what factors determine whether a seller’s or lessor’s statement constitutes an express warranty...

• What factors determine whether a What factors determine whether a seller’s or lessor’s statement seller’s or lessor’s statement constitutes an express warranty or constitutes an express warranty or mere puffery?mere puffery?• What implied warranties arise under What implied warranties arise under

the UCC? the UCC?

© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 2

• Can a manufacturer be held liable to Can a manufacturer be held liable to any person who suffers an injury any person who suffers an injury proximately caused by the proximately caused by the manufacturer’s negligently made manufacturer’s negligently made product?product?• What are the elements of a cause of What are the elements of a cause of

action in strict product liability? action in strict product liability?


• What defenses to liability can be raised What defenses to liability can be raised in a product liability lawsuit?in a product liability lawsuit?


• A warranty is an assurance or A warranty is an assurance or guarantee by the seller or lessor of guarantee by the seller or lessor of certain facts concerning the goods certain facts concerning the goods being sold or leased. being sold or leased. • If seller breaches a warranty, buyer If seller breaches a warranty, buyer

can recover damages, or rescind the can recover damages, or rescind the contract.contract.


• Warranties automatically arise in Warranties automatically arise in most commercial sales transactions.most commercial sales transactions.• Normally warranties can be Normally warranties can be

disclaimed or modified with specific disclaimed or modified with specific language in the contract. language in the contract.


• Warranties of Title. UCC-312 can Warranties of Title. UCC-312 can creates three express warranties at creates three express warranties at sale:sale:–Good Title.–No Liens.–No Infringements.


• Express Warranties.Express Warranties.–Representations concerning quality,

condition, description, or performance potential of goods.–Can be created by:• Any Affirmation or Promise.• Any Description.• Any Sample or Model.


• Express Warranties (cont’d).Express Warranties (cont’d).–Basis of the Bargain. • Seller does not have to use the words

“guarantee” or “warranty.” • Buyer must rely on warranty when he

enters into contract.


• Express Warranties (cont’d).Express Warranties (cont’d).–Statements of Opinion and Value. Only

statements of fact create express warranties.• Exception for Statements of Opinion by

Experts. • Puffery versus Express Warranties.


• Implied Warranties.Implied Warranties.–Inferred at law based on the

circumstances or nature of the transaction. –Implied Warranty of Merchantability.• Automatically arises from merchants.


• Implied Warranties (cont’d).Implied Warranties (cont’d).–Implied Warranty of Merchantability.•Merchantable Goods:–Goods are of average, fair, or medium-grade.–Adequately packaged and labeled.–Conform to promises on label.–Have a consistent quality and quantity

among the commercial units.


• Implied Warranties (cont’d).Implied Warranties (cont’d).–Implied Warranty of Merchantability.

–Knowledge of Defect Not Required: warranty can be breached even if merchant did not know or could not have discovered product was defective.

•Merchantable Food.–CASE 21.1 Webster v. Blue Ship Tea Room, Inc.Webster v. Blue Ship Tea Room, Inc.

(1964). Was the soup fit to eat on the basis of consumer expectations?


• Implied Warranties (cont’d).Implied Warranties (cont’d).–Implied Warranty of Fitness for a

Particular Purpose: arises by any seller who: • Knows the particular purpose for which the

goods are being bought; and• Knows the buyer is relying on seller’s skill

and judgment to select suitable goods.


• Implied Warranties (cont’d).Implied Warranties (cont’d).–Implied Warranty of Fitness for a

Particular Purpose.• Particular vs. Ordinary Purpose: Differs from

ordinary purpose of merchantability. Goods can be merchantable but unfit for a particular purpose.• Knowledge and Reliance Requirements:

seller must have reason to know purpose, and buyer must have relied on the recommendation.


• Implied Warranties (cont’d).Implied Warranties (cont’d).–Implied Warranty From Prior Dealings or

Trade Custom.• Arises when both parties to a contract have

knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction.


• Overlapping Warranties.Overlapping Warranties.–Occurs when two or more warranties are

made in a single transaction:•When Warranties are Consistent.•When Warranties are Inconsistent:– (1) Implied warrant of fitness for a particular

purpose. (2) Samples take precedence over inconsistent descriptions. (3) Exact or technical specifications displace inconsistent samples or descriptions.


• Warranty Disclaimers.Warranty Disclaimers.–Express Warranties can be disclaimed:• If they were never made (evidentiary

matter).• If a clear written disclaimer in contract

with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).


• Warranty Disclaimers.Warranty Disclaimers.–Implied Warranties.• Unless circumstances indicate otherwise,

warranties of fitness and merchantability can be disclaimed with the words “As Is,” “With All Faults.”


• Warranty Disclaimers (cont’d).Warranty Disclaimers (cont’d).–Implied Warranties.• Disclaimer of the Implied Warranty of

Merchantability: must use the word merchantability.• Disclaimer of the Implied Warranty of

Fitness: must be in writing and conspicuous.


• Warranty Disclaimers (cont’d).Warranty Disclaimers (cont’d).–Implied Warranties.• Buyer’s Examination or Refusal to

Inspect. Warranties are disclaimed as to defects that could reasonably be found on examination. •Warranty Disclaimers and

Unconscionability.


• Warranty Disclaimers (cont’d).Warranty Disclaimers (cont’d).–Magnuson-Moss Warranty Act.•Modifies UCC for consumer sales. Does

not require a warranty.• Only applies when written warranties are

made by Seller (including a service contract).– If goods > $25label “full” or “limited.”–Full warranty provides free repair or

replacement.© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 22

• Coverage of Lemon Laws.Coverage of Lemon Laws.–Generally manufacturer is given limited

number opportunities (usually four) to remedy the defect.–If manufacturer fails, buyer is entitled

to new car, replacement of defective parts, or return of all consideration.

• Arbitration is Typical Procedure.Arbitration is Typical Procedure.© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 23

• Product Liability is not a new tort.Product Liability is not a new tort.• Liability can be based on:Liability can be based on:–Negligence; –Misrepresentation; –Strict Liability; –Warranty Theory.


• Negligence. Negligence. –Based on a manufacturer’s breach of

the reasonable standard of care and failing to make a product safe.–Due Care Must Be Exercised in: design,

selection of materials, using appropriate production process, assembling and testing, adequate warnings, inspection, and testing.


• Negligence (cont’d).Negligence (cont’d).–Privity of Contract Not Required. No

privity of contract required between Plaintiff and Manufacturer. Liability extends to any person’s injuries caused by a negligently made (defective) product.


• Misrepresentation.Misrepresentation.–Occurs when fraud committed against

consumer or user of product. Fraud must have been made knowingly or with reckless disregard for safety.–Plaintiff does not have to show product

was defective.


• Strict Liability holds people liable for Strict Liability holds people liable for results of their acts, regardless of results of their acts, regardless of their intentions or exercise of their intentions or exercise of reasonable care. reasonable care.


• Strict Liability and Public Policy. Strict Liability and Public Policy. –Consumers should be protected from

unsafe products;–Manufacturers and distributors should

be liable to any user of the product;–Manufacturers, sellers and distributors

can bear the costs of injuries.


• Requirements for Strict Liability:Requirements for Strict Liability:1. Product must be in defective condition

when sold.2. Defendant is in the business of selling

the product.3. Product must be unreasonably

dangerous.


• Requirements for Strict Liability:Requirements for Strict Liability:4. Plaintiff must be physically harmed5. Defective condition must be proximate

cause of injury.6. Goods are in substantially same

condition.


• Requirements for Strict Liability Requirements for Strict Liability (cont’d).(cont’d).–Proving a Defective Condition.• Plaintiff does not need to show product

or in what manner the product become defective. • But plaintiff must show product was

defective and “unreasonably dangerous” to the user.


• Product Defects. Three types of Product Defects. Three types of product defects:product defects:–Manufacturing Defects. –Design Defects. –Warning Defects.


• Product Defects (cont’d). Product Defects (cont’d). –Manufacturing Defects.• Occurs when a product “departs from its

intended design even though all possible care was exercised in the preparation and marketing of the product.”


• Product Defects (cont’d).Product Defects (cont’d).–Design Defects.• Product is manufactured correctly, but

defect is based on design. • Test for Design Defects: plaintiff must

show defendant’s failure to use a reasonable alternative design rendered the product not reasonably safe.


• Product Defects (cont’d).Product Defects (cont’d).–Design Defects.• Factors to be Considered. –Magnitude and probability of foreseeable

risks. –Relative advantages and disadvantages of

product.–Most courts use “risk-utility” analysis.


• Product Defects (cont’d).Product Defects (cont’d).–Inadequate Warnings.• A product may be defective because of

inadequate warnings or instructions.• Liability based on foreseeability that

proper instructions/labels would have made the product safe to use.


• Product Defects (cont’d).Product Defects (cont’d).–Inadequate Warnings.• Obvious Risks. No duty to warn.• Foreseeable Misuses. Seller must warn

about foreseeable misuse. • CASE 21.2 Wyeth v. Levin Wyeth v. Levin (2009). Federal

law did not preempt state claim for inadequate warning.


• Market Share Liability.Market Share Liability.–Theory of liability when multiple

Defendants contributed to manufacture of defective product.–Liability of each Defendant is

proportionate to the share of the market held by each respective Defendant.

• Other Applications: to bystanders.Other Applications: to bystanders.© 2012 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 39

• Assumption of Risk.Assumption of Risk.–CASE 21.3 Boles v. Sun Ergoline, Inc. Boles v. Sun Ergoline, Inc.

(2010). Why did court find the exculpatory clause unenforceable?

• Product Misuse. Plaintiff does not Product Misuse. Plaintiff does not know the product is dangerous for a know the product is dangerous for a particular use. particular use.


• Comparative Negligence (Fault).Comparative Negligence (Fault).–Defendants may be able to limit

damages by apportioning fault.• Commonly Known Dangers.Commonly Known Dangers.• Knowledgeable User.Knowledgeable User.


what factors determine whether a seller’s or lessor’s statement constitutes an express warranty...

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