525
Chapter 22
Warranties and Product Liability
See Separate Lecture Outline System
INTRODUCTION
At one time, caveat emptor (“let the buyer beware”) was the philosophy in sales contract law. This was a realistic
approach when buyers and sellers were equally capable of judging the quality of the goods that were the subjects of their
bargains. Today, however, it is likely that a buyer does not comprehend what is behind the goods he or she buys, including the
risks and their assumption. Thus, caveat emptor was replaced with a consumer-oriented approach. A warranty now covers most
goods. The term warranty is synonymous with the term promise. Breaching a warranty has the same consequences as
breaching any contractual promise.
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in part.
under the former. Under a theory of negligence, an injured party must show that a manufacturer, for example, did not exercise
ordinary care. Under a theory of strict liability, that showing is not necessary (although injury and causation must still be
proved). This different burden of proof makes it easier for injured plaintiffs to recover and makes manufacturers and other
sellers virtual insurers of their products.
ADDITIONAL RESOURCES—
VIDEO SUPPLEMENTS
The following video supplements relate to topics discussed in this chapter—
PowerPoint Slides
To highlight some of this chapter’s key points, you might use the Lecture Review PowerPoint slides compiled for
Chapter 22.
Business Law Digital Video Library
The Business Law Digital Video Library at www.cengage.com/blaw/dvl offers a variety of videos for group or
individual review. Clips on topics covered in this chapter include the following.
• Ask the Instructor
• Legal Conflicts in Business
Product Liability—Caleb’s Cigar Selling Idea—The software start-up discusses whether to offer other products for
sale on its web site, but disagree about whether to sell cigars. Should they be concerned about the seller’s liability in
selling such a product?
• Drama of the Law
• LawFlix
Matilda—Contracts; misrepresentation (Scene in which Matilda’s father explains to Matilda how to make a bad car
look good and sell).
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CHAPTER OUTLINE
I. Types of Warranties
If parties have not agreed to limit or modify remedies available to a buyer on a seller’s breach of warranty, a buyer can
sue to recover damages. Under some circumstances, a breach can allow the buyer to rescind an agreement
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A. WARRANTIES OF TITLE
Provisions similar to the following apply to leases [see UCC 2A–211(1), 2A–214(4), 2A–516(3)(b), 2A–516(4)(b)].
1. Good Title
2. No Liens
3. No Infringements
A merchant warrants that goods are free of any third person’s patent, trademark, or copyright claim; this
warranty does not apply to buyers who furnish specifications for specially manufactured goods [UCC 2–
312(3), 2–607(6)].
ANSWER TO VIDEO QUESTION LTR. A
What warranties of title arise in the sales of used cars by dealers? Title warranties that arise in the sales of used
cars by dealers include the warranties that arise in the sales of goods generally. Sellers warrant that they have good
title to the goods they sell and that the transfer of title is rightful. Sellers also warrant that the goods will be delivered
4. Disclaimer of Title Warranty
These warranties can be disclaimed or modified by specific language [UCC 2–312(2)].
B. EXPRESS WARRANTIES
Express warranties arise if a seller indicates goods will conform to—
• An affirmation or promise of fact.
1. Basis of the Bargain
2. Statements of Opinion and Value
A seller’s statement about the value or worth of goods or a seller’s statement of opinion (puffing) is not an
express warranty.
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b. Puffery v. Express Warranties
Clearly improbable claims and oral statements are less likely to qualify as warranties.
ANSWER TO VIDEO QUESTION LTR. B
In the video, a father (Danny DeVito) who owns a used car lot uses a tool to turn back the numbers on a vehicle’s
odometer so that the mileage is inaccurate. When he sells this car, if he tells the buyer the mileage is only 60,000
knowing that at it is really 120,000, has he breached an express warranty? What if the seller did not make any oral
statements about the car’s mileage? Could the buyer claim an express warranty existed? Explain. Under the UCC, an
express warranty arises if a seller indicates goods conform to an affirmation or promise of fact, or a description. The
ENHANCING YOUR LECTURE—
THE DEBATE OVER PUFFERY
The term puffing refers to a salesperson’s exaggerated claims as to the quality of goods offered for sale. Puffing is
considered a statement of opinion and not a statement of fact, and therefore it does not constitute an express
warranty. The law assumes that most buyers or lessees know, or should know, that sellers and lessors traditionally
have engaged in “huffing and puffing” their wares, and that reasonable buyers and lessees will not be “taken in” by this
puffery. Some customers do not recognize the difference between puffery and statements of fact, however. This
problem is exacerbated when customers do not have a complete command of the English language and are taken in by
fast-talking salespersons.
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In the meantime, the courts have to distinguish between statements that amount to mere puffery and statements
that constitute express warranties or misrepresentations of material facts.
PUFFERY V. EXPRESS WARRANTIES
The line between statements that amount to puffery and statements that constitute express warranties is not
always clear. For example, in one case a tobacco farmer had read an ad stating that Chlor-O-Pic was a chemical
fumigant that would suppress black shank disease, a fungal disease that destroys tobacco crops. The ad specifically
indicated how much of the product should be applied per acre and stated that, if applied as directed, Chlor-O-Pic would
give “season-long control with application in fall, winter, or spring.” The farmer bought eight thousand pounds of
Chlor-O-Pic and applied it as directed to 143 acres of his tobacco crop. Nonetheless, the crop developed black shank
disease, resulting in an estimated loss of three thousand pounds of tobacco per acre.
PUFFERY V. MISREPRESENTATION
The line between puffery and fraudulent misrepresentation is also not always readily discernible. For example, in
one case, a sales representative for a Mazda dealer was trying to sell a used Mazda to Kevin Garrett. The salesperson
said that although the car had nearly 15,000 miles on it, the salesperson himself had used the car as a demonstrator
and for his personal use and had “babied it to death.” In fact, the car had been stolen from the dealer and driven
10,000 miles, and prior to the theft, the dealer had had to replace the engine after the car had been driven only
approximately 3,000 miles.
WHERE DO YOU STAND?
In the cases just discussed, the courts held those who made claims about their products liable either for breach of
warranty or for misrepresentation. In numerous other cases, though, the courts, despite a buyer’s reliance on a seller’s
promise, have held that the alleged factual representation or express warranty was, in fact, mere puffery. Should the
law be changed to hold sellers legally accountable for the often exaggerated opinions and promises that they make to
customers? Or would such a change in the law create even greater problems?
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C. IMPLIED WARRANTIES
Merchants impliedly warrant that the goods they sell are merchantable and, in certain circumstances, fit for a
particular purpose. An implied warranty may arise from a course of dealing or usage of trade.
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a. Merchantable Goods
Goods that are merchantable are “reasonably fit for the ordinary purposes for which such goods are
used.” They must at least: (1) be of average, fair, or medium-grade quality; (2) pass without objection
in the trade or market for goods of the same description; (3) be adequately packaged and labeled as
provided by the agreement; and (4) conform to promises or affirmations of fact made on the container
or label.
ANSWER TO VIDEO QUESTION LTR. C
What would a person who buys the car in the video have to show to prove that the seller breached the implied
warranty of merchantability? An implied warranty of merchantability automatically arises in every sale of goods by a
merchant who deals in goods of the kind. To be merchantable, goods must be “reasonably fit for the ordinary purposes
for which such goods are used.” They must be of at least average, fair, or medium-grade quality. The quality must be
evidence of a breach of warranty. In this case, repairs that would be attributable to the car’s true mileage, as well as
the likely reattachment of the glued bumper, and the sawdust in the transmission would serve as proof.
b. Merchantable Food
The serving of food or drink is a sale of goods subject to the implied warranty of merchantability [UCC
2–314(1)].
CASE SYNOPSIS—
Case 22.1: Webster v. Blue Ship Tea Room
Webster brought an action against the Blue Ship Tea Room for personal injuries she sustained when she swallowed
a fish bone contained in a bowl of the Blue Ship Tea Room’s fish chowder. Her theory was breach of implied warranty
of merchantability. A jury rendered a verdict for her. Blue ShipTea Room appealed.
availability of fresh fish chowder. We should be prepared to cope with the hazards of fish bones, the occasional
…………………………………………………………..……………………………………………………………………
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Notes and Questions
This is a landmark case in Massachusetts where fish and clam chowder are common. Whether the same result
would prevail in a state in which chowder is not so common is open for conjecture, but the case is a logical application
of the UCC, and most students find it interesting.
have been held to notice the obvious (that is, that fish chowder may have bones). What if Webster had told Blue Ship
ANSWER TO “THE E-COMMERCE DIMENSION”
QUESTION IN CASE 22.1
If Webster had made the chowder herself from a recipe that she had found on the Internet, could she have
successfully brought an action against its author for a breach of the implied warranty of merchantability? Explain. No,
does not indicate that there would have been an exchange for a price, a communication over the Internet could
arguably be construed intangible, the source of the recipe might easily have been a non-merchant. More importantly,
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Recent cases centering on food that allegedly breaches the implied warranty of merchantability include the
following.
• McCroy ex rel. McCroy v. Coastal Mart, Inc., 207 F.Supp.2d 1265 (D.Kan. 2002) (a buyer burned by a hot drink from
a vending machine failed to show that the beverage was defective, or that its temperature rendered it unfit for human
consumption at the time that it was sold, as required for a claim for a breach of the implied warranty of
merchantability).
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Recent cases concerning other implied warranty of merchantability questions include the following.
2. Implied Warranty of Fitness for a Particular Purpose
This warranty arises when any seller knows a particular purpose for which a buyer will use goods and that
the buyer is relying on the seller’s skill and judgment to select suitable goods [UCC 2–315, 2A–213].
3. Warranties Implied from Prior Dealings or Trade Custom
Warranties can arise from a course of dealing or usage of trade. When the parties know of a well-recognized
trade custom, courts will infer that they intended the custom to apply to their contract [UCC 2–314(3), 2A–
212(3)].
ADDITIONAL BACKGROUND—
Warranties under the CISG
The United Nations Convention on Contracts for the International Sale of Goods (CISG) provides for warranty
protection similar to that available under the UCC. Article 35 of the CISG states that the seller “must deliver goods
D. MAGNUSON-MOSS WARRANTY ACT
Under this federal statute, a seller need not give a written warranty for consumer goods, but if he or she does and
the price of goods is more than $25, the warranty must be labeled as either full or limited. Certain information
must be disclosed in “readily understood language.”
• A full warranty requires free repair or replacement of a defective part; if repair cannot be done within a
reasonable time, a buyer can choose a refund or replacement with no charge.
• A limited warranty is what its name implies. Generally, the language must be conspicuous.
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B. CONFLICTING WARRANTIES
III. Warranty Disclaimers and Limitations on Liability
Courts view warranty disclaimers with disfavor, especially when consumers are involved, often holding disclaimers
unconscionable. There are federal and state statutes that may make a disclaimer unenforceable. A buyer prevented
from claiming breach of warranty may be able to sue successfully on a theory of negligence or strict liability
A. EXPRESS WARRANTIES
A seller’s best protection from being held accountable for affirmations of fact or promises is not to make them in
B. IMPLIED WARRANTIES
Implied warranties can be disclaimed by the expression “as is,” or “with all faults,” or some other similar phrase
[UCC 2–316, 2A–214].
1. Disclaimer of the Implied Warranty of Merchantability
2. Disclaimer of the Implied Warranty of Fitness
To disclaim an implied warranty of fitness for a particular purpose, a disclaimer must be written and be con-
spicuous (but the word fitness does not need to be used).
C. BUYER’S OR LESSEE’S EXAMINATION OR REFUSAL TO INSPECT
If a buyer refuses to examine goods or if a buyer examines goods as fully as desired before contracting, there is no
implied warranty with respect to defects that a reasonable examination will reveal.
D. WARRANTY DISCLAIMERS AND UNCONSCIONABILITY
E. STATUTES OF LIMITATIONS
Under the UCC, an action for breach of contract must be brought within four years after the cause accrues.
Parties can reduce this period to not less than one year, but they cannot extend it beyond four years [UCC 2–
725(1)]. A cause for breach of warranty generally accrues when a seller tenders delivery, even if the
nonbreaching party is unaware [UCC 2–725(2)].
IV. Product Liability
A. PRODUCT LIABILITY BASED ON NEGLIGENCE
1. Due Care Must Be Exercised
Due care must be exercised in designing products, in selecting materials, in producing and testing products,
2. Privity of Contract Not Required
An action based on negligence does not require privity of contract).
ADDITIONAL BACKGROUND—
Restatement (Second) of Torts, Section 395, Comments
A manufacturer who fails to use reasonable care in manufacturing its product may be liable for harm caused by the
product to those whom the manufacturer should expect to be endangered by use of the product. This rule is stated in
the Restatement (Second) of Torts, Section 395. The following is the text of Restatement (Second) of Torts, Section
395, Comments—selected comments accompanying the section.
Comment:
to disclose the danger became liable to a third person injured by the defect.
The most important of these exceptions, however, made the seller liable to a third person for negligence in the
manufacture or sale of an article classified as “inherently” or “imminently” dangerous to human safety. By degrees this
category was redefined to include articles “intended to preserve, destroy, or affect human life or health.” For more
than half a century, however, the category remained vague and imperfectly defined. It was held to include food, drugs,
b. This Section states the rule thus generally adopted. The justification for it rests upon the responsibility assumed
by the manufacturer toward the consuming public, which arises, not out of contract, but out of the relation resulting
from the purchase of the product by the consumer; upon the foreseeability of harm if proper care is not used; upon the
representation of safety implied in the act of putting the product on the market; and upon the economic benefit
derived by the manufacturer from the sale and subsequent use of the chattel.
ENHANCING YOUR LECTURE—
MACPHERSON V. BUICK MOTOR CO. (1916)
product.
CASE BACKGROUND
The case was brought by Donald MacPherson, who suffered injuries while riding in a Buick automobile that
suddenly collapsed because one of the wheels was made of defective wood. The spokes crumbled into fragments,
throwing MacPherson out of the vehicle and injuring him.
MacPherson had purchased the car from a Buick dealer, but he brought suit against the manufacturer, Buick Motor
Company. The wheel itself had not been made by Buick; it had been bought from another manufacturer. There was
evidence, though, that the defects could have been discovered by reasonable inspection by Buick and that no such
inspection had taken place. MacPherson charged Buick with negligence for putting a human life in imminent danger.
THE ISSUE BEFORE THE COURT AND THE COURT’S RULING
The major issue before the court was whether Buick owed a duty of care to anyone except the immediate
purchaser of the car (that is, the Buick dealer). In deciding the issue, Justice Benjamin Cardozo stated that “[i]f the
nature of a thing is such that it is reasonably certain to place life and limb in peril when negligently made, it is then a
thing of danger. . . . If to the element of danger there is added knowledge that the thing will be used by persons other
than the purchaser, and used without new tests, then, irrespective of contract, the manufacturer of this thing of
danger is under a duty to make it carefully.”
its construction is defective. This automobile was designed to go 50 miles an hour. Unless its wheels were sound and
CHAPTER 22: WARRANTIES AND PRODUCT LIABILITY 539
to MacPherson for the injuries he sustained when he was thrown from the car.
APPLICATION TO TODAY’S WORLD
This landmark decision was a significant step toward the world we live in today—in which it is common for an
automobile manufacturer to be held liable when its negligence causes a product user to be injured. As is often the
situation, technological developments necessitated changes in the law. Had the courts continued to require privity of
B. PRODUCT LIABILITY BASED ON MISREPRESENTATION
When fraudulent misrepresentation to a user or consumer results in injury, it may serve as a basis of liability. A
bad ad or label can show intent, but the injured party must have relied on it.
V. Strict Product Liability
Imposed since the 1960s in many states, strict product liability does not require privity of contract, or proof of fault or
the lack of reasonable care
A. STRICT PRODUCT LIABILITY AND PUBLIC POLICY
Strict liability is imposed as a matter of public policy. Some states limit its application to situations involving
personal injury.
B. THE REQUIREMENTS FOR STRICT LIABILITY
For a cause of action in strict product liability against a manufacturer—
• A product must be in a defective condition when the manufacturer sells it.
ADDITIONAL BACKGROUND—
Restatement (Second) of Torts, Section 402A, Comments
The Restatement (Second) of Torts explains how the doctrine of strict liability should be applied to assess liability
against sellers of goods (including manufacturers, processors, assemblers, packagers, bottlers, wholesalers,
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distributors, and retailers). The following is the text of Restatement (Second) of Torts, Section 402A, Comments—
selected comments accompanying the section.
Comment:
* * * *
b. History. Since the early days of the common law those engaged in the business of selling food intended for
liable to third persons in the absence of negligence or privity of contract. In the beginning, these decisions displayed
considerable ingenuity in evolving more or less fictitious theories of liability to fit the case. The various devices
included an agency of the intermediate dealer or another to purchase for the consumer, or to sell for the seller; a
theoretical assignment of the seller’s warranty to the intermediate dealer; a third party beneficiary contract; and an
implied representation that the food was fit for consumption because it was placed on the market, as well as numerous
others. In later years the courts have become more or less agreed upon the theory of a “warranty” from the seller to
consumer or his property.
* * * *
d. The rule stated in this Section is not limited to the sale of food for human consumption, or other products for
intimate bodily use, although it will obviously include them. It extends to any product sold in the condition, or
substantially the same condition, in which it is expected to reach the ultimate user or consumer. Thus the rule stated
applies to an automobile, a tire, an airplane, a grinding wheel, a water heater, a gas stove, a power tool, a riveting
machine, a chair, and an insecticide. It applies also to products which, if they are defective, may be expected to and do
cause only “physical harm” in the form of damage to the user’s land or chattels, as in the case of animal food or a
herbicide.
* * * *
The rule does not, however, apply to the occasional seller of food or other such products who is not engaged in
that activity as a part of his business. Thus it does not apply to the housewife who, on one occasion, sells to her
neighbor a jar of jam or a pound of sugar. Nor does it apply to the owner of an automobile who, on one occasion, sells
it to his neighbor, or even sells it to a dealer in used cars, and this even though he is fully aware that the dealer plans to
resell it. The basis for the rule is the ancient one of the special responsibility for the safety of the public undertaken by
one who enters into the business of supplying human beings with products which may endanger the safety of their per-
sons and property, and the forced reliance upon that undertaking on the part of those who purchase such goods. This
* * * *
h. A product is not in a defective condition when it is safe for normal handling and consumption. If the injury
results from abnormal handling, as where a bottled beverage is knocked against a radiator to remove the cap, or from
abnormal preparation for use, as where too much salt is added to food, or from abnormal consumption, as where a
child eats too much candy and is made ill, the seller is not liable. Where, however, he has reason to anticipate that
danger may result from a particular use, as where a drug is sold which is safe only in limited doses, he may be required
to give adequate warning of the danger * * *, and a product sold without such warning is in defective condition.
i. Unreasonably dangerous. The rule stated in this Section applies only where the defective condition of the
product makes it unreasonably dangerous to the user or consumer. Many products cannot possibly be made entirely
safe for all consumption, and any food or drug necessarily involves some risk of harm, if only from over-consumption.
Ordinary sugar is a deadly poison to diabetics, and castor oil found use under Mussolini as an instrument of torture.
That is not what is meant by “unreasonably dangerous” in this Section. The article sold must be dangerous to an extent
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1. Proving a Defective Condition