Warranties

1
CHAPTER 19
Product Warranty

• Warranties
• Product Liability

2
Product Liability (Tort)

• Based on
• Negligence
• Misrepresentation
• Requirement for Strict Liability

3
Express Warranty

• Warranty Contractual promise by seller
  regarding quality, character or suitability of
  goods sold
• Creation of Warranty/Guarantee
• Specific words or intent not required
• Statement of fact or promise
• Concerning the goods
• Which becomes a part of the bargain
• Question 2 at end of chapter
• The court found that in agreeing to produce
  crystal balls conforming to the prototype sample
  approved by the testing laboratory, Plastic had
  created an express warranty that its product
  would conform to the sample. It breached that
  warranty when the production balls had thinner
  walls that differed from the prototype sample and
  would not pass the safety test. Beck v. Plastic
  Products Co., Inc., 412 N.W.2d 315 (Ct. App.
  Minn. 1987).

4
Express Warranty

• Creation of Warranty/Guarantee
• Advertisements
• Bobholz v. Banaszak, p.321
• Where the seller in one advertisement described a
  boat as being in perfect condition, in another
  ad described it is as in excellent condition,
  and represented to the potential buyer in a
  conversation that the boat had been properly
  maintained and winterized in the previous year,
  that statements were held to constitute express
  warranties. The statements were affirmations of
  fact relating to the goods and the representation
  regarding the quality of the boat was a basis of
  the bargain because it induced the buyer to
  purchase the boat. Note what the plaintiff must
  show in order to be able to recover on a theory
  of breach of express warranty, namely show that
  the statement was an affirmation of fact relating
  to the goods and that the representation was a
  part of the basis of the bargain because it
  induced the buyer to purchase it.

5
Express Warranty

• Creation of Warranty/Guarantee
• Not Mere Opinion/Puffery
• Question 1.Yes. The statements in the leaflet
  constituted descriptions of the capabilities of
  the product and were not mere puffing. The
  product was purchasedand used in reliance on
  those statements. They constituted an express
  warranty, and the failure of the product to
  conform to the representations was the cause of
  Klagess injury. Klages v. General Ordnance
  Equipment Corp., 19 UCC Rep. 22 (Super. Ct. Pa.
  1976).

6
Express Warranty

• Creation of Warranty/Guarantee
• Advertisements
• Question 1 at end of chapter
• Yes. The court held that the statements in the
  advertisements could create express warranties
  but that they had to be shown to be part of the
  basis of the bargain on which Cippolone had
  purchased the cigarettes. Thus (1) Antonio
  Cipollone had to prove that his wife had read,
  seen or heard the advertisements in question and
  (2) Liggett had to have an opportunity to prove
  that any advertisements read, seen, or heard by
  Cipollone were not believed by her. Cipollone v.
  Liggett Group, Inc., 893 F.2d 541 (3rd Cir.
  1990).

7
Implied Warranty

• Nature - Imposed by Law
• Merchantability- Fit for Ordinary Purpose
• Conform to promises or statements of fact made on
  label
• Adequately Packaged/Labeled
• Same Kind/Quality/Quantity w/I each unit
• Fungible (Mixed Goods that cannot be separated,
  e/g. coal), of average quality
• Acceptable in trade or business

8
Implied Warranty

• Denny v. Ford Motor Co., p.323
• Where the manufacturer designed a vehicle for
  off-road usebut marketed and sold it knowing
  that most buyers intended to use in for on-road
  drivingand the vehicle had a propensity to roll
  over when used on the highway, the manufacturer
  was held liable for breach of the implied
  warranty of merchantability on the grounds it was
  not fit for the ordinary purpose for which it was
  intended.
• Would the result have been different in this case
  if the product had been marketed solely as an
  off-road vehicle? What if had been marketed only
  as an off-road vehicle and it rolled over while
  being used off-road?

9
Implied Warranty

• Mexacali Rose v.Superior Court, p.324
• Where a customer in a Mexican restaurant was
  injured by a chicken bone contained in a chicken
  enchilada that he purchased, the court majority
  applied the foreign-natural test and held that if
  an injury producing substance is natural to the
  preparation of the food served, then it can be
  said that it was reasonably expected and the food
  cannot be considered unfit or defective. A
  minority of the court dissented, stating that no
  reasonable consumer would anticipate finding the
  bone. The minority would have applied the
  reasonable expectation test.

10
Implied Warranty

• Klein v. Sears Roebuck Co., p.325
• Where the buyer explained to the seller his
  particular needs concerning a lawnmower and
  relied on the sellers recommendation as to the
  appropriate model that would be suitable for his
  needs, the seller made an implied warranty of
  fitness for a particular purpose which was
  breached when the mower proved to be unsuitable
  for the buyers needs and he was injured as a
  consequence.
• Note the dual requirements that must be met for
  the implied warranty of fitness for a particular
  purpose to be created the seller must know the
  particular purpose for which the buyer needs the
  goods and that the buyer is relying on the seller
  to select goods suitable for that purpose.

11
Implied Warranty

• Example Marino v. Perna.
• This case involves two separate sales of a 1981
  Oldsmobile. In the first sale of the vehicle at
  an auction conducted by the Marshall of the city
  of New York, the sale was considered to be out of
  the ordinary course of business and carried no
  warranty of title. However, when the buyer at
  the auction resold the car to a co-worker, the
  sale did carry with it an implied warranty of
  title.

12
Implied Warranty

• Example Under the Code, if the seller of goods
  is a merchant with respect to goods of that kind,
  a warranty of merchantability is implied in the
  contract of sale. To be merchantable, the goods
  must be at least fit for the ordinary purposes
  for which they are sold and conform to any
  promises or affirmations of fact made on the
  container or label. When a product fails to meet
  the reasonable expectations of the user, it can
  be inferred that there was some sort of defect
  that breached the warranty. A thermos bottle
  that implodes or explodes when coffee and milk
  are poured into it is defective. Virgil v. Kash
  N Karry Service Corp., 484 A.2d 652 (Ct. App.
  Md. 1984).

13
Implied Warranty

• Question 4 at end of chapter
• No. The court adopted the reasonable expectation
  test and held that a jury could reasonably find
  that because the nature of the food was a
  hamburger (which is not usually eaten with a
  knife and fork), the restaurant customer should
  not reasonably have anticipated the presence in
  it of a bone particle. Mitchell v. BBB Services
  Co., Inc., 582 S.E.2d 470 (Ct. App. Ga. 2003).

14
Implied Warranty

• Question 5 at end of chapter.
• Yes. Where the seller at the time of contracting
  has reason to know the purpose for which the
  goods are required, and that the buyer is relying
  on the seller to furnish goods that are suitable
  for that purpose, a warranty of fitness for a
  particular purpose arises. The glasses were
  advertised as suitable for use by baseball
  players and were bought and used for that
  purpose. The buyer relied on the sellers
  assurance that the glasses were suitable for
  baseball playing. In fact, they were not. The
  lenses were so thin that they shattered into
  exceedingly sharp splinters when broken. Since
  they lacked the safety features of plastic or
  shatterproof glasses, they were not fit for
  baseball players. Filler v. Rayex Corp., 435 F.2d
  336 (7th Cir. 1970).

15
Implied Warranty

• Question 6 at end of chapter
• Yes. The court found that under Section 2-312 of
  the UCC, a merchant selling goods warrants that
  he is passing clear title to the goods. Williams
  breached that warranty of title when he sold the
  stolen camera to Brooke because a thief cannot
  pass clear title to goods, nor can his successor.
  It is irrelevant that Williams did not know the
  goods were stolen. The court also found that
  there was no effective disclaimer of the warranty
  of title through the placing of as is signs in
  the store. Brooke v. Williams, 766 P.2d 1311
  (Sup. Ct. Mont. 1989).

16
Implied Warranty

• Bryant v. Hoffman-La Roche, Inc., p. 330
• Where a patient was given some free samples of
  medicine that the manufacturer had provided to
  her physician, the patient was not entitled to
  the benefit of the implied warranties of
  merchantability and fitness for a particular
  purpose because there was no privity between the
  patient and the manufacturer. Note that if the
  doctor had provided the medicine to someone in
  his family or who was a guest in his home, the
  warranties would be available to the recipient of
  the medicine.

17
Implied Warranty

• Question 3 at end of chapter
• Yes. the court held that Eveready breached the
  implied warranty of merchantability when it
  produced batteries that leaked battery fluid on
  the consumers ankle. The batteries were subject
  to the warranty, they were defective at the time
  of sale because when they were put to their
  intended use they malfunctioned, and the injury
  was due to their defective nature. DeWitt v.
  Eveready Battery Co., Inc., 565 S.E.2d 140 (Sup.
  Ct. 2002).

18
Exclusions/Modifications

• General Rules
• Parties have right to agree to
• Courts frown on seller self-limits
• Limitation of Express Warranty
• Disclaimers must not be inconsistent with
• Thacker v. Menard, p.327
• Where a written estimate clearly disclaimed any
  warranty that the materials were fit for any
  purpose, even if a contract was formed, it did
  not include any such warranty.

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Exclusions/Modifications

• Exclusion of Implied Warranty
• For merchantability
• Must specifically mention merchantability
• If in writing must be conspicuous
• For Fitness for Particular Purpose
• Must be in writing and conspicuous
• Or by conditions of sale (e.g. as is)
• Unconscionable Disclaimers
• Courts may not enforce
• Limitation of Warranty
• May limit nature of liability

20
Who May Sue?

• Old Rule Privity of Contract Required
• Current trend Suits allowed against manufacturer

21
Who May Sue?

• Old Rule Privity of Contract Required
• Current trend Suits allowed against manufacturer
• Question 8 at end of chapter
• In Re air Crash Disaster at Sioux City, Iowa on
  July 19, 1989 / Banks v. United Airlines, Inc.
• A passenger on an airplane that crashed was not
  in privity of contract with a supplier of a
  component part to the aircraft and thus not able
  to assert a claim for breach of warranty of
  fitness for a particular purpose. The court
  declined to extend to an injured passenger the
  warranty protection the California legislature
  had given to an injured employee.

22
FTC Warranty Rules

• Magnuson-Moss Warranty Act (1975)
• Purpose of Act
• Provide Minimum Warranty Protection for Consumers
• Increase Consumer Understanding of Warranties
• Ensure Warranty Performance by Providing
  Meaningful Remedies
• Encourage Better Product Reliability

23
FTC Warranty Rules

• Magnuson-Moss Warranty Act (1975)
• Requirements
• Seller must
• I.d. who can use the warranty
• Must clearly describe goods covered by the
  warranty
• Must state nature of remedy(ies)
• Must state duration of warranty
• Must explain process for initiating a claim
• Must state any exclusions
• Must inform as to possible legal variances

24
FTC Warranty Rules

• Magnuson-Moss Warranty Act (1975)
• Full Warranty
• Fix or replace
• Not limited in duration
• Not limit consequential damages
• Refund option if cant repair/replace
• No unreasonable duties on consumer
• Notify of exclusion where improper use

25
FTC Warranty Rules

• Magnuson-Moss Warranty Act (1975)
• If Not Full Limited Warranty
• Availability of Warranty
• In writing, before sale
• Enforcement
• FTC enforces disclosures

26
Negligence

• Types
• Improperly Manufactured
• Misrepresented
• Failure to Disclose/Warn/Instruct Known Defects
• Question 10 at end of chapter.
• No. The court held that under the circumstances
  Honda satisfied its duty to warn under the law of
  strict liability and negligence. It was not
  necessary to warn of every conceivable danger
  that could be encountered if the user rode the
  bikes on public highways. The boys were old
  enough to read and to comprehend the warning they
  were given. Baughn v. Honda Motor Co., Ltd., 727
  P.2d 655 (Sup. Ct. Wash. 1986).

27
Negligence

• Types
• Failure in Design Due Care
• Weigl v. Quincy Specialties Company, p. 334
• Where a lab coat marketed for that purpose had a
  tendency to melt and fuse to the user when
  exposed to a flame, burned much more readily than
  lab coats manufactured by other companies, and
  the coat contained no warning as to its
  flammability characteristics, a person who was
  badly burned while wearing the coat was entitled
  to recover on the theories of defective design,
  negligent-testing, failure to warn, and breach of
  warranty.

28
Negligence

• Types
• Failure in Design Due Care
• Question 9 at end of chapter
• Griggs v. BIC Corp., p.270-271
• Where a three-year-old child started a house fire
  with a disposable lighter that seriously injured
  his younger brother, the manufacturer of the
  lighter was potentially liable for negligence for
  failing to manufacture a childproof lighter. The
  court found that it was foreseeable that a
  lighter might fall into the hands of a child who,
  although not the intended user, could ignite it
  with the risk of serious injury to himself and
  others. Note that the court found that strict
  liability was not applicable. Could a case be
  made that strict liability should be applicable
  to lighters?

29
Negligence

• Types
• Failure in Design Due Care
• Example In designing a product, the manufacturer
  has a duty to design it so that it is reasonably
  safe in light of the risks of injury that can be
  foreseen. A risk is not foreseeable where a
  product is used in a manner that could not be
  reasonably anticipated. The purposes of an
  automobile trunk are top transport, show and
  secure the spare tire, luggage, and other goods,
  and to protect them from the weather. The
  dimensions of a trunk, the height of its sill and
  load floor, and the effort required to lower the
  trunk lid and then to engage its latch are among
  the design features that encourage closing and
  latching it from the outside. Its design makes
  it almost impossible for an adult to
  intentionally enter the trunk and close the lid.
  Use of the trunk as a means to commit suicide was
  unforeseeable and the manufacturer had no duty to
  design the trunk in light of this risk.
  Manufacturers also have no duty to warn of a risk
  that is unforeseeable. In addition, they have no
  duty to warn of duties that are obvious. In
  fact, Daniell initially took that risk. Finally,
  the potential efficacy of a warning, given
  Daniells use for a deliberate suicide attempt,
  is questionable. Daniell v. Ford Motor Co.,
  Inc., 581 F. Supp. 728 (D.N.M. 1984)

30
Negligence

• Types
• Failure in Design Due Care
• Example Commonly there are three types of
  product defects that may give rise to a claim
  that a manufacturer of a product should be liable
  in strict liability (1) a flaw in the
  manufacturing process resulting in a product that
  differs from the manufacturers intended result
  (2) products that are perfectly manufactured but
  are unsafe because of the absence of a safety
  device, that is a defect in design and (3)
  products that are dangerous because they lack
  adequate warnings or instructions. Here, the
  claim is based on an asserted failure of the
  dangerous propensities of Halcion that were known
  or scientifically knowable. The California
  Supreme Court has held that a drug manufacturer
  may not be held strictly liable for failure to
  warn of a drugs inherent risks where it neither
  knew nor could have known by the application of
  scientific knowledge available at the time of
  distribution that the drug could not produce the
  undesirable side effects suffered by a plaintiff.
  The court was concerned that unless limited,
  strict liability might make drug companies
  reluctant to undertake the risks of developing
  and marketing beneficial new drugs. Accordingly,
  it set forward the following statement of the
  law A manufacturer is not strictly liable for
  injuries caused by a prescription drug so long as
  the drug was properly prepared and accompanied by
  warnings of its dangerous propensities that were
  either known or scientifically knowable at the
  time of distribution. Accordingly, Carlin should
  be given an opportunity to show that the alleged
  side effects were known or knowable at the time
  she purchased the drug and that she was not given
  suitable warning concerning them. Carlin v.
  Superior Court of Sutter County, 38 Cal. Rptr.2d
  576 (Ct. App. Cal. 1995).

31
Negligence

• Obvious Danger Defense
• Not a complete defense, but a factor
• Privity/Disclaimers Not Apply

32
Strict Liability

• Elements
• Sold in defective condition
• Unreasonably dangerous
• Product of type seller normally sells
• Received in unaltered condition
• Consequential harm

33
Strict Liability

• State Of The Art-Dangerous or Defective
• What known that could have been done to make
  safer?
• Uniroyal Goodrich Tire Co. v. Martinez, p.336
• The manufacturer was held strictly liable for
  injuries caused by the plaintiffs failure to
  follow a suitable warning where the manufacturer
  was aware of a safer tire design but had not
  utilized in the design of the tire that caused
  the injury.

34
Strict Liability

• Industry-wide Liability (e.g. asbestos)
• Statutory Limitations
• Statutes of Repose (like statute of limitations)

35
Elements Strict Liability

• Defective Condition or Unreasonably Dangerous
• Selling Engaged in Selling Product
• Reach Consumer Without Change
• Harm/Damage From Condition

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Defenses- Strict Liability

• Assumption of Risk
• Nonforeseeable Product Misuse
• Contributory/Comparative Negligence