7.1 - Products Liability Lawsuits Flashcards
Explain the basis of products liability and how lawsuits are brought in contract
Definition - “privity of contract”
Relationship that exists between two parties or more by virtue of their having entered into a contract
-the history of products liability is one of erosion of the idea of ‘privity of contract’
Products Liability
-manufacturers of goods, wholesalers, jobbers, repairers, installers, and retailers are part of the group that can be held liable for injuries caused by the products they manufacture, fix, install, or sell
-as the consuming public becomes more demanding, standards for manufactured goods expand, which affects all parties involved in a product’s production, distribution, sale, installation and repair. A weak link along the supply chain can create more liability risk for the manufacturer or the retailer
Ladder of Supply
-to gain perspective on the entire process and to establish who is responsible for an injury arising out of the use of a product, consider the whole process as a ladder of supply
Ladder of Supply:
->Manufacturer
->Manufacturer’s agent
->Distributor or jobber
->Wholesaler
->Retailer
->Installer, inspector, or repairer
->Purchaser, consumer, or user
-the ladder of supply shows how a defective part gets from the manufacturer to eventual users
-not all the possibilities are noted here, since so much depends on the particular product; other rungs might include labeller, assembler, or bottler
-installers, inspectors and repairers might be found liable if they fail to warn of a dangerous hazard. And if information becomes available at some later date, they must warn those in danger of injury
-any entity on the ladder might be held liable for damages resulting from a claim
-the role of each party provides an opportunity for something to go wrong
-for example, a distributor might sell sunglasses and claim they are impact-resistant, and if they are not impact-resistant, the distributor is guilty of negligently representing the product
Breach of Contract - Tort
-products liability claims may arise out of a breach of contract or in tort (through the wrongful action of anyone on the ladder)
-the particular circumstances determines the eligibility of the injured party to choose the appropriate legal approach, in law, each approach applies its own set of rules
Breach of Contract - Tort.
- landmark cases
-the evolution of products liability is tied to each of the following landmark cases:
1 >part of the wheel of an automobile is defective (‘MacPherson v. Buick Motor Co.’)
2 >a person buys an ice cream bar that contains powdered glass (‘Buckley v. Mott’)
3 >a soft drink bottle contains a decomposed snail (Donoghue v. Stevenson’)
In ‘MacPherson v. Buick Motor Co,’ the court ruled:
>”If the nature of a thing is such that it is reasonable certain to place life and limb in peril when negligently made, then it is a thing of danger, its nature giving warning of the consequences to be expected. If to the element of danger there is added knowledge that the thing will be used by persons other than the purchaser and used without new tests, then, irrespective of contract, the manufacturer of this thing is under duty to make it carefully”
-all 3 cases have the same concept, even though there was no “contract between the plaintiff and the defence”:
>the auto inherently dangerous so if it was negligently made, this fact justified an exception to the privity rule
>there was a duty not to sell a dangerous food product - liability imposed on the manufacturer
>this case expanded on the duty of care that it created: a manufacturer owes a duty of care to not only the purchaser, but any TP who might reasonably be affected by a defect in a product even though no contract is made between them
-theoretically, the ladder of supply demonstrates that anyone on a rung can be responsible for injuries caused, which could result in the injured party suing everyone involved, which can lead to expensive litigation
-government regulation and case law somewhat alleviates this burden
No contractual relationship and standard of care
-when a contractual relationship cannot be established, the consumer has a right to pursue a claim in tort against the manufacturer by proving that the manufacturer negligently manufactured the goods
-claims have been successfully brought against negligent parties because of flaws in the design of products, flaws caused in products during the manufacturing process, products that have a tendency to cause injury, and warning or labels that were inadequate or improper
-it the manufacturer sends a recall notice to its customers, this serves as proof that the product is defective
-the required standard of care for the manufacturer in this circumstance is reasonable care
-the terms of the sales transaction, the nature of the goods, and any opportunity for intermediate inspection may influence the standard of care
-the standard may be less stringent if the manufacturer knows the product is only used by a large commercial operation familiar with the product’s characteristics
-products available to the general public must be made safe for those who are not familiar with their potentially dangerous effects
-the standard of care toward children is generally higher than it is toward the general public
-courts may also look to a manufacturer’s peers in the industry to determine what product standard could be considered reasonable
-however, a court may decide that the industry’s standards are inadequate
-both the nature of the product and its capacity to do harm will raise the standard of care
-the breach of a statute by a manufacturer does not provide an injured customer cause to sue, but it may provide evidence of negligence, and even though a manufacturer has complied with a statute, it may not relieve the manufacturer from liability for the claim
-Governing statute law may include standards of care
-when a reasonable method to make a product safe for consumers is ignored in the manufacture of an inherently dangerous product, the manufacturer will be judged as not having used reasonable care
-a manufacturer should always choose to make a safe product
-warnings and labels in such a case would not mitigate the manufacturer’s liability
-mass merchandising brings the potential for large numbers of claims
-when many individuals experience a common type of loss, claimants may apply to the courts for certification as a class action
-class action proceedings allow large numbers of claimants to act together to resolve common issues within the court system
-while multiple plaintiffs can take advantage of judicial economies and easier access to justice, this type of access expands the potential for lawsuits against all of those entities involved in the delivery of a product to consumers
-The globalization of business has made products available around the world
-Lawsuits may emerge from any part of the world where the product is sold or used
Products Liability and Loss Prevention
-the duty of care owed by the manufacturer of a product to the users of that product makes the role of the loss prevention inspector crucial to avoid incidents that may expose the manufacturer to product liability
-to help ensure their products do not cause harm, a loss prevention inspector may work with experts at the outset to ensure the proper design of a product
-during the manufacturing process, processes and procedures are put in place to ensure that machinery is calibrated and maintained and that the finished products pass through inspection before moving on to the next level of the supply chain
-if components are purchased from an external supplier, a manufacturer may want to visit the supplier to understand its production process and periodically inspect or test the components
-a manufacturer should also provide instruction manuals and warn of any potential dangers of using the products
-today, manufacturing is often outsourced to China or other countries with low labour costs
-a Canadian company trading as a wholesaler, distributor, or retailer needs to ensure that the products it is importing are safe, free from defects, and will not cause harm to consumers
-some strategies the Canadian company could implement include the following:
> ensuring the design of the product considers the risk of its use by the end-user
> visiting and inspecting the production facilities
> ensuring the packaging of items is also properly designed and that it is not damaged in transit
> testing the finished products to ensure they are fit for their intended use and are sage and free from defects
-ensuring there are proper warning labels
Burden of Proof for Products Claims
-in tort actions, the burden of proof is upon the person brining the action, the plaintiff, to prove that the defendant was negligent
-such proof can be very difficult to establish for a products liability claim because a product may have become defective as it passed through some phase of preparation, handling, sales, or service
-the product likely would have been handled many: the manufacturer, wholesaler, distributor, or retailer or the service, repair, or maintenance entities
-it is often difficult to prove the negligence of the manufacturer because a close examination of the process is not available to the plaintiff
-the plaintiff must show that the product was in a defective state when it left the control of the manufacturer, the defect caused the damages the plaintiff suffered, and the defect was the result of the manufacturer’s negligence
-‘Res ipsa loquitur’ is a useful rule of evidence for an injured claimant when insufficient evidence exists to support an action
-it allows the burden of proof to shift to the manufacturer to show that it was not negligent
-the premise of ‘res ipsa loquitur’ holds that the accident could have occurred only because of the manufacturer’s negligence
-this inference can be made when there is no other possible way that the product could have become defective
-thus, the accident could only have happened due to the manufacturer’s negligence in producing the merchandise and the manufacturer was in control of the product at all times
-for example, if it can be shown that before the product reached the user it was in a sealed container and no one else had tampered with it in any way, but it still causes damage to the user, then the rule of evidence creates a type of strict liability in that the manufacturer may be held liable without proof of negligence
-liability regardless of fault may be imposed on defendants because of strict liability applied to dangerous products, food and drink, medicines, and products related to medicines
-for such claims, the defendant will not escape liability by asserting reasonable care was taken
Contract Theory of Products Liability
-products liability claims may arise from breach of contract or breach of warranty under a contract of sale
-the legal doctrine of privity of contract is established between the buyer and seller, limiting the enforcement of the contract’s obligations between them, even a buyer’s family members would not have the right to enforce the contract of sale provisions
-the privity rule prevents plaintiffs from rung-jumping on the ladder of supply
-Under Prov. and Terr. sale of goods legislation enacted to protect consumers, the buyer of goods is entitled to a warranty of fitness from the seller
-the legislation affirms that products sold must be warranted to meet the following criteria:
> Be reasonable fit for their intended use
> Be of merchantable quality
-if the product does not meet the warranted conditions, a suit may be brought on the basis of breach of contract
-certain conditions must apply to the sale to qualify for the warranty under the legislation:
> The buyer must rely on the skill and judgement of the seller to provide suitable goods
»_space; did the seller describe the product to the buyer?
»_space; did the seller provide guidance to the buyer in selecting and purchasing this product?
»_space; Did the buyer indicate why they were buying that product?
»_space; The decision to buy the product may indicate the buyer relied on the seller’s judgement
> The goods sold must fit within the seller’s scope of business
»_space; When the seller decides to sell the goods, it is usually sufficient to establish this parameter even if it was the first time the seller sold them
-if the goods are not fit for the purpose for which they are required and consequently cause injury or damage to buyers, they can recover damages from the seller regardless of negligence. Therefore a type of strict liability exists because there is no need for claimants to prove negligence
-analyzing the ladder of supply highlights the inadequacy of the contract theory of products liability
-it is not equitable that many injured consumers do not receive compensation for their injuries even though a negligently made product has caused the injury
-not only does a contract exist between the purchaser and the retailers, but similar contractual relationships may also exist between the retailer, wholesaler, and manufacturer
-anyone handling the product may have damaged it during preparation for sale, anyone else in the chain might have contributed to the injury
-in the US, the interpretation of the law by the courts of many states has placed a considerably heavier burden on manufacturers and suppliers than is the present situation in Canada
-a doctrine of strict liability is prevalent, which implies that the manufacturer will be held liable without the plaintiff being required to prove negligence
-in Canada, the law in all of the prov. and terr. contains some degree of strict liability
Special provisions, or Express Warranties
-sometimes the relationship between purchaser, retailer, wholesaler and manufacturer may be changed by special circumstances
-the bill of sale may contain special provisions or express warranties
-in an attempt to narrow the liability in contract, an express warranty may describe the condition of the article and its acceptability to the receiver
-for example, certain express warranties are limited to repairing or replacing the product and exclude any resulting injury or economic loss
-if the warranty tries to dismiss a fundamental term of the contract, it will probably not stand up in court
-conversely, greater liability may be assigned when special qualities of the product are claimed either on the invoice, in manuals, or in brouchures
-in other instances, a manufacturer may agree to indemnify a wholesaler or retailer against any liability arising out of a product it manufactures
-representations made in advertising and marketing are also implied warranties
-an action brought in contract could be based on such warranties
Discovery of a Defect
-if the manufacturer of a product discovers that there has been a defect in the product, it is its responsibility to warn its customers
-recalls of consumer products such as automobiles and electrical appliances are common; manufacturers employ various media to ask purchasers to return a certain model for repair or replacement
-if a design fault affects a production run, a great many number of airbags, for example, may be produced before the mistake is discovered
-ex. Takata airbags recall 2018 - 19 auto manufacturers recalled their vehicles. Most vehicles were installed from 2002-2015 and estimated 37 million vehicle is US alone affected. The recall was initiated because some of the airbags could deploy explosively, injuring or even killing car occupants
-it is the manufacturer’s responsibility (in ex above - Takata) to contact the automotive industry and to work with them to replace the defective items
-in the aircraft industry, the term ‘sistership’ arose out of a similar circumstance
-a particular airplane was found to have a certain defect so all planes of that model were grounded in order to repair or replace defective parts
-this term has been accepted in the industry to identify the product recall policy exclusion
-in the case of aviation defects, grounding aircraft can be achieved by withdrawing airworthiness certification
-in other industries, such regulation may not apply but this does not diminish the manufacturer’s need to take immediate action by withdrawing or recalling the product
-it is also the responsibility of the manufacturer to warn the customer of any defects in its products if it learns of the defect after the article has been sold (ex. ‘Rivtow Marine Ltd. v. Washington Iron Works’)
-when a defect is discovered after a product is released into the market, consumers must be alerted to the problem in an appropriate way
-the Consumer Product Safety division of Health Canada establishes and enforces safety standard for consumer products
-under the ‘Hazardous Product Act’, certain regulations have been set up for any product that is likely to be a danger to the health and safety of the public
-for certain products, more than one federal statute may apply, commodities such as cosmetics for example, are subject to the ‘Foods and Drugs Act’ regarding their composition, safety, labelling, and advertising, and also, non-food consumer products are subject to the ‘Consumer Packaging and Labelling Act’ regarding bilingual labelling and deceptive packaging
-the foreseeable risks associated with the use of the product must be made known to consumers, so the packaging and any other material sold with the product may be subject to packaging and labelling criteria set out in legislation
-standards may also be derived from similar products of other manufacturers
-Ex - Cannabis and Products Liability examines the new risks of product liability arising from the legislation of recreational cannabis in Oct 2018. The ‘Cannabis Act’ creates a strict legal framework for controlling the production, distribution, sale and possession of cannabis across Canada
-evolution of litigation in this new area is still uncertain, for example, future litigation may result from failure to warn of the harms of cannabis or from manufacturing and defect claims
-many insurers off liability ins to cannabis growers, distributors, and retailers, perhaps without fully appreciating the risks involved
