Chapter One | Introduction And Overview

The Defective Product

The area of law termed products liability is a hybrid of both contract law (involving either express or implied promises, found in the law of warranties) and tort law (based upon specific conduct, oftentimes reflected in a negligence standard, or actions based on fraud or misrepresentation). In general terms, products liability refers to the obligations or duties of manufacturers, wholesalers (or other middlemen), or retailers/sellers (as well as other parties) to consumers, purchasers, users, and even bystanders when a product is found to be defective. No matter what the theory of liability, the predicate of a suit in products liability is a defective product.

Three Sources of a Defective Product

A defect in a product can arise from three common sources:

• A manufacturing or production defect — that occurs from a random and atypical breakdown in the manufacturing process;
• A design defect — that is characteristic of a whole product line (such as the Ford Pinto); or
• A marketing defect — involving inadequate warnings relating to risks or dangers, or inadequate instructions relating to how to properly or safely use a product. Many cases in the area of a marketing defect involve food, drugs, or more recently, children’s toys, cribs, or car seats).

Three Theories to Bring Suit

Under the common law, there were three theories under which a plaintiff could bring a suit for personal injury or property or economic damage caused by a defective product.

Negligence, a tort action, focuses on the defendant’s conduct or omission and whether that act or omission was reasonable in light of the defendant’s duty of due care for others. Negligence in a products liability action requires proof that a product was designed or manufactured in an unreasonable manner, or that the warnings or directions were inadequate under the circumstances. One of the features of a suit based on negligence is the requirement, in many cases, of expert proof that can be quite expensive for an ordinary plaintiff.

Another negative was the existence of the doctrine of privity. The the doctrine of privity made it difficult, if not impossible, to reach a negligent manufacturer with whom an injured plaintiff had not entered into a contract. What happened then if a plaintiff sued the retailer? The retailer was absolved from liability because the retailer had normally only passed on the product and was not ordinarily negligent.

Since there was no liability on the part of either the manufacturer or retailer, the common law doctrine of caveat emptor, or “let the buyer beware” was routinely applied to negligently made products. The requirement of vertical privity between the plaintiff and the manufacturer was later severely limited in the 1916 case of MacPherson v. Buick Motors.

A further negative was the defense of contributory negligence, which at common law, was an absolute bar to recovery by a plaintiff. Finally, the sometimes-tortured reasonable man standard could be problematic in negligence cases, more specifically, reaching a consensus on what would be the standard required of a reasonable manufacturer or reasonable designer or of a reasonable plaintiff or reasonable defendant under the circumstances of the case.

Misrepresentation and fraud actions focus on proof of a false representation or statement of a material fact (which may be found in words, actions, concealment, or in some cases silence where the common law found a duty to speak), upon which a plaintiff reasonably relied in entering into a contract. At common law, proof of falsehood was required to prove misrepresentation, and proof of scienter, the intent to deceive (arising from either knowledge of falsity or reckless disregard for the truth), was a part of the prima facie proof required in cases of fraud. An assertion of safety or of a safe product formed the basis of many fraud claims.

A drawback to a suit based on fraud was the common belief or even expectation that all sellers would in fact engage in a certain amount of sales puffing or exaggeration regarding their products, and the common notion that no matter how careful a manufacturer might be, no one could absolutely guarantee the safety of any product in all cases, thus negating the element of reasonable reliance.

Actions for breach of warranty were essentially based on contract promises, either express or implied. Warranties were subject to disclaimers on the part of sellers and could also be severely limited in their scope. Warranty actions also were subjected to severe notice requirements (that is, the injured party had to give the party causing the injury a notice that damage/injury had occurred within a rather limited period of time). Another drawback is the plaintiff had to show that he or she relied upon specific words or promises made by a seller in order to maintain a warranty action.

Warranties under the Uniform Commercial Code (UCC) arose in cases involving the sale of goods, and not in the myriad of other types of transactions that resulted in goods or personal property reaching the hands of a consumer—most notably through leases or bailments.
Under the common law, there was also an aspect of privity – horizontal privity—that limited a manufacturer’s liability under a warranty to the actual purchaser of a product and not to any other parties. Privity of contract was greatly expanded with the decision in Henningsen v. Bloomfield Motors (See Chapter 6 for the case), which saw the expansion of liability under the warranty of merchantability to persons other than the consumer/buyer (horizontal privity). This expansion of horizontal privity may be seen in UCC § 2-318, which significantly expanded the range of potential plaintiffs in a warranty action.

The drawbacks inherent in the three common law forms of action led to the development of the modern and now preferred theory in products liability cases—strict (or absolute) liability in tort. The theory of strict liability focuses exclusively on the existence of a product defect, and not on the nature of the conduct of the defendant (negligence), or on specific words or promises (warranty/misrepresentation/fraud). Strict liability permits an injured party (broadly defined) to sue a manufacturer directly, even in the absence of privity of contract and will not permit manufacturers to disclaim their duty of due care. Notice requirements under strict liability are less stringent than under warranty actions, which were often as short as three months. Actions under strict liability permit plaintiffs to sue within more generous statute of limitation time periods. (Under the Uniform Commercial Code, the Statute of Limitations can never be less than one year and may extend to no more than four years.)

What is a Product?

As a preliminary matter…. A product can be defined by making reference, for example, to the definition of a good, found in UCC Section 2-105-1: A good is defined as an item of personal property that is both movable and tangible. By definition, pure services would be excluded from the area of products liability. In cases under the UCC where both a good and a service are involved, courts will use the “which predominates” test to determine if the transaction involved is a good or a service. According to the UCC, food or drink served in a restaurant is considered a good by definition.

The definition of product is also sufficiently broad to include certain intangibles such as electricity, some natural products (crops, pets, plants), some writings (like a navigation chart—although in the case of certain writings, courts are properly solicitous of the implications of the First Amendment). In certain cases, real property, notably, defectively made mass produced or manufactured homes, may be considered as products, although there is still a pronounced reluctance to extend products liability to transactions involving land (real estate), buildings, or appurtenances (unattached buildings).

Questions

1. Find modern day examples of the following:
   1. Manufacturing or production defect
   2. Design defect
   3. Marketing defect
2. Given the shift from the three common law theories to the notion of strict liability, how is it different from its predecessors?
3. What were some of the drawbacks to the following common law theories:
   1. Negligence
   2. Misrepresentation & fraud
   3. Warranty Actions
4. How do courts use the “which predominates” test to determine if the transaction involved is a good or service under the UCC? Find a case to support this.
5. In the Ford Pinto case, which type of defect did the product exhibit? Moreover, which of the three common law theories can best be applied for the action?