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LES: Week Nine (Third Exam)
Terms in this set (59)
Affirmation of fact or promise of performance (samples, models, descriptions).
Restriction: Must be part of the basis of the bargain.
Disclaimer: Cannot make a disclaimer inconsistent with an express
Implied Warranty of Mechantability
Given in every sale of goods by a merchant ("fit for ordinary purposes)
Restriction: Only given by merchants
Disclaimer: 1. Must use disclaimer of quality or us "merchant-ability" or general disclaimer "as is" or "with all faults" 2. If written--(record) must be conspicuous
Implied Warranty of Fitness for a Particular Purpose
Seller knows of buyer's reliance for a particular use (buyer is ignorant).
Restriction: Seller must have knowledge--buyer must rely.
Disclaimer: 1. Must be in writing(record) 2. Must be conspicuous 3. Must be clear there are no warranties (using specific language) or 4. Also disclaimed with "as is" or "with all faults"
Given in every sale
Restriction: Does not apply in circumstances where apparent warranty is not given.
Disclaimer: Must state " There is no warranty of title".
Social Regulatory Cycle/Litigation
LATENCY: Only people in Aide situation are aware; Demographics reflect trends; Scientific studies and journals; Sometimes international appearance. Industry specific.
AWARENESS: Well-read people only, appearance in restricted periodicals such as Wall St. journal.
ACTIVISM: More popular attention, localized laws, not national; News-TV, radio, petitions, etc.
REGULATION: Litigation, government regulation.
What was the required legal temperature for cooking burgers at the time of the E-coli illnesses and deaths?
What is bait and switch?
A sales tactic prohibited by the FTC.
Is a Latin term that means "let the buyer beware."
What temperature was Jack-in-the-Box cooking its burgers when the E-Coli illnesses and deaths occurred?
What did the GM internal memo estimate the cost of the exploding gas tanks would be to GM?
2.40 per car
The implied warranty of merchantability
is given in every sale by a merchant unless property disclaimed.
Which car that GM manufactured had issues similar to the Pinto?
What did the memo entitled, "Fatalities Associated with Crash Induced fuel leakage and Fires" analyze?
The cost-benefit analysis of producing the Pinto as is or changing its design/components.
Which of the following is NOT an example of an express warranty?
This is the finest spring water available.
Razor scooters had to issue a recall because the bolts created to connect the t-handle bars of the scooter with the board were too short to hold the handle bars on. What type of product liability issue is involved in this situation?
A restatement section 402 defect in design.
Bait and Switch
Term given to advertising technique in which a low-price product is advertised and then the customer is told that the product is unavailable or is talked into a higher-price product; prohibited by FTC.
Federal Trade Commission (FTC)
Federal agency responsible for regulation of unfair and deceptive trade practices, including deceptive advertisements.
In negligence, a defense that allocates responsibility for an accident between the plaintiff and defendant when both were negligent and allocates the recovery in proportion to liability. WRONG
Expressed promise by seller to the quality, abilities, or performance of a product.
For administrative agencies, a type of plea bargain; a settlement document for an administrative agencies chargers.
Implied Warranty of merchantability
A warranty that the goods are of average quality; given in every sale of goods by a merchant.
Implied Warranty for a particular purpose
Warranty given by seller to buyer's specified needs that are known to the seller.
Direct contractual relationship.
Liability without fault.
Development of Product Liability
Initially courts Followed a Theory of Caveat Emptor (Let the buyer beware)- No liability for the seller.
Hennigsen vs. Bloomfield motors- Caveat Emptor Removed.
Advertising as a Contract Basis for Product Liability
UCC Article II (Sales) Governs.
Description of goods and abilities
Promise of performance
Seller need intend to create warranty or use the terms "promise", "warrant", or guarantee. Example: Fabric will not shrink ; 50/50 polycot ton- non-toxic.
Federal Regulation of Warranties and advertising
Federal trade Commission given broad authority.
Federal trade Commission Act authorizes FTC as enforcement agency. (passed in 1994, requires regulation of "unfair and deceptive trade practices".
Broadened by Wheeler-Lea Act of 1938
"Is public deceived?" standard
Not limited to adverse impact on competition.
FTC improvements Act of 1980
Put some restrictions on FTC regulation.
Federal regulations of internet advertising
Ad-blocking software is evolving.
Property rights and speed.
Content control and accuracy
"No aspirin", "aspirin free", all dairy products, and so on (like express warranties")
Like express warranties too-promise of performance.
FTC has required corrective advertising when unsubstantiated claims have been made.
Celebrity must have used product.
If celebrity has not used product, source of claims must be given.
Bait and switch
Prohibits advertising of cheaper product and then getting customers to buy more expensive product
FTC took a laissez-faire approach during the 1980's
Congress amended trademark law in 1989 to allow competitors to bring suit for dececptive statements about products in competitor's ads
Elimination of ads
Ad regulation by FDA
as more prescription meds are advertised directly, FDA is regulating more.
State regulation of advertising
Professional ads (lawyers, accountants)
Similar to FTC, generally through state attorneys general
The Implied Warranty of Merchantability
Given in every sale of goods by merchant
Goods are fit for ordinary purposes
Average quality with adequate packaging
The Implied Warranty of Fitness for a Particular Purpose
Arises when seller promises buyer goods are appropriate for a particular purpose.
Requirements: Seller has the particular skill or judgement, Buyer is relying on that skill or judgement, Seller knows or has reason to know of reliance, seller makes recommendation to buyer.
Eliminating Warranty Liability by Disclaimer
Use "with all faults", "as they stand", "as is"--disclaims both implied warranties.
Can also disclaim by suing the names of both warranties.
Privity Standards for UCC Recovery
Can recover from manufacturer
Privity at buyer level- three code alternatives: Alternative A: buyer, members of household, and guests, Alternative B: any natural person expected to use goods, Alternative C: extends to any person expected to use the goods.
Restaurant owner is liable for food defects.
Strict tort liability
Defendant has the duty to manufacture a reasonably safe product/ was in the business of selling or manufacturing product.
The duty was breached.
Breach of duty caused plaintiff's injury (product reached plaintiff in same condition).
Foreseeable that defect will cause injury.
Plaintiff has property or physical damages.
Unreasonably Dangerous Defective Condition
Improper warnings or insufficient instructions/failure to warn.
Negligent parking, manufacturing, or handling. Example: Drug tampering/food tampering cases.
Reaching the buyer in the same condition
No substantial change in product design that caused malfunction or injury.
Product not tampered with during distribution.
The requirement of a seller engaged in a business
Need not to be a merchant
Need not to be "in the business" of selling that product. Examples: Peanuts sold at game by a baseball club.
Recovery allowed in some cases against defendants who did not manufacture the plaintiff's particular product, but manufacture the product.
Same elements as strict tort liability plus prior knowledge of defective condition; punitive damages if plaintiff can show manufacturer/ seller knew of defect.
Privity Issues in Tort Theories of Product Liability
Don't need privity
Was injury to that party foreseeable?
Should Anticipate household use, presence of children, and so on.
Misuse or Abnormal Use of A product
Examples: Exceeding the weight limitations, using around flames.
is a complete defense
overlaps a misuse
Some states have comparative negligence; reduces the amount of recovery instead of being a complete defense
Assumption of risk
Plaintiff aware of danger
Does it anyway
Is a defense to liability
Product liability reform
Verdicts and costs affect International competitiveness
Congress has made efforts to make laws uniform
restatement (3rd) is proposed
Business need to focus on prevention
Federal standards for Product liability
Consumer product safety commission: Federal penalties of $2000 per Violation
Up to 500,000 maximum (willful violations carry $50,000 and/or 1 year imprisonment)
Uniform Product Liability Act
International issues in Product liability
EU trying to gain uniformity
"State-of-the-art" defense (product as good as it can be upon release)
International standards Organization's 9000 guidelines for Quality Assurance
CISG Limits product liability
FTC remedy that requires a company to run ads explaining previous deceptive ads or run a new statement in future ads.
For administrative agencies, a type of plea bargain; a settlement document for an administrative agency's charges.
A provision in contract that eliminates liability such as a warranty disclaimer or disclaimer of tort liability.
A defense to an otherwise valid contract that is grossly unfair to one side in the contract.
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