Chapter 7: Business Torts and Product Liability

Torts

Civil wrongs not arising from contracts. Torts involve breaches of duty to particular persons, whereas crimes are regarded as public wrongs breaching duties to all of society.

Three types of torts

Intentional, Negligent, Strict Liability

Intentional tort

Involves voluntary acts that harm a protected interest. May have intended to do such an act, but that doesn't mean they meant to cause harm.

Negligent tort

Involves situations in which harm is caused accidentally. Intent is absent, but because of one party's carelessness, another has been harmed.

Strict Liability Tort

A no-fault concept where an individual or organization is responsible for harm without proof of carelessness. Limited to "unreasonably dangerous" products and practices. Product may be defective or unreasonably dangerous.

Battery

Intentionally touching another in a harmful or offensive way without legal justification or the consent of that person is a battery.

Assault

Intentionally causing another to reasonably believe that he or she is about to be the victim of a battery is an assault. (just the anticipation)

False imprisonment

Occurs when someone is intentionally confined against his or her will; that is, his or her freedom of movement is restricted.

Fraud

Intentional misrepresentation of facts, sometimes identified by the formal title of deceit.

Defamation

Slander or libel. Must have: a false statement, harm to the victim's reputation, publication of the statement.

Slander per se

Slander but without the requirement of proving actual harm as the statement are so inherently damaging.

Absolute privilege

Includes remarks by government officials in the course of their duties or by participants in a trial.

Qualified Privilege

Includes statements to secure credit or a job. The statement will not be treated as defamatory, unless malice is proven.

Invasion of Privacy (4 forms)

Appropriation of a person's name or likeness, intrusion, public disclosure of private facts, false light.

Appropriation of a person's name or likeness

Unauthorized use of a person's name or likeness for financial gain.

Intrusion

An intentional invasion of a person's solitude if it would be highly offensive to a reasonable person.

Public Disclosure of Private Facts

Examples: Disclosure of debt payment practices or sexual preferences.

False Light

When claims are published about another that have the effect of casting the victim in a false light in the public mind, a tort claim may emerge. Involves one's interest in being left alone.

Emotional distress

Examples: employment terminations, drug tests, sexual harassment cases. Courts ask for compelling evidence of outrageous conduct causing severe emotional pain.

Real Property

Land and immovable objects attached to it.

Personal Property

Movable property; all property other than real property.

Trespass to Real Property

Occurs with the intentional entry onto the land of another without consent.

Trespass to Personal Property

Involves an intentional interference with a person's right to enjoy his or her personal property.

Conversion

More serious and extensive interference with personal property. Parking lot company keeps car for months and suffers damage during impoundment.

Injurious Falsehood

A form of defamation that is directed against the property of a person. Falsely claiming that a competitor's product is defective or harmful would likely constitute injurious falsehood.

Nuisance

In which enjoyment of one's land is impaired because of some tortious interference.

Defenses to Intentional Torts

Consent, mistake, necessity, self-defense

Negligence Test

Duty, breach of duty, causation (actual cause and proximate cause), injury

Proximate cause

Defendant's actions must be a proximate cause of the injury.

Negligence in Defective Products

Manufacturing defects, design defects, inadequate warnings.

Res Ipsa Loquitur

The thing speaks for itself. The facts suggest that the plaintiff's injury must have resulted from the defendant's negligence. (1) injury was caused by an instrumentality under the control of the defendant (2) the accident ordinarily would not happen abse

Risk Utility Test

Holds that a product is negligently designed if the benefits of a product's design are outweighed by the risks that accompany that design.

Consumer Expectations Test

Imposes on the manufacturer a duty to design its products so that they are safe not only for their intended use but also for any reasonably foreseeable use.

Warnings

A product may be considered defective because of inadequate warnings when reasonable warnings would have reduced or avoided the foreseeable risks and the failure to warn resulted in a product that was not reasonably safe.

Comparative Negligence

An approach that involves weighing the relative negligence of the parties. In many states, if the plaintiff is more than 50% at fault, he will be barred from recovery.

Contributory Negligence

Any contribution by the plaintiff to his or her own harm constitues a complete bar to recovery.

Assumption of Risk Defense

A plaintiff who willingly enters a dangerous situation and is injured, in many states, will be barred from recovery. Requirements are (1) knowledge of the risk and (2) voluntary assumption of the risk.

Express Warranty

Exists if a seller of goods states a fact or makes a promise regarding the character or quality of the goods. Applies to affirmation of facts, descriptions, and samples/models (UCC 2-313)

Puffing

Sales talk in which the seller expresses his opinion, not a promise regarding the product. Hardest way to find is by discovering the difference between a seller's promise and a mere expression of opinion.

Implied Warranty

Automatically attaches to the sale of goods unless the warranty is disclaimed by the seller. There are two types of implied warranties: (1) merchantability; usage of trade and (2) fitness for particular purpose.

Merchantability; Usage of Trade

UCC 2-314: Goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.

Fitness for Particular Purpose

Where the seller at the time of contracting has reason to know any particular purpose for which goods are required and that the buy is relying on the seller's skill or judgment to select or furnish suitable goods.

Disclaimers

Express warranties may be disclaimed or modified only with great difficulty.

Inspection of Goods

When a buyer before entering a contract inspects the goods or declines to inspect, no implied warranty exists with regard to defects that should have been apparent on inspection.

Magnuson-Moss Warranty Act

Applies only to consumer products and only to written warranties. Where a warranty is offered and the cost of the goods is over $10, the warranty must be labeled as full or limited. If a warranty is offered on goods costing more than $15, the warrantor mu

Full warranty

Requires free repair of any defect. If repair is not achieved within a reasonable time, the buyer may elect either a refund or replacement without charge.

Limited warranty

Limitation must be conspicuously displayed.

Coverage

Generally extends to both personal injuries and property damage, but in some states property damage is excluded. Some states have 15 year limits from date of manufacture or sale.

Tort Reform

Argued for by free market advocates and the business community. The argument is that the threat of tort litigation significantly affects business decision making and, in some instances, actually prevents products from reaching the market.

For Tort Reform

Consultants Tillinghast-Towers Perrin estimated that tort suits cost the US more than $260 billion in 2004. ($900 for every American)

Against Tort Reform

The tort burden is not of the magnitude suggested by critics. Lawsuits are a part of business and we can't rely on the market and managerial ethics to protect the public.

Tort cases to trial

Only about 3 percent of tort cases ever make it to trial.