co.

Kelso v. Bayer Corporation

Greene v. Boddie-Noell Enterprises, Inc

Chapter Outcomes

After reading and studying this chapter, the student should be able to:

Identify and describe the types of warranties.

List and explain the various defenses that may be successfully raised to a

warranty action.

TEACHING NOTES

Modern methods of distributing goods, in which retailers are principally

distributors of prepackaged, well- advertised goods has led to the inclusion of

manufacturers and other suppliers in product liability coverage.

In response to recent public clamor over product liability and the resulting high

cost of liability insurance, nearly all the states have revised their tort law to

make product liability lawsuits more di!cult to win.

I. WARRANTIES

A warranty obligates the seller to assure that the goods he sells will conform to

certain qualities, characteristics, or conditions. A seller, however, is not required

to warrant the goods; and, in general, he may, by appropriate words, disclaim

(exclude) or modify a particular warranty or even all warranties.

In bringing a warranty action, the buyer must prove that:

(1) a warranty existed,

(2) the warranty has been breached,

(3) the breach of the warranty caused the loss su.ered, and

(4) notice of the breach of warranty was given to the seller.

*** Chapter Outcome ***

Identify and describe the types of warranties.

A. TYPES OF WARRANTIES

A warranty may arise out of the mere existence of a sale (a warranty of title), out

of any a!rmation of fact or promise made by the seller to the buyer (an express

warranty), or out of the circumstances under which the sale is made (an implied

warranty).

Warranty of Title

A seller implicitly guarantees that good title is conveyed to the buyer. This

includes warranting that the property is not subject to a lien or security interest.

Express Warranties

Expressions by the seller regarding the quality or nature of the goods; may

include facts, descriptions, promises or even a model or sample of the goods,

and may be oral or in writing.

Creation — It is not necessary that the seller have an intent to create an

express warranty or use formal words such as “warrant” or “guarantee.” Sales

warranty.

Even if a seller does not know of the falsity of a statement she makes, she may

still be liable for breach; however, to prove fraud on the part of the seller, the

buyer would have to demonstrate both intent and knowledge of falsity.

CISG — Seller must deliver goods that conform to the quality and description in

the contract; goods must possess the qualities of any samples or model used by

the seller.

Basis of Bargain — The Code does not require that the buyer rely on the

expression, it matters only that the warranty was part of the basis of the

bargain.

CASE 24-1

BELDEN INC. V. AMERICAN ELECTRONIC COMPONENTS,

INC.

Court of Appeals of Indiana, 2008

885 N.E.2d 751, 66 UCC Rep.Serv.2d 399

http://scholar.google.com/scholar_case?q=885+N.E.2d+751&hl=en&as_sdt=2,34&case=6981122239976535930&scilh=0

Barnes, J.

Belden, Inc., and Belden Wire & Cable Company (collectively “Belden”) * * * manufactures

wire, and [American Electronic Components, Inc.] AEC manufactures automobile sensors. Since

1989, AEC, in repeated transactions, has purchased wire from Belden to use in its sensors.

In 1996 and 1997, Belden sought to comply with AEC’s quality control program and

provided detailed information to AEC regarding the materials it used to manufacture its wire. In

its assurances, Belden indicated that it would use insulation from Quantum Chemical Corp.

(“Quantum”). In June 2003, however, Belden began using insulation supplied by Dow Chemical

Company (“Dow”). The Dow insulation had different physical properties than the insulation

provided by Quantum.

the parties rely were in writing, the existence of express warranties is a question of law.

[Citation.] Because the alleged warranty is based on written exchanges, whether the writings are

sufficient to create an express warranty is a question of law appropriate for summary judgment.

* * *

Belden claims that these 1996 and 1997 communications did not amount to an express

warranty for purposes of the October 2003 contract. Section 2–313 of the UCC provides:

(1) Express warranties by the seller are created as follows:

(a) any affirmation of fact or promise made by the seller to the buyer which relates to the

goods and becomes part of the basis of the bargain creates an express warranty that

the goods shall conform to the affirmation or promise.

“An express warranty requires some representation, term or statement as to how the product

is warranted.” [Citation.]. There does not seem to be a dispute that in 1996 and 1997 Belden

made express warranties regarding its wire. Instead, the issue is whether the 1996 and 1997

statements by Belden regarding certification created an express warranty that extended to the

October 2003 contract.

Based on the designated evidence, we believe Belden’s compliance with AEC’s quality

control program was essential to its contracts with AEC and was intended to extend to the

parties’ repeated contracts. First, Comment 7 to Section 2–313 provides in part, “The precise

time when words of description or affirmation are made or samples are shown is not material.

The sole question is whether the language or samples or models are fairly to be regarded as part

of the contract.” Thus, although Belden made its initial representations in 1996 and 1997, there is

on damages, the parties’ course of dealing established that Belden made an express warranty

regarding its compliance with the quality control standards. The limitation on damages and the

express warranty are unrelated issues-there is no correlation between the two.

A course of dealing is conduct “fairly to be regarded as establishing a common basis of

understanding for interpreting their expressions and other conduct.” § 1-205(1). It is undisputed

that Belden’s wire complied with the AEC’s quality control requirements for the parties’ more

Implied Warranties

Implied warranties are not created by expressions of the seller like express

warranties; rather, the Code makes implied warranty implicit in the transaction

in order to provide protection to the buyer. An implied warranty arises out of the

circumstances under which the parties enter into their contract and is simply an

operation of law.

Merchantability — The implied warranty of merchantability guarantees that

the product will be 6t for the ordinary purpose for which it was intended.

CISG — The seller must deliver goods, unless otherwise agreed, that are 6t for

the purposes for which goods of the same description would ordinarily be used.

Fitness for Particular Purpose — The implied warranty of fitness for a

particular purpose requires that if a seller, including merchants and

CISG — The seller must deliver goods, unless otherwise agreed, that are 6t for

any particular purpose made known by the buyer, except where the buyer did

not rely on the seller’s skill and judgment or where it was unreasonable for the

buyer to rely on the seller.

CASE 24-2

IN RE L.B. TRUCKING, INC.

United States Bankruptcy Court, D. Del, 1994

163 BR 709, 23 U.C.C. Rep.Serv.2d 1092

http://scholar.google.com/scholar_case?case=6401409485061780661&q=163+BR+709&hl=en&as_sdt=2,34

Balick, J.

[Dudley B. Durham, Jr., and his wife, Barbara Durham, owned and operated a trucking company,

L. B. Trucking, Inc., and a farm, Double-D Farms, Inc. In April 1983, Dudley Durham met with

Richard Thomas of Southern States Cooperative—which is in the business of supplying various

agricultural supplies to farmers—about arranging for the application of herbicides to the

Durhams’ fields.

At a subsequent meeting in early May, Durham met with Thomas to complete credit

arrangements and to arrange the application of herbicides. Durham told Thomas, “I want it done

the cheapest way, the best way it can be done.” Thomas responded, “Will do.” Thomas then

outlined with some specificity the chemicals he proposed to use on the Durhams’ fields. The plan

When the herbicides were actually to be applied, Southern States herbicide applicator,

Gilbert McClements, received from Mr. Thomas instructions concerning which chemicals to

apply and would mix the chemicals each day prior to spraying. Apparently, though, Mr.

McClements used a nitrogen solution to prepare the herbicides and did not make extensive

prespraying inspections of the grass and weeds in the fields to be sprayed. When Durham noticed

a significant number of weeds and grasses had survived the herbicidal treatment, he promptly

* * *

1. Express Warranty An express warranty may be created by a seller through: (1) any

affirmation of fact or promise to the buyer relating to the goods which becomes the basis of the

bargain so that the goods conform to the affirmation or promise; (2) any description of the goods

which is made part of the basis of the bargain so that the whole of the goods conform to the

sample of model. UCC §2–313(1)(a)–(c). The question of whether an express warranty has been

The relevant testimony concerning Thomas’ statements to Durham reveal several oral express

warranties concerning the herbicides and their application which Southern States plainly

breached. First, Thomas stated that water would be the carrier for the herbicides, especially since

Durham wanted the job done inexpensively. In its application, Southern States used the nitrogen

solution regardless of the University of Delaware recommendations dissuading its use and

despite the fact that it is more expensive than using water as a carrier. Southern States’ reference

to the common trade usage of nitrogen in 1983 is inapposite in an action for breach of express

warranty because it is the affirmation or promise—not the custom or trade usage—which

becomes the standard against which a breach is determined. In addition, Thomas’ statements

were more than “seller’s talk” or puffing in that they were product-specific and not overly broad

or vague. Second, Thomas also made statements regarding the effectiveness of the herbicides in

removing weeds and grass so as to promote successful no-till farming. The purchase of

2. Implied Warranties There are two theories of recovery for breach of implied warranty

under the Delaware UCC: breach of implied warranty of merchantability under UCC §2–314 and

breach of implied warranty of fitness for a particular purpose under UCC §2–315. The implied

warranty of fitness for a particular purpose may, to some degree, overlap a seller’s express

warranty. [Citations.] Unless there is a valid disclaimer, these implied warranties are implied in

every sales transaction involving goods and run not only to those in contractual privity with the

Southern States sprayed (and in some instances resprayed) the various Durham farm tracts with

herbicidal and other chemicals in order to increase the crop yields. Nevertheless, the farms’

respective crop yields did not improve, but rather fell dramatically as the result of the chemical

applications. Specifically, the herbicidal recipes were unfit for the ordinary purpose for which

they were intended to be used, chemical agents that would kill weeds without damaging the

primary crops. [Citation.] The chemicals did not operate for their ordinary purpose which was to

promote no-till farming which is why Durham purchased them in the first place.

* * *

As for proximate cause and damages, the court finds that these elements have been met. * * *

Finally, the notice requirement for a breach of implied warranty of merchantability cause of

action was plainly met. Durham notified Southern States as soon as he suspected that the

herbicides were failing to work just a few weeks after their application. * * *

Southern States also breached the implied warranty that the herbicides were fit for their

particular purpose. * * *

The breach of this warranty is the one most apparent on the facts. As indicated earlier,

Durham relied on Thomas’ skill and judgment in selecting suitable herbicides to conduct no-till

*** Chapter Outcome ***

List and explain the various defenses that may be successfully raised to a warranty action.

B. OBSTACLES TO WARRANTY ACTIONS

Technical obstacles which limit the use of a warranty as a way for a buyer to

recover loss or damages include disclaimers of warranties, limitations or

modi6cations of warranties, privity, notice of breach, and the conduct of the

plainti..

Disclaimer of Warranties

A disclaimer (negation of warranty) must be positive, explicit, unequivocal, and

conspicuous.

Express Exclusions — In general, a seller cannot provide an express warranty

and then disclaim it. A seller can, however, carefully refrain from making an

express warranty by not making any promises, not describing the goods, or not

using a sample or model in a sale.

To exclude or to modify:

A warranty of title may be excluded only by specific language or by certain

circumstances, including judicial sales or sales by sheri.s, executors, or

foreclosing lienors. Section 2–312(2); Section 2A–214(4). In the latter cases the

seller is manifestly o.ering to sell only such right or title as he or a third person

might have in the goods, as it is apparent that the goods are not the property of

the person selling them.

In an implied warranty of merchantability, the language of disclaimer or

modi6cation must mention merchantability and, in the case of a writing, must be

conspicuous.

Buyer’s Examination or Refusal to Examine — If the buyer inspects the

goods, implied warranties do not apply to obvious defects that are apparent on

examination. The warranties also do not apply where the buyer has refused to

examine the goods or where the examination should have revealed the obvious

defects.

CISG — If buyer knows of lack of conformity upon entering the contract, the

seller is not liable for the warranty of particular purpose, ordinary purpose or

sale by sample or model.

CASE 24-3

WOMCO, INC. V. NAVISTAR INTERNATIONAL CORPORATION

Court of Appeals of Texas, Twelfth District, Tyler, 2002

84 S.W.3d 272, 48 U.C.C. Rep.Serv.2d 130

http://scholar.google.com/scholar_case?case=377667224667598367&q=84+S.W.3d+272&hl=en&as_sdt=2,22

Griffith, J.

[In 1993, Womco, Inc. purchased through Price, a dealer, thirty 1993 International model 9300

tractor trucks manufactured by Navistar. Also, in 1993, C. L. Hall purchased sixteen 1994

International model 9300 tractor trucks also manufactured by Navistar through Mahaney, another

dealer. Almost immediately after the trucks were put into service, Womco and Hall (plaintiffs)

Womco and Hall filed suit against Navistar, Price, and Mahaney (defendants). The trial court

granted the defendants’ motion for summary judgment based on their affirmative defenses of

disclaimer of warranty. Womco and Hall appealed.]

* * *

It is undisputed that Appellants’ breach of implied warranty claims as to nine trucks are not

barred by limitations. However, * * * Appellees contend that such implied warranties were

disclaimed. The Texas Uniform Commercial Code allows sellers to disclaim both the implied

warranty of merchantability as well as the implied warranty of fitness for particular purpose.

[UCC] §2.316(b), [citation]. In order to disclaim an implied warranty of merchantability in a

sales transaction, the disclaimer must mention the word “merchantability.” The disclaimer may

be oral or written, but if in writing, the disclaimer must be conspicuous. [Citation]; [UCC]

* * *

Further, Appellants argue that Appellees were required to offer proof of the context of the

purported disclaimers, contending that in order for a disclaimer of an implied warranty to be

effective, the plaintiffs must have had an opportunity to examine it prior to consummation of the

contract for sale. [Citation.] * * * In Dickenson, [citation], the court held that a disclaimer of an

express warranty was ineffective where the buyer was not given the opportunity to read the

warranty or warranties made until after the contract is signed. Although the instant case concerns

a converse situation to Dickenson, the rationale applied by the Dickenson court is helpful. One of

the underlying purposes of [UCC] section 2.316 is to protect a buyer from surprise by permitting

the exclusion of implied warranties. [UCC] §2.316, comment 1. We fail to see how section

[UCC] 2–316 can fulfill such a purpose unless a disclaimer is required to be communicated to

the buyer before the contract of sale has been completed, unless the buyer afterward agrees to the

disclaimer as a modification of the contract. [Citations.]

In support of their motion for summary judgment, Appellees offered six disclaimers, all of

which were deposition exhibits. None of these six disclaimers is probative as to the issue of

* * *

Accordingly, the trial court’s order granting summary judgment is reversed as to Appellants’

claims for breach of warranty * * * and is remanded to the trial court for further proceedings. As

to all other claims of Appellants, the trial court’s order granting summary judgment is affirmed.

Federal Legislation Relating to Warranties of Consumer Goods —

Congress enacted the Magnuson-Moss Warranty Act to protect purchasers of

consumer goods. Obvious defects or those defects which would have been

discovered in an inspection are not covered by the implied warranties. Also, the

act provides that a seller who makes a written warranty cannot disclaim any

implied warranty.

The Federal Trade Commission has established guidelines for the type of

consumer product warranty information a seller must supply.

Limitation or Modification of Warranties

If not unconscionable, the parties may by contract limit or modify warranties or

impose time limits within which the warranty is e.ective. One important

Privity of Contract

Common law required that the plainti. have a contractual relationship with the

defendant in order to pursue a breach of warranty action. This relationship is

known as privity of contract.

Horizontal privity refers to noncontracting parties injured by defective goods.

The Code relaxes the requirements for determining to whom horizontal privity

extends. In addition, the UCC provides three alternatives which are available for

adoption by the states.

A) warranty extends to buyer’s family and household guests

B) warranty extends to any person who may reasonably be expected to use

the goods

C) warranty extends to arti6cial entities such as corporations.

Most states have, for all practical purposes, eliminated horizontal privity in

warranty cases.

Notice of Breach of Warranty

The buyer must notify the seller of any warranty breach within a reasonable time

or she will not be permitted a recovery. In determining a reasonable period of

time, commercial standards apply to a merchant buyer while more lenient

standards apply to a retail consumer.

Plaintiff’s Conduct

Contributory and comparative negligence are tort defenses and usually cannot

be used as a defense to a breach of warranty action. Voluntary assumption of

the risk is a defense if the buyer is aware of defects in the product and continues

to use it.