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Chapter 11

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Products Liability

LEARNING OBJECTIVES

After reading this chapter, you should understand the following:

1. How products-liability law allocates the costs of a consumer society

2. How warranty theory works in products liability, and what its limitations are

3. How negligence theory works, and what its problems are

4. How strict liability theory works, and what its limitations are

5. What efforts are made to reform products-liability law, and why

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11.1 Introduction: Why Products-Liability Law Is Important

LEARNING OBJECTIVES

1. Understand why products-liability law underwent a revolution in the

twentieth century.

2. Recognize that courts play a vital role in policing the free enterprise system by

adjudicating how the true costs of modern consumer culture are allocated.

3. Know the names of the modern causes of action for products-liability cases.

In previous chapters, we discussed remedies generally. In this chapter, we focus specifically on remedies

available when a defective product causes personal injury or other damages. Products liability describes a

type of claim, not a separate theory of liability. Products liability has strong emotional overtones—ranging

from the prolitigation position of consumer advocates to the conservative perspective of the

manufacturers.

History of Products-Liability Law The theory of caveat emptor—let the buyer beware—that pretty much governed consumer law from the

early eighteenth century until the early twentieth century made some sense. A horse-drawn buggy is a

fairly simple device: its workings are apparent; a person of average experience in the 1870s would know

whether it was constructed well and made of the proper woods. Most foodstuffs 150 years ago were grown

at home and “put up” in the home kitchen or bought in bulk from a local grocer, subject to inspection and

sampling; people made home remedies for coughs and colds and made many of their own clothes. Houses

and furnishings were built of wood, stone, glass, and plaster—familiar substances. Entertainment was a

book or a piano. The state of technology was such that the things consumed were, for the most part,

comprehensible and—very important—mostly locally made, which meant that the consumer who suffered

damages from a defective product could confront the product’s maker directly. Local reputation is a

powerful influence on behavior.

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The free enterprise system confers great benefits, and no one can deny that: materialistically, compare the

image sketched in the previous paragraph with circumstances today. But those benefits come with a cost,

and the fundamental political issue always is who has to pay. Consider the following famous passage from

Upton Sinclair’s great novel The Jungle. It appeared in 1906. He wrote it to inspire labor reform; to his

dismay, the public outrage focused instead on consumer protection reform. Here is his description of the

sausage-making process in a big Chicago meatpacking plant:

There was never the least attention paid to what was cut up for sausage; there would come all the way

back from Europe old sausage that had been rejected, and that was moldy and white—it would be dosed

with borax and glycerin, and dumped into the hoppers, and made over again for home consumption.

There would be meat that had tumbled out on the floor, in the dirt and sawdust, where the workers had

tramped and spit uncounted billions of consumption germs. There would be meat stored in great piles in

rooms; and the water from leaky roofs would drip over it, and thousands of rats would race about on it. It

was too dark in these storage places to see well, but a man could run his hand over these piles of meat and

sweep off handfuls of the dried dung of rats. These rats were nuisances, and the packers would put

poisoned bread out for them; they would die, and then rats, bread, and meat would go into the hoppers

together. This is no fairy story and no joke; the meat would be shoveled into carts, and the man who did

the shoveling would not trouble to lift out a rat even when he saw one—there were things that went into

the sausage in comparison with which a poisoned rat was a tidbit. There was no place for the men to wash

their hands before they ate their dinner, and so they made a practice of washing them in the water that

was to be ladled into the sausage. There were the butt-ends of smoked meat, and the scraps of corned

beef, and all the odds and ends of the waste of the plants, that would be dumped into old barrels in the

cellar and left there.

Under the system of rigid economy which the packers enforced, there were some jobs that it only paid to

do once in a long time, and among these was the cleaning out of the waste barrels. Every spring they did

it; and in the barrels would be dirt and rust and old nails and stale water—and cartload after cartload of it

would be taken up and dumped into the hoppers with fresh meat, and sent out to the public’s breakfast.

Some of it they would make into “smoked” sausage—but as the smoking took time, and was therefore

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expensive, they would call upon their chemistry department, and preserve it with borax and color it with

gelatin to make it brown. All of their sausage came out of the same bowl, but when they came to wrap it

they would stamp some of it “special,” and for this they would charge two cents more a pound. [1]

It became clear from Sinclair’s exposé that associated with the marvels of then-modern meatpacking and

distribution methods was food poisoning: a true cost became apparent. When the true cost of some

money-making enterprise (e.g., cigarettes) becomes inescapably apparent, there are two possibilities.

First, the legislature can in some way mandate that the manufacturer itself pay the cost; with the

meatpacking plants, that would be the imposition of sanitary food-processing standards. Typically,

Congress creates an administrative agency and gives the agency some marching orders, and then the

agency crafts regulations dictating as many industry-wide reform measures as are politically possible.

Second, the people who incur damages from the product (1) suffer and die or (2) access the machinery of

the legal system and sue the manufacturer. If plaintiffs win enough lawsuits, the manufacturer’s insurance

company raises rates, forcing reform (as with high-powered muscle cars in the 1970s); the business goes

bankrupt; or the legislature is pressured to act, either for the consumer or for the manufacturer.

If the industry has enough clout to blunt—by various means—a robust proconsumer legislative response

so that government regulation is too lax to prevent harm, recourse is had through the legal system. Thus

for all the talk about the need for tort reform (discussed later in this chapter), the courts play a vital role in

policing the free enterprise system by adjudicating how the true costs of modern consumer culture are

allocated.

Obviously the situation has improved enormously in a century, but one does not have to look very far to

find terrible problems today. Consider the following, which occurred in 2009–10:

In the United States, Toyota recalled 412,000 passenger cars, mostly the Avalon model, for

steering problems that reportedly led to three accidents.

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Portable baby recliners that are supposed to help fussy babies sleep better were recalled after the

death of an infant: the Consumer Product Safety Commission announced the recall of 30,000

Nap Nanny recliners made by Baby Matters of Berwyn, Pennsylvania.

More than 70,000 children and teens go to the emergency room each year for injuries and

complications from medical devices. Contact lenses are the leading culprit, the first detailed

national estimate suggests.

Smith and Noble recalled 1.3 million Roman shades and roller shades after a child was nearly

strangled: the Consumer Product Safety Commission says a five-year-old boy in Tacoma,

Washington, was entangled in the cord of a roller shade in May 2009. [2]

The Consumer Product Safety Commission reported that 4,521 people were killed in the United

States in consumer-product-related incidences in 2009, and millions of people visited hospital

emergency rooms from consumer-product-related injuries. [3]

Reports about the possibility that cell-phone use causes brain cancer continue to be hotly

debated. Critics suggest that the studies minimizing the risk were paid for by cell-phone

manufacturers. [4]

Products liability can also be a life-or-death matter from the manufacturer’s perspective. In 2009,

Bloomberg BusinessWeek reported that the costs of product safety for manufacturing firms can be

enormous: “Peanut Corp., based in Lynchberg, Va., has been driven into bankruptcy since health officials

linked tainted peanuts to more than 600 illnesses and nine deaths. Mattel said the first of several toy

recalls it announced in 2007 cut its quarterly operating income by $30 million. Earlier this decade, Ford

Motor spent roughly $3 billion replacing 10.6 million potentially defective Firestone tires.” [5]Businesses

complain, with good reason, about the expenses associated with products-liability problems.

Current State of the Law Although the debate has been heated and at times simplistic, the problem of products liability is complex

and most of us regard it with a high degree of ambivalence. We are all consumers, after all, who profit

greatly from living in an industrial society. In this chapter, we examine the legal theories that underlie

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products-liability cases that developed rapidly in the twentieth century to address the problems of

product-caused damages and injuries in an industrial society.

In the typical products-liability case, three legal theories are asserted—a contract theory and two tort

theories. The contract theory is warranty, governed by the UCC, and the two tort theories are

negligence and strict products liability, governed by the common law. See .

Figure 11.1 Major Products Liability Theories

KEY TAKEAWAY

As products became increasingly sophisticated and potentially dangerous in the

twentieth century, and as the separation between production and consumption

widened, products liability became a very important issue for both consumers and

manufacturers. Millions of people every year are adversely affected by defective

products, and manufacturers and sellers pay huge amounts for products-liability

insurance and damages. The law has responded with causes of action that provide

a means for recovery for products-liability damages.

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EXERCISES

1. How does the separation of production from consumption affect products-

liability issues?

2. What other changes in production and consumption have caused the need for

the development of products-liability law?

3. How can it be said that courts adjudicate the allocation of the costs of a

consumer-oriented economy?

[1] Upton Sinclair, The Jungle (New York: Signet Classic, 1963), 136.

[2] FindLaw, AP reports, http://news.findlaw.com/legalnews/us/pl.

[3] US Consumer Product Safety Commission, 2009 Report to the President and the Congress,

accessed March 1, 2011,http://www.cpsc.gov/cpscpub/pubs/reports/2009rpt.pdf.

[4] Matt Hamblen, “New Study Warns of Cell Phone Dangers,”Computerworld US, August 9,

2009, accessed March 1, 2011,http://news.techworld.com/personal-tech/3200539/new-study-

warns-of-cell-phone-dangers.

[5] Michael Orey, “Taking on Toy Safety,” BusinessWeek, March 6, 2009, accessed March 1,

2011,http://www.businessweek.com/managing/content/mar2009/ca2009036_271002.htm.

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11.2 Warranties

LEARNING OBJECTIVES

1. Recognize a UCC express warranty and how it is created.

2. Understand what is meant under the UCC by implied warranties, and know the main

types of implied warranties: merchantability, fitness for a particular purpose, and

title.

3. Know that there are other warranties: against infringement and as may arise from

usage of the trade.

4. See that there are difficulties with warranty theory as a cause of action for products

liability; a federal law has addressed some of these.

The UCC governs express warranties and various implied warranties, and for many years it was the only

statutory control on the use and meanings of warranties. In 1975, after years of debate, Congress passed

and President Gerald Ford signed into law the Magnuson-Moss Act, which imposes certain requirements

on manufacturers and others who warrant their goods. We will examine both the UCC and the Magnuson-

Moss Act.

Types of Warranties Express Warranties

An express warranty is created whenever the seller affirms that the product will perform in a certain

manner. Formal words such as “warrant” or “guarantee” are not necessary. A seller may create an express

warranty as part of the basis for the bargain of sale by means of (1) an affirmation of a fact or promise

relating to the goods, (2) a description of the goods, or (3) a sample or model. Any of these will create an

express warranty that the goods will conform to the fact, promise, description, sample, or model. Thus a

seller who states that “the use of rustproof linings in the cans would prevent discoloration and

adulteration of the Perform solution” has given an express warranty, whether he realized it or

not. [1] Claims of breach of express warranty are, at base, claims of misrepresentation.

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But the courts will not hold a manufacturer to every statement that could conceivably be interpreted to be

an express warranty. Manufacturers and sellers constantly “puff” their products, and the law is content to

let them inhabit that gray area without having to make good on every claim. UCC 2-313(2) says that “an

affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or

commendation of the goods does not create a warranty.” Facts do.

It is not always easy, however, to determine the line between an express warranty and a piece of puffery. A

salesperson who says that a strawberry huller is “great” has probably puffed, not warranted, when it turns

out that strawberries run through the huller look like victims of a massacre. But consider the classic cases

of the defective used car and the faulty bull. In the former, the salesperson said the car was in “A-1 shape”

and “mechanically perfect.” In the latter, the seller said not only that the bull calf would “put the buyer on

the map” but that “his father was the greatest living dairy bull.” The car, carrying the buyer’s seven-

month-old child, broke down while the buyer was en route to visit her husband in the army during World

War II. The court said that the salesperson had made an express warranty. [2] The bull calf turned out to be

sterile, putting the farmer on the judicial rather than the dairy map. The court said the seller’s spiel was

trade talk, not a warranty that the bull would impregnate cows. [3]

Is there any qualitative difference between these decisions, other than the quarter century that separates

them and the different courts that rendered them? Perhaps the most that can be said is that the more

specific and measurable the statement’s standards, the more likely it is that a court will hold the seller to a

warranty, and that a written statement is easier to construe as a warranty than an oral one. It is also

possible that courts look, if only subliminally, at how reasonable the buyer was in relying on the

statement, although this ought not to be a strict test. A buyer may be unreasonable in expecting a car to

get 100 miles to the gallon, but if that is what the seller promised, that ought to be an enforceable

warranty.

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The CISG (Article 35) provides, “The seller must deliver goods which are of the quantity,

quality and description required by the contract and which are contained or packaged in

the manner required by the contract. [And the] goods must possess the qualities of goods

which the seller has held out to the buyer as a sample or model.”

Implied Warranties

Express warranties are those over which the parties dickered—or could have. Express warranties go to the

essence of the bargain. An implied warranty, by contrast, is one that circumstances alone, not specific

language, compel reading into the sale. In short, an implied warranty is one created by law, acting from an

impulse of common sense.

Implied Warranty of Merchantability

Section 2-314 of the UCC lays down the fundamental rule that goods carry

an implied warranty of merchantability if sold by a merchant-seller. What is merchantability? Section 2-

314(2) of the UCC says that merchantable goods are those that conform at least to the following six

characteristics:

1. Pass without objection in the trade under the contract description

2. In the case of fungible goods, are of fair average quality within the description

3. Are fit for the ordinary purposes for which such goods are used

4. Run, within the variations permitted by the agreement, of even kind, quality, and quantity within

each unit and among all units involved

5. Are adequately contained, packaged, and labeled as the agreement may require

6. Conform to the promise or affirmations of fact made on the container or label if any

For the purposes of Section 2-314(2)(c) of the UCC, selling and serving food or drink for consumption on

or off the premises is a sale subject to the implied warranty of merchantability—the food must be “fit for

the ordinary purposes” to which it is put. The problem is common: you bite into a cherry pit in the cherry-

vanilla ice cream, or you choke on the clam shells in the chowder. Is such food fit for the ordinary

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purposes to which it is put? There are two schools of thought. One asks whether the food was natural as

prepared. This view adopts the seller’s perspective. The other asks what the consumer’s reasonable

expectation was.

The first test is sometimes said to be the “natural-foreign” test. If the substance in the soup is natural to

the substance—as bones are to fish—then the food is fit for consumption. The second test, relying on