Business Law (Test 2: Ch. 5-6)

Question 1

tort

Answer 1

A wrong. There are three categories of torts: (1) intentional torts, (2) unintentional torts (negligence), and (3) strict liability.

Question 2

intentional tort

Answer 2

A category of torts that requires that the defendant possessed the intent to do the act that caused the plaintiff’s injuries.

Question 3

assault

Answer 3

(1) The threat of immediate harm or offensive contact or
(2) any action that arouses reasonable apprehension of imminent harm. Actual physical contact is unnecessary.

Question 4

battery

Answer 4

Unauthorized and harmful or offensive direct or indirect physical contact with another person that causes injury.

Question 5

transferred intent doctrine

Answer 5

Sometimes a person acts with the intent to injure 1 person but actually injures another. The transferred intent doctrine applies to such situations. Under this doctrine, the law transfers the perpetrator’s intent from the target to the actual victim of the act. The victim can then sue the defendant.

Question 6

false imprisonment

Answer 6

The intentional confinement or restraint of another person without authority or justification and without that person’s consent.

Question 7

merchant protection statutes (shopkeeper’s privilege)

Answer 7

Statutes that allow merchants to stop, detain, and investigate suspected shoplifters without being held liable for false imprisonment if

(1) there are reasonable grounds for the suspicion,
(2) suspects are detained for only a reasonable time, and
(3) investigations are con- ducted in a reasonable manner.

Question 8

misappropriation of the right to publicity (tort of appropriation)

Answer 8

An attempt by another person to appropriate a living person’s name or identity for commercial purposes.

Question 9

invasion of the right to privacy

Answer 9

The unwarranted and undesired publicity of a private fact about a person. The fact does not have to be untrue. If a fact is public information, there is no claim to privacy. However, a fact that was once public (e.g., commission of a crime) may become private after the passage of time.

Examples Secretly taking photos of another person with a cell phone camera in a men’s or women’s locker room constitutes invasion of the right to privacy. Read- ing someone else’s mail, wiretapping someone’s telephone, and reading someone else’s e-mail without authorization to do so are also examples of invasion of the right to privacy.

Placing someone in a “false light” constitutes an invasion of privacy.

Example Sending an objectionable telegram to a third party and signing another’s name would place the purported sender in a false light in the eyes of the receiver.

Question 10

defamation of character

Answer 10

False statement(s) made by one person about another. In court, the plaintiff must prove that

(1) the defendant made an untrue statement of fact about the plaintiff and
(2) the statement was intentionally or accidentally published to a third party. In this context, publication simply means that a third person heard or saw the untrue statement. It does not require appearance in newspapers, magazines, or books.

This protection ends upon a person’s death.

Public Figures as Plaintiffs In New York Times Co. v. Sullivan,1 the U.S. Supreme Court held that public officials cannot recover for defamation unless they can prove that the defendant acted with “actual malice.” Actual malice means that the defendant made the false statement knowingly or with reckless disregard of its falsity. This requirement has since been extended to public figure plaintiffs such as movie stars, sports personalities, and other celebrities.

Question 11

libel

Answer 11

A false statement that appears in a letter, newspaper, magazine, book, photograph, movie, DVD, video game, and so on.

Question 12

slander

Answer 12

Oral defamation of character.

Question 13

disparagement

Answer 13

False statements about a competitor’s products, services, property, or business reputation.

Question 14

intentional misrepresentation (fraud or deceit)

Answer 14

The intentional defrauding of a person out of money, property, or something else of value.

Four elements are required to find fraud:

1. The wrongdoer made a false representation of a material fact.
2. The wrongdoer had knowledge that the representation was false and intended

to deceive the innocent party.
3. The innocent party justifiably relied on the misrepresentation.

4. The innocent party was injured.

Item 2, which is called scienter, refers to intentional conduct. It also includes situations in which the wrongdoer recklessly disregards the truth in making a representation that is false. Intent or recklessness can be inferred from the circumstances.

Scienter is a legal term for intent or knowledge of wrongdoing. An offending party then has knowledge of the “wrongness” of an act or event prior to committing it. For example, if a man sells a car with brakes that do not work to his friend, but the seller does not know about the brake problem, the seller then has no scienter.

Question 15

intentional infliction of emotional distress (tort of outrage)

Answer 15

A tort that says a person whose extreme and outrageous conduct intentionally or recklessly causes severe emotional distress to another person is liable for that emotional distress.

An indignity, an annoyance, rough language, or an occasional inconsiderate or unkind act does not constitute outrageous behavior. However, repeated annoy- ances or harassment coupled with threats are considered outrageous.

The mental distress suffered by the plaintiff must be severe. Many states require that this mental distress be manifested by some form of physical injury, discomfort, or illness, such as nausea, ulcers, headaches, or miscarriage. This requirement is intended to prevent false claims. Some states have abandoned this requirement.

***Examples Shame, humiliation, embarrassment, anger, fear, and worry constitute severe mental distress.

Question 16

malicious prosecution

Answer 16

A lawsuit in which the original defendant sues the original plaintiff. In the second lawsuit, the defendant becomes the plaintiff and vice versa.

To succeed in a malicious prosecution lawsuit, the courts require the plaintiff to prove all of the following:

1. The plaintiff in the original lawsuit (now the defendant) instituted or was responsible for instituting the original lawsuit.
2. There was no probable cause for the first lawsuit (i.e., it was a frivolous lawsuit).
3. The plaintiff in the original action brought it with malice. (Caution: This is a very difficult element to prove.)
4. The original lawsuit was terminated in favor of the original defendant (now the plaintiff).
5. The current plaintiff suffered injury as a result of the original lawsuit.

Example One student actor wins a part in a play over another student actor. To get back at the winning student, the rejected student files a lawsuit against the winning student, alleging intentional infliction of emotional distress, defamation, and negligence. The lawsuit is unfounded, but the winning student must defend the lawsuit. The jury returns a verdict exonerating the defendant. The defendant now can sue the plaintiff for malicious prosecution and has a very good chance of winning the lawsuit.

Question 17

unintentional tort (negligence)

Answer 17

A doctrine that says a person is liable for harm that is the foreseeable consequence of his or her actions.

Question 18

duty of care

Answer 18

The obligation people owe each other not to cause any unreasonable harm or risk of harm.

Defendants with a particular expertise or competence are measured against a reasonable professional standard. Applying this test, the courts attempt to determine how an objective, careful, and conscientious equivalent professional would have acted in the same circumstances and then measure the defendant professional’s conduct against that standard.

Examples A brain surgeon is measured against a reasonable brain surgeon stan- dard. A general practitioner doctor who is the only doctor who serves a small community is measured against a reasonable small-town general practitioner standard.

Question 19

reasonable person standard

Answer 19

A test used to determine whether a defendant owes a duty of care. This test measures the defendant’s conduct against how an objective, careful, and conscientious person would have acted in the same circumstances.

Question 20

breach of the duty of care

Answer 20

A failure to exercise care or to act as a reasonable person would act.

Question 21

injury

Answer 21

A plaintiff’s personal injury or damage to his or her property that enables him or her to recover monetary damages for the defendant’s negligence.

Question 22

actual cause (causation in fact)

Answer 22

The actual cause of negligence. A person who commits a negligent act is not liable unless actual cause can be proven.

Examples Suppose a corporation negligently pollutes the plaintiff’s drinking water. The plaintiff dies of a heart attack unrelated to the polluted water. Although the corporation has acted negligently, it is not liable for the plaintiff’s death. There was a negligent act and an injury, but there was no cause-and-effect relationship between them. If, instead, the plaintiff had died from the polluted drinking water, there would have been causation in fact and the polluting corporation would have been liable.

Question 23

proximate cause (legal cause)

Answer 23

A point along a chain of events caused by a negligent party after which this party is no longer legally responsible for the consequences of his or her actions.

Question 24

Elements of Negligence

Answer 24

1. The defendant owed a duty of care to the plaintiff.
2. The defendant breached this duty.
3. The plaintiff suffered injury.
4. The defendant’s negligent act was the actual cause (or causation in fact) of the plaintiff’s injuries.
5. The defendant’s negligent act was the proximate cause (or legal cause) of the plaintiff’s injuries. The defendant is liable only for the foreseeable consequences of his or her negligent act.

Question 25

professional malpractice

Answer 25

The liability of a professional who breaches his or her duty of ordinary care.

Professionals, such as doctors, lawyers, architects, accountants, and others, owe a duty of ordinary care in providing their services. This duty is known as the reasonable professional standard.

Question 26

negligent infliction of emotional distress

Answer 26

A tort that permits a person to recover for emotional distress caused by the defendant’s negligent conduct.

The most common example of negligent infliction of emotional distress involves bystanders who witness the injury or death of a relative that is caused by another’s negligent conduct. Under this tort, the bystander, even though not physically injured personally, may be able to recover damages against the negli- gent party for his or her own mental suffering. Many states require that the following elements are proved in bystander cases:

1. A close relative was killed or injured by the defendant.
2. The plaintiff suffered severe emotional distress.
3. The plaintiff’s mental distress resulted from a sensory and contemporaneous observance of the accident.

Question 27

negligence per se

Answer 27

A tort in which the violation of a statute or an ordinance constitutes the breach of the duty of care.

Statutes often establish duties owed by one person to another. The violation of a statute that proximately causes an injury is negligence per se.

The plaintiff in such an action must prove that

(1) a statute existed,
(2) the statute was enacted to prevent the type of injury suffered, and
(3) the plaintiff was within a class of persons meant to be protected by the statute.

Question 28

res ipsa loquitur

Answer 28

res ipsa loquitur (Latin for “the thing speaks for itself”)

A tort in which the presumption of negligence arises because

(1) the defendant was in exclusive control of the situation and
(2) the plaintiff would not have suffered injury but for someone’s negligence. The burden switches to the defendant to prove that he or she was not negligent.

Examples Haeran goes in for major surgery and is given anesthesia to put her to sleep during the operation. Sometime after the operation, it is discovered that a surgical instrument was left in Haeran and she suffers severe injury because of this. Haeran has no way to identify which doctor or nurse carelessly left the instrument. In this case, the court can apply the doctrine of res ipsa loquitur and place the presumption of negligence on the defendants. Any defendant who can prove that he or she did not leave the instrument in Haeran escapes liability; any defendant who does not disprove his or her negligence is liable. Other typical res ipsa loquitur cases involve commercial airplane crashes, falling elevators, and the like.

Question 29

gross negligence

Answer 29

A doctrine that says a person is liable for harm that is caused by his or her willful misconduct or reckless behavior. Punitive damages may be assessed.

Question 30

attractive nuisance doctrine

Answer 30

A tort rule that imposes liability on a landowner to children who have been attracted onto the landowner’s property by an attractive nuisance and who are killed or injured on the property.

Question 31

Good Samaritan law

Answer 31

A statute that relieves medical professionals from liability for ordinary negligence when they stop and render aid to victims in emergency situations.

Example

If, in the prior example, Pamela was not a doctor or otherwise protected by the Good Samaritan law, she would be liable for any injuries caused to Sam by her ordinary negligence (or gross negligence or recklessness) while rendering aid to Sam.

Thus, there is some liability exposure when a person renders aid to another person.

Question 32

superseding event (intervening event)

Answer 32

An event for which a defendant is not responsible. The defendant is not liable for injuries caused by the superseding or intervening event.

Example Assume that an avid golfer negligently hits a spectator with a golf ball, knocking the spectator unconscious. While lying on the ground, waiting for an ambulance to come, the spectator is struck by a bolt of lightning and killed. The golfer is liable for the injuries caused by the golf ball. He is not liable for the death of the spectator, however, because the lightning bolt was an unforeseen intervening event.

Question 33

assumption of the risk

Answer 33

A defense that a defendant can use against a plaintiff who knowingly and voluntarily enters into or participates in a risky activity that results in injury.

Example Under assumption of the risk, a race-car driver assumes the risk of being injured or killed in a crash.

Question 34

contributory negligence

Answer 34

A doctrine that says that a plaintiff who is partially at fault for his or her own injury cannot recover against the negligent defendant.

Example Suppose a driver who is driving over the speed limit negligently hits and injures a pedestrian who is jaywalking against a red “Don’t Walk” sign. Suppose the jury finds that the driver is 80 percent responsible for the acci- dent and that the jaywalker is 20 percent responsible. The pedestrian suf- fered $100,000 in injuries. Under the doctrine of contributory negligence, the pedestrian cannot recover any damages from the driver.

Question 35

comparative negligence (comparative fault)

Answer 35

A doctrine under which damages are apportioned according to fault.

Example When the comparative negligence rule is applied to the previous example in which the pedestrian suffered $100,000 of injuries, the result is much fairer. The plaintiff-pedestrian, who was 20 percent at fault for causing his own injuries, can recover 80 percent of his damages (or $80,000) from the negligent defendant-driver.

Question 36

strict liability

Answer 36

A tort doctrine that imposes liability without fault on a person who engages in an abnormally dangerous activity that causes injury or death to another person.

Activities such as crop dusting, blasting, fumigation, burning of fields, storage of explosives, and the keeping of animals and pets are usually considered activities to which strict liability applies.

Example Ellison has owned a dog for years. The dog has shown no dangerous pro- pensities and has never bitten anyone. Ellison goes out of town on a business trip and has his neighbor take care of the dog while he is gone. While Ellison is gone, the neighbor, while walking the dog, lets the dog off of her leash to play with a child who has asked to play with the dog. When the child hits the dog in the eye, the dog bites the child, injuring the child. Here, Ellison is strictly liable for the injuries caused by his dog even though he has committed no negligence himself.

Question 37

product liability

Answer 37

The liability of manufacturers, sellers, and others for the injuries caused by defective products.

Question 38

negligence

Answer 38

A tort related to defective products in which the defendant has breached a duty of due care and caused harm to the plaintiff.

Question 39

intentional misrepresentation (fraud)

Answer 39

A tort in which a seller or lessor fraudulently misrepresents the quality of a product and a buyer is injured thereby.

Question 40

Product Liability: strict liability

Answer 40

A tort doctrine that makes manufacturers, distributors, wholesalers, retailers, and others in the chain of distribution of a defective product liable for the damages caused by the defect, regardless of fault.

The doctrine of strict liability applies to sellers and lessors of products who are engaged in the business of selling and leasing products. Casual sales and transactions by nonmerchants are not covered. Thus, a person who sells a defective product to a neighbor in a casual sale is not strictly liable if the product causes injury.

Strict liability applies only to products, not services.

In hybrid transactions that involve both services and products, the dominant element of the transaction dictates whether strict liability applies.

Example In a medical operation that requires a doctor to insert an electronic pace- maker to help a patient’s heart pump blood regularly, the surgical operation would be the dominant element and the provision of the pacemaker would not be the dominant element. Therefore, the doctor would not be liable for strict liability if the pacemaker is defective and fails, causing injury to the patient. However, the manu- facturer and seller of the defective pacemaker (a product) would be strictly liable.

Internet:

Manufacturers, distributors and retailers can all be sued for strict liability.

Manufacturers are the obvious defendants, since they are the ones creating the parts and/or assembling the products. However, because strict liability does not take into account the standard of behavior of those involved in selling consumer products, distributors and retailers can also be sued for strict liability.

That means even though a distributor might simply receive a product from a manufacturer and pass it on to a retailer without a chance for inspection, and the retailer sell it to a consumer without any alteration in the product, a plaintiff consumer can still sue both. The policy behind this rule is that consumers should not be injured without compensation simply because they cannot prove who in the distribution chain was responsible for the product defect.

Once a plaintiff has sued a manufacturer, distributor or retailer, it is up to the defendant to prove who in the chain was actually responsible and recover what they were required to pay to the plaintiff.

Question 41

chain of distribution

Answer 41

All manufacturers, distributors, wholesalers, retailers, lessors, and subcomponent manufacturers involved in a transaction.

Question 42

punitive damages

Answer 42

Monetary damages that are awarded to punish a defendant who either intentionally or recklessly injured the plaintiff.

Question 43

product defects

Answer 43

Something wrong, inadequate, or improper in the manufacture, design, packaging, warning, or instructions about a product.

The most common types of defects are:

• Defect in manufacture • Defect in design
• Failure to warn
• Defect in packaging

• Failure to provide adequate instructions

Question 44

defect in manufacture

Answer 44

A defect that occurs when a manufacturer fails to (1) assemble a product properly, (2) test a product properly, or (3) check the quality of the product adequately.

Question 45

defect in design

Answer 45

A defect that occurs when a product is designed improperly.

In evaluating the adequacy of a product’s design, a court may apply a risk-utility analysis. This requires the court to consider the gravity of the danger posed by the design, the likelihood that injury will occur, the availability and cost of producing a safer alternative design, the social utility of the product, and other factors. Some courts apply a consumer expectation test, which requires a showing that the product is more dangerous than the ordinary consumer would expect.

Example An action-figure doll for children is designed, manufactured, and sold to consumers, but the toys are defective because they contain lead paint, which can cause injury. This is a design defect because all the toys are improperly designed using lead paint. Children who are injured by the lead paint can recover damages for their injuries. Here, all of the parties in the chain of distribution—the manu- facturer of the defective toy and the distributors, wholesalers, and retailers who sold the toy—are strictly liable.

Question 46

crashworthiness doctrine

Answer 46

A doctrine that says that automobile manufacturers are under a duty to design automobiles so that they take into account the possibility of harm from a person’s body striking something inside the automobile in the case of a car accident.

Question 47

failure to warn

Answer 47

A defect that occurs when a manufacturer does not place
a warning on the packaging of products that could cause injury if the danger is unknown.

Question 48

defect in packaging

Answer 48

A defect that occurs when a product has been placed in packaging that is insufficiently tamperproof.

Question 49

failure to provide adequate instructions

Answer 49

A defect that occurs when a manufacturer does not provide detailed directions for safe assembly and use of a product.

Question 50

Defenses to Product Liability

Answer 50

1) Generally known danger. Certain products are inherently dangerous and are known to the general population to be so. Manufacturers and sellers are not strictly liable for failing to warn of generally known dangers.

Example Because it is a known fact that guns shoot bullets, manufacturers and sellers of guns do not have to place a warning on the barrel of a gun warning of this generally known danger.

2) Government contractor defense. Defense and other contractors that manufacture products to government specifications are not usually liable if such a product causes injury. This is called the government contractor defense.

Example A manufacturer that produces a weapon to U.S. Army specifications is not liable if the weapon is defective and causes injury.

3) Abnormal misuse of a product. A manufacturer or seller is relieved of product liability if the plaintiff has been injured by an abnormal misuse of a product.

Example A manufacturer or seller of a power lawn mower is not liable if a con- sumer lifts a power lawn mower on its side to cut hedge and is injured when the lawn mower falls and cuts him.

4) Supervening event. The manufacturer or seller is not liable if a product is materially altered or modified after it leaves the seller’s possession and the alteration or modification causes an injury. Such alteration or modification is called a supervening event.

Example A seller is not liable if a consumer purchases a truck and then replaces the tires with large off-road tires that cause the truck to roll over, injuring the driver or another person.

5) Assumption of the risk. The doctrine of assumption of the risk can be asserted as a defense to a product liability action. For this defense to apply, the defendant must prove that (1) the plaintiff knew and appreciated the risk and that (2) the plaintiff voluntarily assumed the risk.

Example A prescription drug manufacturer warns of the dangerous side effects of taking a prescription drug. A user is injured by a disclosed side effect. The user assumed the disclosed risk and therefore the manufacturer is not liable for product liability.

Question 51

generally known dangers

Answer 51

A defense that acknowledges that certain products are inherently dangerous and are known to the general population to be so.

Question 52

government contractor defense

Answer 52

A defense which provides that contractors that manufacture products to government specifications are not usually liable if such a product causes injury.

Question 53

abnormal misuse of a product

Answer 53

A defense that relieves a seller of product liability if the user abnormally misused a product.

Question 54

supervening event

Answer 54

An alteration or a modification of a product by a party in the chain of distribution that absolves all prior sellers from strict liability.

Question 55

statute of limitations

Answer 55

A statute that requires an injured person to bring an action within a certain number of years from the time that he or she was injured by a defective product.

Question 56

statute of repose

Answer 56

A statute that limits the seller’s liability to a certain number of years from the date when the product was first sold.

Some states have enacted statutes of repose, which limit a manufacturer’s and seller’s liability to a certain number of years from the date when the product was first sold. The period of repose varies from state to state.

Example Assume that a state statute of repose for strict liability is 7 years. If a purchaser purchases a product on May 1, 2018, the statute of repose expires May 1, 2025. If the product is defective but does not cause injury until after that date, the manufacturer and sellers are relieved of liability.

Question 57

STATUTE OF LIMITATION AND STATUTE OF REPOSE

Answer 57

Statute of Statute of limitations And Statute of repose

StatuteBegins to Run

Statue of limitations When the plaintiff suffers injury

Statute of repose When the product is first sold

** Note the difference between time of injury vs. sold.

Question 58

contributory negligence

Answer 58

A defense that says that a person who is injured by a defective product but has been negligent and has contributed to his or her own injuries cannot recover from the defendant.

Question 59

comparative negligence (comparative fault)

Answer 59

A doctrine that applies to strict liability actions that says a plaintiff who is contributorily negligent for his or her injuries is responsible for a proportional share of the damages.

Question 60

Contributory negligence and comparative fault

Answer 60

Doctrine

Contributory negligence - A person who is partially responsible for causing his or her own injuries may not recover anything from the manufacturer or seller of a defective product.

Comparative negligence - A person who is partially responsible for causing his or her own injuries is responsible for a proportional share of the damages. The manufacturer or seller of the defective product is responsible for the remainder of the plaintiff’s damages.