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Legal Environment of Business Dr. John Dehrer-Wendt
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Warranties in General
Type |
How Created | Possible Defenses |
| Warranty of Title (UCC 2-312) |
Upon transfer of title, the seller warrants --
1. The right to pass good and rightful title 2. That the goods are free from unstated liens or encumbrances 3. If a merchant, that the goods are free from infringement claims |
Exclusion or modification only by specific language or circumstances (UCC 2-312(2)) |
| Express Warranty (UCC 2-313) |
As part of a sale or bargain -- 1. An affirmation of fact or promise 2. A description of the goods 3. A sample shown as conforming to bulk Under the Magnusson-Moss Warranty Act, express written warranties covering consumer goods priced at more than $10, if made, must be labeled as one of the following -- 1. "Full" warranty -- free repair or replacement of defective parts; refund or replacement for goods if cannot be repaired in a reasonable time 2. "Limited" warranty -- when less than full warranty is being offered |
1. Opinion (puffing) 2. Exclusion or limitation (UCC 2-316 (1)) 3. No statement by seller |
| Implied Warranty of Merchantability (UCC 2-314) |
When the seller is a merchant who deals in goods of the kind sold, the seller warrants that the goods sold are properly packaged and labeled, are of proper quality, and are reasonably fit for the ordinary purposes for which such goods are used | 1. Specific Disclaimer - can be oral or in
writing, but must mention "merchantability" and if in writing, must be
conspicuous (UCC 2-316(2)) 2. Sales stated "As Is" or "With all faults" (UCC 2-316(3)(a) 3. If there is an examination by the buyer, the buyer is bound by all defects found, or that should have been found; if the buyer refuses or fails to examine, the buyer is bound by obvious defects (UCC 2-316(3)(b)) 4. Course of dealing, performance, or usage of trade (UCC 2-316(3)(c) |
| Implied Warranty of Fitness for a
Particular Purpose (UCC 2-315) |
Arises when -- 1. The buyer's purpose or use is expressly or impliedly known by the seller, and 2. The buyer purchases in reliance on the seller's selection |
1. Specific disclaimer -- must be in writing
and conspicuous. For example, "There are no warranties which extend beyond the
description on the face hereof." (UCC 2-316 (2)) 2. Same as merchantability above (numbers 2 through 4) |
| Implied Warranty Arising from Course
of Dealing or Trade Usage (UCC 2-314 (3)) |
By prior dealings and/or usage of trade | Exclusion by specific language or as provided under UCC 2-316 |
| Alternative: | Seller Liable to: | Liable to: |
| A | Buyer, buyer's family, and guests | Personal Injury |
| B | Buyer, buyer's family, and any natural person expected to use the product | Personal Injury |
| C | Buyer, buyer's family, and anyone expected to use the product
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Personal and Property Injury Minnesota Statutes 336.2-318 Third party beneficiaries of warranties express or implied. A seller's warranty whether express or implied extends to any person who may reasonably be expected to use, consume or be affected by the goods and who is injured by breach of the warranty. A seller may not exclude or limit the operation of this section. |
Product Liability
| Liability Based on Negligence or Fraud | 1. Due care must be used by the manufacturer
in designing the product, selecting materials, using the appropriate production process,
and placing adequate warnings on the label or product 2. Privity of contract is not required. A manufacturer is liable for failure to exercise due care to any person who sustains an injury proximately caused by the negligently made (defective) product 3. Fraudulent misrepresentation of a product may result in the tort of fraud. A manufacturer may also be liable for non-fraudulent (innocent) misrepresentation of the product to a user. |
| Requirements of Strict Product
Liability
Restatement (Second) Torts 402A |
1. The defendant must sell the product in a
defective condition 2. The defendant must normally be engaged in the business of selling that product 3. The product must be unreasonably dangerous to the user or consumer because of its defective condition (in most states) 4. The plaintiff must incur physical harm to self or property by use or consumption of the product (Courts will also extend strict liability to include injured bystanders) 5. The defective condition must be the proximate cause of the injury or damage 6. The goods must not have been substantially changed from the time the product was sold to the time the injury was sustained. |
| Requirements of Strict Product
Liability
Restatement (Third) Torts Product Liability |
1. Manufacturing Defects A product “contains a manufacturing defect when the product departs from its intended design even though all possible care was exercised in the preparation and marketing of the product.” This is strict liability, or liability without fault. 2. Design Defects A product “is defective in design when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe.
3. Warning Defects A product “is defective because of inadequate instructions or warnings when the foreseeable risks of harm posed by the product could have been reduced or avoided by the provision of reasonable instructions or warnings by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the instructions or warnings renders the product not reasonably safe.” There is no duty to warn about risks that are obvious or commonly known. There is a duty to warn of harm that can result from foreseeable misuse. |
| Liability Sharing | In cases in which plaintiffs cannot prove which of the many distributors of a harmful product supplied the particular product that caused the plaintiffs" injuries, some courts have applied industry-wide liability. All the firms that manufactured and distributed the harmful product during the period in question are then held liable for the plaintiffs' injuries in proportion to their respective shares of the market directed by the court. |
| Possible Defenses to Product Liability | 1. Misuse of the product by the user or consumer in a way unforeseeable
by the manufacturer 2. Assumption of the risk on the part of the user or consumer 3. Contributory negligence on the part of the user/consumer. If allowed, liability may be distributed between the plaintiff and defendant under the theory of comparative negligence. 4. Commonly Known Dangers If a plaintiff’s injury resulted from a commonly known danger, the defendant will not be liable. |
Common Torts
| Intentional Torts against Persons | 1. Assault & Battery -- am unexcused and
intentional act that causes another person to be apprehensive of or to fear immediate
harm. Assault resulting in physical contact is called battery 2. False imprisonment or false arrest - intentional confinement or restraint of another person's movement without consent or justification 3. Infliction of mental distress - An intentional act that amounts to extreme and outrageous conduct resulting in severe emotional distress to another. 4. Defamation (libel or slander) - A false statement of fact, not made under privilege, which is communicated to a third person, and which causes damage to a person's or product's reputation. For public figures, plaintiff must prove malice. 5. Invasion of the right of privacy - Publishing or otherwise making known or using information relating to the private life and affairs of a person without that person's permission or approval 6. Misrepresentation (fraud, deceit) - A false representation made by one party - by a misstatement of facts or by conduct - with the intention of deceiving another and on which the other reasonably relies to his or her detriment. |
| Intentional Torts against Property | 1. Trespass to Land - Invasion of another's
real property without consent or privilege. Specific rights and duties apply once a person
is expressly or impliedly established as a trespasser. 2. Trespass to personal property or Conversion - Unlawfully damaging or interfering with the owner's rights to use, possess, or enjoy his or her personal property. Conversion occurs when the personal property of the owner is wrongfully converted to the use of the trespasser. |
| Unintentional torts | 1. Negligence - The careless performance of a
legally required duty or the failure to perform a legally required act. Elements that must
be proved are that a legal duty exists, that the defendant breached that duty, and that
the breach was the proximate cause of damage. 2. Strict Liability - A person is held liable, regardless of care exercised, for damages or injuries caused by his or her product or activity. This includes liability for defective products (see Product Liability Notes) and liability for abnormally dangerous activities 3. Negligent Infliction of Emotional Distress - An unintentional act that amounts to extreme and outrageous conduct resulting in severe emotional distress to another. |
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