Product liability

In general, a manufacturer’s responsibility to market safe products. Under the law of torts, a manufacturer is held strictly liable when one of its products, placed on the market with the knowledge that it will be used without inspection for defects, proves to have a defect that causes injury to a human being.

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Product liability comprises a number of laws and court rulings that apply to any business that makes or sells a product. Businesses that make or sell products are responsible for ensuring that those products are safe and do not pose a hazard to the public. Such businesses can be held liable for any damage or harm their products might cause.

According to Section 102(2) of the Uniform Product Liability Act, product liability includes "all claims or action brought for personal injury, death, or property damage caused by the manufacture, design, formula, preparation, assembly, installation, testing, warnings, instructions, marketing, packaging, or labeling of any product." Product liability issues have become increasingly important to manufacturers and marketing managers, due to the spread of the doctrine of strict liability and the adoption of new theories that permit recovery in so-called "delayed manifestation" cases.

Because of their limited resources, small businesses must be particularly aware of their responsibilities under product liability laws. In addition to making safe products, this responsibility extends to prominently displaying warnings of any potential hazards on products and packaging. Experts recommend that small business owners consult with legal counsel experienced in the product liability field. An attorney can help the small business owner sift through the numerous federal and state laws that apply to different types of products. Small businesses are also encouraged to purchase product liability insurance. Unfortunately, the increasing number of lawsuits and large damage awards in this area have made such insurance very expensive and reduced the amount of coverage available. In fact, the expense of insuring against product liability has prevented small manufacturers from competing in certain product areas.

Development of Product Liability Laws

Product liability began to have meaning in the mid-1800s, when the American courts increasingly found that sellers of goods had a "duty" to use reasonable care in the production of those goods. Sellers were held liable to third parties for negligence in the manufacture or sale of goods "inherently dangerous" (the danger of injury arises from the product itself, rather than from a defect in the product) to human safety, ranging from food and beverages to drugs, firearms, and explosives. In the early 1960s, tort principles were first applied to product liability. During this time, the concept of "inherently dangerous" goods was still held to be significant, but there was a shift to negligence (tort) principles that held that producers of goods were required to apply "due care" in the marketing of goods to users.

Since that time, businesses have operated under an understanding that because they knowingly market products which affect the interests of consumers, they owe a legal duty of caution and prudence to consumers. Since manufacturers may foresee potentially harmful product effects, they are responsible for attempting to minimize harm. Establishing this legal duty between the manufacturer and the consumer made it possible for plaintiffs to argue the negligent breach of that duty. These principles are now accepted throughout the country and followed by all American courts. Eventually, the concept of "inherently dangerous" products fell into disuse and the concept of negligence was expanded beyond production to include labeling, installation, inspection, and design.

Elements of Product Liability

Four elements must be present for a product liability case to be considered under the negligent tort principles:

• The particular defendant owes a duty to the particular plaintiff to act as a reasonably prudent person under the same or similar circumstances.
• There is a breach of such a duty by the defendant—that is, a failure to act reasonably.
• There is an injury, including personal injury or property damage.
• There is a causal link between defendant's breach of duty and injuries sustained by the plaintiff.

The concept of negligence is applicable to every activity preceding a product's availability in the market. This encompasses everything from product design, the inspection and testing of materials, and the manufacture and assembly of the product to the packaging, the accompanying instructions and warnings, and the inspection and testing of the final product are all susceptible to negligence. Negligence can result from omission as well as commission—failure to discover a flaw is as negligent as creating one. Similarly, failing to provide adequate warnings about potential dangers in the use of a product is a violation of duty.

Still, it is often difficult to prove negligence in product liability cases. Defendants only must meet the general standards of reasonable behavior as judged against the behavior of a reasonably careful competitor who demonstrates the standard skills and expertise of the industry. In reality, a manufacturer must only show that "ordinary care under the circumstances" was applied to avoid liability for negligence. This is easy compared to the task of consumers showing evidence to the contrary.

Many products, even the most ordinary, pose some level of risk, and the law recognizes that it is often not possible to design a totally safe product. However, manufacturers are legally obligated to warn consumers about known dangers. Manufacturers may be found negligent if:

• They fail to warn users about recognized risk
• The warning is too vague to be adequate
• The warning is not brought to the user's attention

There is no duty to warn against misuse that is so rare or unusual that it cannot be foreseen. The obligation to warn consumers of potential dangers poses a unique difficulty for manufacturers who must not only provide warnings, but must communicate them such that a reasonable person will find and understand them. In some cases a warning buried in a product's instructions may be judged inadequate; in other situations, a warning sticker on the product itself may be considered sufficient.

Strict Product Liability

The most recent evolution in tort law, strict liability, has transformed the very nature of product liability because it eliminates the entire question of negligence. Strict liability only requires a plaintiff to demonstrate that a product caused an injury because it was defective; the reason for the defect is irrelevant. The product itself, not the defendant's use, is under investigation.

Under strict liability, the manufacturer is held liable for allowing a defective product to enter the marketplace. The issue is a matter of public policy, not the manufacturer's unreasonable or negligent conduct. The introduction of a defective product into the marketplace brings each member of the product's distribution channel into liability for negligence. The theory of strict liability holds that manufacturers: have the greatest control over the quality of their products; can distribute their costs by raising prices; and have special responsibilities in their role as sellers.

The tort of negligence at least provided the responsible person a standard by which to measure negligence, although it imposed the added burden of proving that the defendant was negligent. Although strict liability eases those burdens for the plaintiff and improves chances of recovery, it does not provide a universally accepted standard for measuring failure. Instead, it relies on what has become known as the "consumer-expectation" test: one who sells any product in a defective condition unreasonably dangerous to the user is subject to liability for physical harm caused to the user if:1) the seller is engaged in the business of selling such a product, and 2) the product is expected to and does reach the user without substantial change in the condition in which it is used. "Unreasonably dangerous" is defined as dangerous beyond the expectations of the ordinary consumer who purchases it. Despite its great influence, this definition has not been universally accepted.

Tort law does recognize that some products beneficial to society cannot be made entirely safe. Prescription drugs and vaccines are notorious examples. Such products are not considered defective simply because of their inevitable hazards; something else must be wrong with them as well. Therefore, drug companies are not held strictly liable for a properly manufactured product accompanied by appropriate directions and warnings. In sum, design defects are not the same as manufacturing defects.

One defense manufacturers have employed with controversy is called "state of the art." This means that manufacturers should be held accountable only for information available to them at the time of manufacture. Flaws or defects which arose due to unavailable knowledge are not considered in questions of liability. The problem interpreting this defense concerns the variation of knowledge and its applications across the country.

Further Reading:

Gooden, Randall. "Reduce the Potential Impact of Product Liability on Your Organization." Quality Progress. January 1995.

Lane, Marc J. Legal Handbook for Small Business. AMACOM, 1989.

Siomkos, George, and Paul Shrivastava. "Responding to Product Liability Crises." Long Range Planning. October 1993.

Spiro, George W. Legal Environment of Business. Prentice Hall, 1993.

This entry contains information applicable to United States law only.

The responsibility of a manufacturer or vendor of goods to compensate for injury caused by a defective good that it has provided for sale.

When a person is harmed by an unsafe product, she may have a cause of action against the persons who designed, manufactured, sold, or furnished that product. In the United States, some consumers have hailed the rapid growth of product liability litigation as an effective tool for consumer protection. The law has changed from caveat emptor ("let the buyer beware") to strict liability for manufacturing defects that make a product unreasonably dangerous. Manufacturers and others who distribute and sell goods argue that product liability verdicts have enriched plaintiffs' attorneys and added to the cost of goods sold. Businesses have sought tort reform from state legislatures and Congress in hopes of reducing damage awards that sometimes number in the millions of dollars.

Theories of Liability

In most jurisdictions a plaintiff's cause of action may be based on one or more of four different theories: negligence, breach of warranty, misrepresentation, and strict tort liability.

Negligence refers to the absence of, or failure to exercise, proper or ordinary care. It means that an individual who had a legal obligation either omitted to do what should have been done or did something that should not have been done.

A manufacturer can be held liable for negligence if lack of reasonable care in the production, design, or assembly of the manufacturer's product caused harm. For example, a manufacturing company might be found negligent if its employees did not perform their work properly or if management sanctioned improper procedures and an unsafe product was made.

Breach of warranty refers to the failure of a seller to fulfill the terms of a promise, claim, or representation made concerning the quality or type of the product. The law assumes that a seller gives certain warranties concerning goods that are sold and that he must stand behind such assertions.

Misrepresentation in the advertising and sales promotion of a product refers to the process of giving consumers false security about the safety of a particular product, ordinarily by drawing attention away from the hazards of its use. An action lies in the intentional concealment of potential hazards or in negligent misrepresentation. The key to recovery on the basis of misrepresentation is the plaintiff's ability to prove that he relied upon the representations that were made. Misrepresentation can be argued under a theory of breach of express warranty or a theory of strict tort liability.

Strict liability involves extending the responsibility of the vendor or manufacturer to all individuals who might be injured by the product, even in the absence of fault. Injured guests, bystanders, or others with no direct relationship to the product may sue for damages caused by the product. An injured party must prove that the item was defective, the defect proximately caused the injury, and the defect rendered the product unreasonably dangerous.

Historical Development

The history of the law of product liability is largely a history of the erosion of the doctrine of privity, which states that an injured person can sue the negligent person only if she was a party to the transaction with the injured person. In other words, a defendant's duty of reasonable care arose only from the contract, and only a party to that contract could sue for its breach. This meant that a negligent manufacturer who sold a product to a retailer, who in turn sold it to the plaintiff, was effectively insulated from liability. The plaintiff was usually without a remedy in tort, because it was the manufacturer and not the retailer whose negligence caused the harm.

The privity doctrine dominated nineteenth-century law, yet courts created exceptions to avoid denying an injured plaintiff a remedy. Soon privity of contract was not required where the seller fraudulently concealed the defect or where the products were inherently or imminently dangerous to human life or health, such as poisons or guns. The decisions then began to expand these exceptions. Some courts dropped the fraud requirement. A concealed defect coupled with some sort of "invitation" by the defendant to use the product was enough. In a few cases the term imminently dangerous was construed to mean especially dangerous by reason of the defect itself, and not necessarily dangerous per se. For example, products intended for human consumption, a defective scaffold, and a coffee urn that exploded would be considered imminently dangerous.

The seminal case of MacPherson v. Buick Motor Co., 217 N.Y. 382, 111 N.E. 1050 (N.Y. 1916), broadened the category of "inherently" or "imminently" dangerous products so as to effectively abolish the privity requirement in negligence cases. It held that lack of privity is not a defense if it is foreseeable that the product, if negligently made, is likely to cause injury to a class of persons that includes the plaintiff. Because this is essentially the test for negligence, the exception swallowed the rule. The MacPherson case quickly became a leading authority, and the privity rule in negligence cases soon was ignored. Increasing public sympathy for victims of industrial negligence also contributed to the demise of the rule.

In warranty, a similar privity limitation was imposed, in part because warranties were thought to be an integral part of the sales contract. Beginning in the early twentieth century, an exception to the privity rule developed for cases involving products intended for human consumption (food, beverages, drugs) and eventually also for products intended for "intimate bodily use" (e.g., cosmetics) so that the warranty in these cases extended to the ultimate consumer. In the case of express warranties, which could be said to be made to the public generally, the privity requirement was abandoned during the 1930s. For example, a manufacturer's statement in literature distributed with an automobile that the windshield was "shatterproof" constituted an express warranty to the purchaser that the windshield would not break (Baxter v. Ford Motor Co., 168 Wash. 456, 12 P.2d 409 [Wash. 1932]).

But with respect to implied warranties, exception to the privity rule did not extend beyond food, drink, and similar products until Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358, 161 A.2d 69 (1960). In this case the New Jersey Supreme Court abolished the privity limitation generally and held that the implied warranties run to the foreseeable ultimate user or consumer of the product. The Henningsen decision, which also invalidated the manufacturer's attempted disclaimer of implied warranty liability, has been followed in almost all jurisdictions.

From 1930 to 1960, various legal writers and a few judges discussed the creation of strict liability in tort for defective products. The best-known judicial exposition of this view was California Supreme Court Justice Roger John Traynor's concurring opinion in Escola v. Coca Cola Bottling Co. of Fresno, 24 Cal. 2d 453, 150 P.2d 436 (1944). A number of justifications are advanced for strict liability: negligence is often too difficult to prove; strict liability can be accomplished through a series of actions for breach of warranty; strict liability provides needed safety incentives; the manufacturer is in the best position to either prevent the harm or insure or spread the cost of the risk; and the manufacturer of a product induces consumer reliance on the expectation of the product's safety and should be made to stand behind the product.

Finally in 1963, in Greenman v. Yuba Power Products, Inc., 59 Cal. 2d 57, 377 P.2d 897, the California Supreme Court adopted strict tort liability for defective products. Within a short time, strict liability swept the country and is now the law in all but a few states.

Negligence

The duty to guard against negligence and supply a safe product applies to everyone in the chain of distribution, including a manufacturer who carelessly makes a defective product, the company that uses the product to assemble something else without discovering an obvious defect, and the vendor who should exercise greater care in offering products for sale. These individuals owe a duty of care to anyone who is likely to be injured by such a product if it is defective, including the initial buyer, her family members, bystanders, or persons who lease the item or hold it for the purchaser.

Additionally, the duty to exercise care involves all phases of getting a product to the consumers or users. The product must be designed in such a way that it is safe for its intended use. It must be inspected and tested at different stages, made from the appropriate materials, and assembled carefully. The product's container or packaging must be adequate. The manufacturer must also furnish adequate warnings and directions for use with the product. The seller is proscribed from misrepresenting the safety or character of the product and must disclose all defects.

Breach of Warranty

Warranties are certain kinds of express or implied representations of fact that the law will enforce against the warrantor. Product liability law is concerned with three types of warranties involving the product's quality or fitness for use: express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose. These and other warranties are codified in the Uniform Commercial Code (UCC), which every state has adopted.

An express warranty can be created in one of three ways: through an affirmation of fact made by the vendor of the goods to the purchaser relating to the goods, which becomes part of the bargain; by way of a description of the goods, which is made part of the basis of the bargain; and through a sample or model, which is made part of the basis of the bargain (U.C.C. § 2-313).

An express warranty can be words spoken during negotiations or written into a sales contract, a sample, an earlier purchase of the same kind of product, or claims made in publicity or on tags attached to the product. An express warranty is created when a salesperson states that the product is guaranteed to be free from defects for one year from the date of the purchase.

Implied warranties are those created and imposed by law, and accompany the transfer of title to goods unless expressly and clearly limited or excluded by the contract. However, with respect to damages for personal injury, the UCC states that any such contractual limitations or exclusions are "prima facie unconscionable" and cannot be enforced (U.C.C. § 2-719(3)).

The implied warranty of merchantability requires that the product and its container meet certain minimum standards of quality, chiefly that the product be fit for the ordinary purposes for which such goods are sold (U.C.C. § 2-314). This includes a standard of reasonable safety.

The implied warranty of fitness for a particular purpose imposes a similar requirement in cases where the seller knows or has reason to know of a particular purpose for which the goods are required and where the buyer is relying on the seller to select or furnish suitable goods. The seller then warrants that the goods are fit for that particular purpose (U.C.C. § 2-315). For example, assume that the buyer tells the seller, a computer supplier, that he needs a high-speed computer to manage inventory and payroll functions for his business. Once the seller recommends a particular computer to handle these requirements, she is making an implied warranty of fitness. If the computer cannot adequately process the inventory and payroll, the buyer may file suit.

The action for breach of one of these warranties has aspects of both tort and contract law. Its greatest value to the injured product user lies in the fact that liability for breach is strict. No negligence or other fault need be shown. However, in addition to the privity limitation, certain contract-related defenses have impaired the remedy's usefulness. These include the requirement that the seller receive reasonably prompt notice of the breach as a condition to his or her liability, the requirement that the buyer has relied upon the warranty, and the ability of the seller to limit or disclaim entirely the implied warranties. These defenses are most appropriate in cases where a product's failure causes economic loss. The trend has been away from strict enforcement of these defenses in personal injury cases where the action is closer to a tort action.

Strict Liability

The rule of strict liability applied in product liability suits makes a seller responsible for all defective items that unreasonably threaten the personal safety of a consumer or the consumer's property. The vendor is liable if she regularly engaged in the business of selling such products, which reach the consumer without any substantial changes having been made in their condition. The vendor is liable even if she exercised care in handling the product and if the consumer bought the product somewhere else and had no direct dealings with the vendor.

Defects

A critical issue in a product liability lawsuit is whether the product contains a defect, which is an imperfection that renders a product unsafe for its intended use. Design defects exist when a whole class of products is inadequately planned in such a way as to pose unreasonable hazards to consumers. For example, an automobile manufacturer's design of a vehicle with the fuel tank placed in such a position that it will explode upon low-speed impact can be classified as defective. In that case, products manufactured in conformity with the intended design would be defective. A production defect arises when a product is improperly assembled. For example, frames of automobiles that are improperly welded to the body at the assembly plant would be classified as a production defect.

In addition, something other than the product itself can cause it to be defective. For example, caustic chemicals should be packaged in appropriate containers. Improper labeling, instructions, or warnings on a product or its container also make a product defective. Dangerous products should carry warning labels that explain how they should be used, under what circumstances they are likely to cause harm, and what steps can be taken in an emergency involving the product.

The principle of proper labeling includes claims made in sales brochures, product displays, and public advertising. It extends beyond warranty or negligence law, because a seller is strictly liable to users or purchasers of the product who are not in privity with the seller.

A manufacturer who creates the demand for goods through print and broadcast media has the responsibility to determine that the product has the qualities represented to the general public. Some courts allow injured consumers to sue even if they have not read a certain label or advertisement. The standard is that if the advertisement is directed toward the public at large and makes claims that a normal consumer would take into consideration when deciding to make a purchase, then the manufacturer must stand behind that claim for every member of the public.

Cause of Injuries

The issue of causation of injuries can become complicated, particularly if the product involved is only an indirect or remote cause, or one of a number of causes. Regardless of the theory of liability, the plaintiff must prove that the product was defective when it left the hands of the defendant and that the defect was the cause of injury. These issues are ordinarily questions of fact to be decided by the jury.

When the evidence indicates that an injury might have been precipitated by several causes, the question becomes whether the cause for which the defendant is liable was a substantial factor in bringing about the injury. A defendant is not necessarily liable if he is responsible for the last cause or the immediate cause of the injury. For example, a person who was injured by a cooking pot that fell apart when the person removed it from the stove might not have to show that a defect in the pot handle was the only possible explanation for the accident. The jury could still properly consider whether a defect was a concurring cause of the accident, even if they found that the plaintiff misused the pot by handling it too roughly.

Risks

A manufacturer has the duty to make the product as safe as possible. If the manufacturer cannot do so, he has the obligation to adequately warn users and buyers of the dangers that exist. The concept of a reasonably safe product extends to any dangers likely to arise when the product is being used normally or in a way that can be anticipated, even if it is not the purpose for which it was sold. For example, a manufacturer might foresee that someone is likely to stand on a table and might be required either to make it sufficiently strong and stable for people to do so without sustaining injury or to warn customers not to stand on it.

No liability is extended to a manufacturer if a plaintiff was disappointed because she had unreasonable hopes for a particular product. Frequently, however, a consumer's expectations are clearly reasonable but are not met. For example, no one expects to find defective brakes in a new automobile.

In some instances a defect might not be inherent in the product, but a consumer should be aware that care is needed. An average adult need not be warned that knives cut, that dynamite explodes, or that electrical appliances should not be used in the shower. A consumer who ignores hazards will not succeed in an action alleging product liability. However, many manufacturers print warnings about commonsense hazards to provide added protection from a lawsuit.

Traditionally, an individual must be at least as careful as a reasonably careful person. Increasing recognition has been given, however, to a more realistic standard — the occasionally careless consumer. Courts are now less interested in how obvious a danger is and more concerned with discovering how serious the risk is and how readily it could have been avoided.

A consumer who clearly misuses a product cannot recover if an injury results. For example, a person who disregards a printed warning that nail polish remover is for external use only cannot blame the manufacturer for making an imperfect product if she ingests it. In addition, the consumer is precluded from recovery if she continues to use a product that is obviously dangerous. The theory is that the consumer has assumed the risk. This rule applies, however, only to obvious defects and does not establish a duty for consumers to scrutinize every product they purchase.

Whether a consumer has assumed responsibility for using an obviously dangerous product or misused a relatively safe product depends on who the user is likely to be. The classic example is children's clothing, which generally must be at least somewhat flame-resistant, because children are less able to appreciate the danger of accidental fires.

Unavoidable Dangers

Although manufacturers and sellers have a duty to take precautions and provide adequate warnings and instructions, the public can still obtain products that are unavoidably unsafe. A seller is not held strictly liable for providing the public with a product that is needed and wanted in spite of the potential risk of danger. Prescription drugs illustrate this principle, because all of them have the potential to cause serious harm if used unreasonably.

The duty to warn consumers of unavoidable dangers presents special problems if certain individuals are likely to suffer allergic reactions. The law considers an allergy to be a reaction suffered by a minority of people that is triggered by exposure to some substance. Courts used to reject claims based on allergic reactions, reasoning that the product was reasonably safe and that the injury was caused by a defect peculiar to the individual. That approach has been abandoned, with manufacturers providing careful instructions on use and clear warnings about possible symptoms that suggest an allergic reaction.

Multiparty Litigation

Since the 1970s, groups of plaintiffs have filed consolidated lawsuits against the manufacturers of certain products. The makers of contraceptive devices, silicone breast implants, asbestos, and tobacco products have encountered this type of multiparty litigation. In many states one judge is appointed to handle all cases involving claims against such a manufacturer. The litigation process can prove costly for defendants, because they may have to defend themselves in many different states. The resulting verdicts or negotiated settlements can also be very expensive to companies.

Product Liability Reform

Businesses have sought relief from state legislatures and Congress regarding product liability, contending that the shifting legal standards make them vulnerable to even the most suspect claim. Some states have passed laws that provide manufacturers with the right to defend themselves by showing that their product met generally acceptable safety standards when made. This assertion is known as the state-of-the-art defense, which relieves manufacturers of the task of attempting to make a perfect product. An injured consumer cannot recover on the theory that the product would have been safe had the manufacturer incorporated safety features that were developed after the product was made. Consumer advocates have opposed such laws because they allow manufacturers to avoid liability. The advocates argue that these laws discourage innovation because higher safety standards are set as improvements are made.

Businesses have also sought to set maximum amounts that persons can recover for punitive damages. Some states have capped awards for punitive damages. In 1996 President Bill Clinton vetoed a bill that would have limited punitive damage awards to $250,000, or two times the economic and noneconomic damages, whichever amount was greater, stating that it would deprive U.S. families of the ability to fully recover for injuries caused by defective products.

See: Consumer Product Safety Commission; Consumer Protection; MacPherson v. Buick Motor Co.; Merchantable; Proximate Cause; Sales Law; Tort Law.

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