Warranties and Product Liability - Essay Example

Warranties Running Head: Warranties and Product Liability WARRANTIES AND PRODUCT LIABILITY Warranties 2 Concomitant to any contract of sale are the words "warranty" and "product liability". Hardly does any business sale transaction hold on to the caveat emptor or 'let the buyer beware' precept. Except for sale of used goods and auction sales, buyers, especially purchasers in good faith are now protected by law through warranties and product liabilities. In USA alone, the Uniform Commercial Code, article 2 on law on sales and the Magnuson-Moss Warranty Act carry provisions on warranties and liabilities. A warranty is defined as an expressed or implied statement that some situation or thing is as it appears to be or is represented to be. It is usually a written guarantee of the integrity of a product and of the maker's responsibility for the repair or replacement of defective parts" (Merriam Webster Dictionary). A warranty also comes to the fore in any contract of sale whenever such contract is subjected to any condition whereby such is not performed. The promisee therefore, has two options. He may refuse to proceed with the contract by reason of a breach of warranty or he may waive the performance of that condition. To test whether in a contract of sale there is warranty, the pertinent question is whether the buyer is an 'ignorant' buyer who relied on the seller's affirmation of fact or promise or not. If he is, there is warranty. However, in one case, there is no warranty when the purchaser is expected to have an opinion and the vendor has no special opinion (Spencer Heater Co v Abbot). In the hereinabove definition of warranty, there are 2 kinds of general warranties enumerated i.e. express warranty and implied warranty. A third one, statutory warranty has recently been added via legal enactments. From these 3 categories are engendered several other warranties which may be express or implied depending on the facts of the case. Express warranty is any affirmation of fact or any pledge by the vendor relating to the goods if the natural inclination of such affirmation or pledge is the inducement of the vendee to buy the same, and if the vendee purchases by reason of such affirmation or pledge. Thus, it is Warranties 3 imperative that such warranty as derived from the language of the contract must be explicit and may take form as an affirmation, pledge or representation (Parish v Kotthoff). The Patricia Henley case whereby petitioner Henley sued Philip Morris for damages on the basis of the latter agent's misrepresentation to her that she should shift to Marlboro Lights in order to escape or diminish the risks of smoking, is one potent example of express warranty. The court ruled that the petitioner's carcinoma of the lungs was caused by her chain-smoking of Marlboro Lights and that such was induced by the (mis)representation of Philip Morris'agent that such is not only safe but desirable (Henley v Philip Morris). Another example is when the product contains these words in the label "This product is guaranteed free from defect". Implied warranty, on the other hand, doesn't involve any explicit promise rather the warranty is imposed on the seller by operation of law. The basis for such is the circumstances of the sale. Thus in each contract of sale, oral or written, it is implied or inferred that the seller guarantees that he has a right to sell the goods at the exact moment when the ownership is to pass; that he assures that the buyer from that moment shall have full legal and peaceful possession of the object of the sale; that the merchandise shall be free from any hidden fault or defect, or any eviction charge or encumbrance which the vendee is oblivious of; that the thing sold shall be merchandisable and fit for the intended purpose. Implied warranties are very common in product advertisements and brochures which are couched in safe but compelling words. Example is, "you'll never have to paint again if you use XYZ paints". Warranty of title is the guarantee given by the vendor to the vendee that the latter receives title , rights or valid claim to the merchandise being transferred and that such merchandise is devoid of any liens, claims from third parties or hidden security interests (Hiscox et al 1998, p. 256). Since most goods sold do not carry explicit warranties of title, this concept is mainly implied warranty. Warranties 4 Closely related to the above, is the warranty to good title which may be implied or express. Here, the seller warrants that he has valid title to the merchandise he is selling and that the conveyance of title is licit. Good title also includes the "warranty that the sale shall not unreasonably expose the buyer to litigation because of any colorable (legitimate or reasonable) claim to or interest in the goods" (2003 amendments to UCC 2-312 (1)(a)). Thus warranty to good title must necessarily include marketable title that is devoid of colorable claim. Warranty against infringement is the guarantee by the merchant-vendor that he shall remit the merchandise free of the rightful claim of any third person who may claim paramount title to the merchandise. Example is when an inventor sues the buyer for damages under Intellectual Property laws for possession and usage of product which patent or trademark or copyright he owns. For this, the vendee must put up the defense that it is the vendor who is liable to answer for such suit. Akin to the title warranty is the warranty against liens. A lien is the "right to take and hold or sell the property of a debtor as security or payment for a debt" (American Heritage Dictionary). Here, the vendor guarantees that there are no liens or encumbrances which the vendee is unaware of at the moment of the contracting of the sale. Example of this is when a creditor who has lien to the car from the vendee, who was completely ignorant of the situation, the vendee has the recourse to recover from the vendor for breach of warranty (Miller & Jentz 2005, p.385). Warranty disclaimer is one method used by vendors to escape responsibility especially legal suits for damages. This can be done orally or in writing and in both cases, the vendor disavows any liability for the quality of the product sold. To disclaim any express warranty, vendor simply avoids to make any affirmation of fact or promise re the merchandise he sells. For example, the vendor might put up in the cigar's label, "smoke at your own risk". However, the law specifies this should be conspicuous. Warranties 5 The concept of basis of the bargain is closely linked to express warranties and such is described by UCC 2-313 which says that "for an express warranty to be created, the affirmation, promise, description or sample must become a part of the basis of the bargain (UCC-2-313(1). And "to create an express warranty, a seller or lessor does not have to use formal words such as warrant or guarantee (UCC 2-313(2) and when such affirmation of fact or pledge becomes incorporated into the basis of the bargain, there is created an "express warranty that the goods shall conform to the affirmation" (UCC 2-313). Statements of opinions, meanwhile, should not be taken as warranties. These are not statements of facts but mere "statements of opinions or recommendations about the goods" and should not be binding on the vendor and the vendee who relies on such claims at face value may find himself at the losing end. An example for this is when an appliance salesman comments, "this radio will entertain you for eternity". This is hyperbole that cannot be proved in any way and this in sales parlance is called 'puffery' which doesn't bind such salesman (Miller & Jentz 2005, p.255). A limited warranty is one wherein any of the four requirements for a full warranty is absent. It is therefore defined by first analyzing the concept of full warranty, which 4 requirements are: "it must warrant that defects will be remedied within a reasonable time; that it must conspicuously display any exclusion or limitation; that an implied warranty cannot be limited in time and that if attempts by the seller to remedy any defects fail, the warranty must promise that the consumer will be allowed to select either a refund or a replacement of the product" (Miller & Jentz 2005, p.258). Lemon laws, meantime, are warranties imposed by law to protect buyers of transportation vehicles, computers and other consumer products that have been 'lemonized'. Example of such lemon is a new SUV car, which keeps on conking out and where the vendor is interminably reviving and rejuvenating it to no avail. Lemon laws give such lemon buyers various remedies Warranties 6 such as rescission of sale with return of the money paid, replacement or monetary compensation (Poisl 2004, p.178). The third category of warranties is what is called as statutory warranties or those that are instituted by state laws or federal laws. Example of this is today's law which requires the producer of the goods to aid the vendees to find resolution to problems concerning the products bought as well as to furnish complete warranty information to all vendees before they make decisions to buy the product . Product Liability Product liability is responsibility imposed by law or manufacturers and sellers for physical harm or property damage caused by their defective products to consumers, users and bystanders (Miller 2005, p.394). The remedies available are found in laws on torts and damages. This also excludes harm inflicted by goods covered with warranties. Product liability has taken a center stage today as milk from China which contains melamine have wreaked havoc on lives in many countries of the world. For consumer-victims, they can sue the manufacturers on grounds of negligence or strict tort liability. Negligence is the "failure to exercise for the protection of the interest of another person that 'degree of due care', precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury. It is also want of due care required by the circumstances. But the consumer could only claim negligence if there is a contractual relationship between him and the manufacturer or if the merchandise involved was intrinsically harmful. To recover for negligence, it is not necessary that the person who sufered injury must have privity of contract with the negligent manufacturer. The MacPherson rule extends to "those third parties who are in the vicinity of probable use" (JSTOR Org. 1940, p.163). But in the case of biscuits from China that are laced with formalin, the victims of such cannot sue for damages on the basis of negligence but on the tort of fraud if there is premeditated disguising of the Warranties 7 product as contained in its label as free from any harmful contaminant. This is fraudulent misrepresentation that makes the manufacturer liable. The concept of strict product liability although akin to negligence is different because the affirmation is "that the product by virtue of its design, even if produced with due care, increased the potential of injury for the user" . A good example of this are the Christmas lights from China which because of its design, have caused fires in several homes. Despite the assertion that they exercised reasonable care in its production, still anybody hurt in the resulting fires may sue for damages despite the absence of privity of contract. To avoid such calamitous consequences, strict product liability is compelled by law as a matter of public policy. But to the injured party, strict liability can only be imposed if he can authenticate the following 6 requirements: "1. The product must be in a defective condition when the defendant sells it. 2. The defendant must normally be engaged in the business of selling or distributing that product. 3. The product must be unreasonably dangerous to the user or consumer because of its defective condition. 4. The plaintiff must incur physical harm to self or property by use or consumption of the product. 5. 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 " (Urisko & Miller 2003, p.231). The victims of 'unreasonably dangerous product' i.e. product that is inherently defective that it is a real threat to the users' health and safety, may pursue in court for damages and such can only prosper if they prove that it is hazardous beyond the expectations of the ordinary users or if a lesser perilous alternative was available and was also economically feasible but that the Warranties 8 manufacturer refused or failed to follow that safe route. The inherently defective product mentioned above has caused discrepancies in court decisions because of the obscurity of its concept, Thus the Restatement (Third) of Torts clarified the concept by defining its 3 types i.e manufacturing defects, design defects and warning defects. A defective product could be the outcome of a production that veers away from the intended design. Such product makes the manufacturer, wholesaler and retailer liable for that product that has a manufacturing defect. The same product that is the result of the failure to adopt a reasonable alternative design when harm was foreseen to be a possibility is termed as one with design defects. The same product that fails to warn the public of the injury that can emanate from the foreseeable misuse of the product is deemed to have warning defects. Among all 3 types, it was the test for design defects, which used Restatement (Second) of Torts, that met discrepancies and variability and even controversiality. This test for design defects has found pressing use in the victims' attempts to pursue a product liability suit. For its success, the plaintiffs have successfully employed the Restatement (Third) of Torts which elucidates the product's actual design and alternative design and shows that the harm could have been prevented had the alternative design been used. The concept of market-share liability is a little bit earthshaking because all possible culprits to a damage done are forced to share in the liability. In one case, plaintiff Smith acquired AIDS virus after a blood transfusion. Since it cannot be ascertained which blood AHF manufacturer was responsible for his sorry lot, the court held that all of them are liable under this weird theory of market-share liability (Smith v Cutter Biological Inc.). For once, there is a statute that is favorable to defendant manufacturer and this is called Statute of Repose, which is a statute of limitations but "it limits the time within which a plaintiff can file a product liability suit" (Miller & Jentz 2005, p. 402). Warranties 9 Defendants in damage suits also have at their disposal a few legal defenses to product liability. In assumption of risk, defendant can claim that they made a product recall but that vendee refused to heed and thus should be deemed to have assumed the risk generated by the defect. The defendant may also propound that plaintiff is guilty of product misuse i.e. using the product for something that it is not designed for. The most radical concept however is that of comparative negligence whereby defendant claims that not only is he guilty of negligence but the plaintiff as well. The most potent defense, however, is the assertion that the plaintiff harmed himself by using products that are 'commonly known dangers' i.e. fraught and associated with danger. A very unique case, wherein MacDonalds was sued for failure to forewarn its customers, notably Ashley Pelman et al, about the adverse, obesity-causing effects of eating its food products, was decisioned by the court in favor of MacDonalds. Its ratio decidendi was based on the fact that everybody knows that MacDonald foods are rich in cholesterol, fats, sugar and salt which are 'commonly known dangers'. Besides no one is compelled to eat at MacDonald. This case is a landmark case because the court draws the line "between individuals' responsibility to take care of themselves and society's responsibility to protect those individuals". The court added that if citizens know that a place offers things that are dangerous to their health "it is not the place of the law to protect them from their own excesses" (Pelman v MacDonalds). Warranties 10 REFERENCES American Heritage Dictionary (1994). Liens. Boston, Mass.:Houghton Miflin Company. Henley v Philip Morris, CA California, 114 Cal. App. 4th 1429. Hiscox, M & Spandel, V & Lewis, M (1998). Business and the law. Pasadena, Cal.: West Educational Publishing Company. JSTOR Org. (1940). The University of Chicago Law Review. University of Chicago Press. Merriam-Webster Dictionary (2005). Warranty. Springfield, MA: Merriam-Webster Inc. Miller, RL & Jentz, G (2005). Business Law Today. Thomson West. Parish v Kothoff, 128 ore. 523. Pelman v MacDonalds, US District Court, Southern District of NY, 2003. 237 F. Supp. 2d 512. Poisl, D. (2004) Como Vivir y prosperar en Estados Unidos. Live and Thrive Press. Smith v Cutter Biological, Inc. 72 Haw. 416, 823 P2d 717 (1991). Spencer Heater Co v Abbot, 91 NJ. L-594, 104 Atl. 91. Uniform Commercial Code (UCC)Article 2_312(1)(a). Urisko, M & Miller, RL (2003) West's Paralegal Today. Thomson Delmar Learning. Read More