CHAPTER 7

Business Torts and

Product Liability

BUSINESS TORTS AND PRODUCT LIABILITY

Key Points• Identify the principal intentional business torts and available defenses• Understand intentional torts• Understand product liability• Understand strict liability

CRIMES

A CRIME IS A PUBLIC WRONG WHEN ONE BREACHES A DUTY OWED TO SOCIETY

TORT

A TORT IS A CIVIL WRONG, OTHER THAN A BREACH OF

CONTRACT, FOR WHICH THE COURT WILL PROVIDE A REMEDY NORMALLY IN THE FORM OF DAMAGES

3 GENERAL TORT

CATEGORIES

Intentional

Product Liability

Strict Liability

INTENTIONAL TORTS

FOUR ELEMENTS

1. DUTY

2. BREACH OF DUTY

3. CAUSATION

4. INJURY

FAULT

An element in most torts except for:

Products liability Strict liability

INTENTIONAL TORTS AGAINST PERSONS

Assault

INTENTIONAL TORTS AGAINST PERSONS

Battery

INTENTIONAL TORTS AGAINST PERSONS

False imprisonment

INTENTIONAL TORTS AGAINST PERSONS

Fraud

INTENTIONAL TORTS AGAINST PERSONS

Defamation:

slander

libel

INTENTIONAL TORTS AGAINST PERSONS

Invasion of privacy:Appropriation of a person’s name or

likenessIntrusionPublic disclosure of private factsFalse light

INTENTIONAL TORTS AGAINST PERSONS

Intentional infliction of emotional distress

INTENTIONAL TORTS AGAINST PERSONS

Personal injury

INTENTIONAL TORTS AGAINST PERSONS

Malpractice

(Medical, legal, accounting, etc.)

INTENTIONAL TORTS AGAINST PERSONS

Wrongful death

INTENTIONAL TORTS AGAINST PROPERTY

Trespass to real property

INTENTIONAL TORTS AGAINST PROPERTY

Trespass to personal property

INTENTIONAL TORTS AGAINST PROPERTY

Conversion

INTENTIONAL TORTS AGAINST PROPERTY

Nuisance

INTENTIONAL TORTS AGAINST PROPERTY

Injurious falsehood

BUSINESS TORTS

Patent Infringement

BUSINESS TORTS

Copyright infringement

BUSINESS TORTS

Trademark infringement

BUSINESS TORTS

Unfair competition

INTENTIONAL TORT DEFENSES

Consent Mistake Necessity Self-defense

PRODUCT LIABILITY

PRODUCT LIABILITY CLAIMS

Causes of action against manufacturer, distributor and/or sellers for injury from a defective product to the person or property of purchaser, consumer and/or

bystander

POSSIBLE TORT AND/OR CONTRACT CLAIMS

Negligence

Breach of warranty

Strict liability

NEGLIGENCE

NEGLIGENCE

Failure to do what a reasonable person would do or doing what a reasonable person would

not do

PLAINTIFF MUST PROVE EACH OF THE FOLLOWING

ELEMENTS:

– Duty– Breach of duty– Causation:

• Actual cause• Proximate cause

– Injury

MANUFACTURING DEFECTS

Improper manufacturing of goods gives rise to tort

claim

DESIGN DEFECTS

Negligence law requires that manufacturers designing products to anticipate and avoid consumer injury

Two tests:

Risk/utility test:

Consumer expectations test:

INADEQUATE WARNINGS

Failure to warn of a danger associated with its product creates manufacture and maybe seller liability!!!!

INADEQUATE WARNINGIssues include:

– Whether the supplier knew or should have known that the product could be dangerous in a foreseeable use

– The feasibility of an effective warning

– The probable seriousness of the injury

NEGLIGENCE DEFENSES

Comparative Negligence

Contributory Negligence

Assumption of Risk

WARRANTIES AND BREACH OF WARRANTIES

EXPRESS WARRANTIES

Express warranty is when a seller of goods states a fact or makes a promise regarding the character or quality of the goods

EXPRESS WARRANTIES

Created by:– Any affirmation of fact or

promise

– Any description of the goods

– Any sample or model

– Advertisement

EXPRESS WARRANTIES

Sales talk or puffing does not create an express warranty

EXPRESS WARRANTIES

An “expert’s” opinion may create an express warranty

DISCLAIMERS – EXPRESS WARRANTIES

May be disclaimed or modified only with great difficulty

IMPLIED WARRANTIES

An implied warranty automatically attaches to the sale of goods

by operation of law

TWO TYPES

1. Merchantability

2. Fitness for a Particular Purpose

DISCLAIMERS-IMPLIED WARRANTIES

May be excluded or modified as follows:

– Any disclaimer of merchantability must mention merchantability and, in the case of a writing, must be conspicuous

– Any disclaimer of fitness for a particular purpose must be by a writing and conspicuous

STRICT LIABILITY

RES IPSA LOQUITUR

• The thing speaks for itself

• In rare cases, plaintiff need not prove manufacturer’s negligence

• Injury caused by an instrumentality under control of defendant·

STRICT LIABILITY—PART IDefinition: One who sells any product in a defective condition, unreasonably dangerous to user or consumer, is liable for harm caused if:

· The seller is engaged in the business of selling such a product and

· The product is expected to and does reach user without substantial change in the condition in which it is sold

STRICT LIABILITY—PART II

• Coverage: The rule applies— – Even though seller has exercised all

possible care– Even where the user has not bought the

product from seller– To all those in the distribution chain,

from manufacturer through ultimate retailer

STRICT LIABILITY—PART III

Policy:

To place the burden and cost of injury on the chain of distribution (which can both insure for and spread the cost), rather than imposing the entire burden on the injured user

Defenses:

• Assumption of risk

• Product misuse

• Normally not assumption of risk

TORT REFORM? PRO

• Tort costs are about 2.2% of America’s GDP• Tort costs are higher in the U.S. than in other countries• Too much of tort awards get paid to the attorneys rather than the victims

TORT REFORM? CONLawsuits are less than 2% pf

spending and product liability suits are only a fraction of that.

Insurance costs don’t drop when tort damages awards are capped

Only 3 % of tort cases go to trialPunitive damages are only

awarded in 3.3% of tort cases

See You in Court? Maybe Not

States have been cracking down on the types of suits that can be filed and how much can be recovered. Here’s a look at some of the restrictions.

McGraw-Hill/Irwin ©2007 by the McGraw-Hill Companies, Inc. All rights reserved.

McGraw-Hill/Irwin ©2007 by the McGraw-Hill Companies, Inc. All rights reserved.

See You in Court? Maybe NotStates have been cracking down on the types of suits that can be filed and how much can be recovered. Here’s a look at some of the restrictions.

Class-action restrictionsLegislatures in nine states have made it harder to combine large numbers of claimants in a single

lawsuit

Medical- malpractice maximums

Limits on damages, including pain and suffering, and similar measures have been approved

by 23 states

Punitive-damages limitsCeilings on the amount of punitive

damages have been passed in 32 states

Barring out-of-state plaintiffsEight states, once meccas for out-of-state

plaintiffs, now curtail suits by people with no connection to the jurisdiction

Appeal-bond reformNearly three dozen states have limited the size of the bond needed to appeal a verdict, removing a

huge burden for companies

GunsSome 33 states have passed laws protecting firearms

makers from certain suits filed by gun victims

Obesity/junk foodLaws in 23 states keep you from suing the likes

of McDonald’s for making you fat

DrugsA number of states have made it harder to

win claims against pharmaceutical companies if their products have been approved by the

U.S. Food & Drug Administration

Class-action restrictionsLegislatures in nine states have made it harder to combine large numbers of claimants in a single

lawsuit

Medical- malpractice maximums

Limits on damages, including pain and suffering, and similar measures have been approved

by 23 states

Punitive-damages limitsCeilings on the amount of punitive

damages have been passed in 32 states

Barring out-of-state plaintiffsEight states, once meccas for out-of-state

plaintiffs, now curtail suits by people with no connection to the jurisdiction

Appeal-bond reformNearly three dozen states have limited the size of the bond needed to appeal a verdict, removing a

huge burden for companies

GunsSome 33 states have passed laws protecting firearms

makers from certain suits filed by gun victims

Obesity/junk foodLaws in 23 states keep you from suing the likes

of McDonald’s for making you fat

DrugsA number of states have made it harder to

win claims against pharmaceutical companies if their products have been approved by the

U.S. Food & Drug Administration