Managment

MGT 5015

Legal Challenges - Chapter 10

Review of Products Liability/Strict Liability

• Purpose: Strict liability in tort was created to promote consumer safety and to protect the consumer.

• Compared to Traditional Negligence/Fraud: Specifically, strict liability in tort is a departure from the traditional requirements of proving negligence or fraud.

1) It is not necessary to prove scienter (i.e. evil mind) as is required for fraud.

2) It is not necessary to prove breach of duty of care as is required for regular negligence. In other words, the plaintiff can win the case even if the seller exercised all care in the preparation, distribution and sale of the product. It is not a defense to strict liability to show that the seller exercised due care.

• Privity not Required: Strict liability is also a departure from the traditional contract “privity” requirements. A user or consumer can win a case even though he or she did not purchase the product from (i.e. enter into a contractual relationship with) the specific defendant. Strict liability regarding products has been applied to manufacturers, wholesalers, distributors, retailers and commercial lessors of products.

• To Whom Does Strict Liability Apply? Strict liability holds that one who sells a product in a defective condition that makes the product unreasonably dangerous to the user, the consumer, or his or her property, is liable to the user or consumer if:

1) The seller is engaged in the business of selling such a product, i.e. the seller is an entity of the marketing chain; and

2) The product is expected to, and in fact does, reach the user or consumer without substantial change in the condition in which it was sold.

• The Defect Test: The essence of strict liability in tort for products is the finding of a “defect” in the product. (Thus, in most jurisdictions, if a product is defective, it is presumed to be “unreasonably dangerous”...