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64 Cards in this Set

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S2. Learning Objectives
What implied warranties arise under the UCC?
Can a manufacturer be held liable to any person who suffers an injury proximately caused by the manufacturer’s negligently made product? 
S3. Learning Objectives
What are the elements of a cause of action in strict product liability?
What defenses to liability can be raised in a product liability lawsuit?
When will advertising be deemed deceptive?
S4. Introduction
A warranty is an assurance or guarantee by the seller or lessor of certain facts concerning the goods being sold or leased.
If seller breaches a warranty, buyer can recover damages, or rescind the contract.
S5. Warranties
Warranties automatically arise in most commercial sales transactions.
Normally warranties can be disclaimed or modified with specific language in the contract. 
S6. Warranties
Warranties of Title.
UCC-312 can create three express warranties at sale:
Good Title.
No Liens.
No Infringements.
S7. Warranties
Express Warranties.
Representations concerning quality, condition, description, or performance potential of goods.
Can be created by:
Any Affirmation or Promise.
Any Description.
Any Sample or Model.
S8. Warranties
Express Warranties.
Basis of the Bargain.
Seller does not have to use the words “guarantee” or “warranty.”
Buyer must rely on warranty when he enters into contract. 
S9. Warranties
Express Warranties.
Statements of Opinion and Value. Only statements of fact create express warranties.
Exception for Statements of Opinion by Experts.
Puffery versus Express Warranties.
S10. Warranties
Implied Warranties.
Inferred at law based on the circumstances or nature of the transaction.
S11. Warranties
Implied Warranty of Merchantability.
Merchantable Goods:
Are average, fair, or medium-grade.
Are adequately packaged and labeled.
Conform to promises on label.
Have a consistent quality and quantity among the commercial units.
S12. Warranties
Implied Warranty of Merchantability.
Merchantable Food: based on consumer expectations.
CASE 12.1 Webster v. Blue Ship Tea Room, Inc. (1964). Was the soup fit to eat on the basis of consumer expectations?
S13. Warranties
Implied Warranty of Fitness for a Particular Purpose.
Arises by any Seller who:
Knows the particular purpose for which the goods are being bought; and
Knows the buyer is relying on seller’s skill and judgment to select suitable goods.
S14. Warranties
Implied Warranty of Fitness for a Particular Purpose.
Particular vs. Ordinary Purpose: Differs from ordinary purpose of merchantability. Goods can be merchantable but unfit for a particular purpose.
S15. Warranties
Implied Warranty of Fitness for a Particular Purpose.
Knowledge and Reliance Requirements: seller must have reason to know purpose, and buyer must have relied on the recommendation.
S16. Warranties
Implied Warranty from Prior Dealings or Trade Custom.
Arises when both parties to a contract have knowledge of a well-recognized trade custom. Courts infer that both meant this custom to apply to their transaction
S17. Overlapping Warranties
Occurs when two or more warranties are made in a single transaction:
When Warranties are Consistent: they are construed as cumulative. 
S18. Overlapping Warranties
When Warranties are Inconsistent:
First: implied warrant of fitness for a particular purpose.
Samples take precedence over inconsistent descriptions.
Exact or technical specifications displace inconsistent samples or descriptions.
S19. Warranty Disclaimers
Express Warranties can be disclaimed:
If they were never made (evidentiary matter).
If a clear written disclaimer in contract with specific, unambiguous language and called to Buyer’s attention (BOLD CAPS UNDERLINED).
S20. Warranty Disclaimers
Implied Warranties.
Unless circumstances indicate otherwise, warranties of fitness and merchantability can be disclaimed with the words “As Is,” “With All Faults.” 
S21. Warranty Disclaimers
Implied Warranties.
Disclaimer of the Implied Warranty of Merchantability: must use the word merchantability.
Disclaimer of the Implied Warranty of Fitness: must be in writing and conspicuous.
S22. Warranty Disclaimers
Buyer’s or Lessee’s Examination or Refusal to Inspect.
Warranties are disclaimed as to defects that could reasonably be found on examination.
Warranty Disclaimers and Unconscionability.
S23. Magnuson-Moss Warranty Act
Modifies UCC for consumer sales.
Only applies when written warranties are made by Seller (including a service contract).
If goods > $25 label must state either a “full” or “limited” warranty. 
S24. Magnuson-Moss Warranty Act
Full Warranty: Seller must repair or replace.
Limited Warranty must be conspicuous.
If limit of time only must say, e.g., “full twelve-month warranty.” 
S25. Magnuson-Moss Warranty Act
UCC Implied Warranties:
May not be disclaimed, but can be limited, but must correspond with time of express warranty.
Requires document of all warranties in “readily understood language.”
S26. Lemon Laws
Apply to cars that are “lemons” and cannot be repaired properly.
Lemon Laws:
Provide remedies to consumers whose automobiles under warranty fail to meet value or performance. 
S27. Lemon Laws
Lemon Laws:
Seller has reasonable attempts to fix the defect (usually 4). If not, buyer has remedy of a new car, replacement of defective parts, or return of all consideration paid.
Arbitration is usual process.
S28. Product Liability
Product Liability is not a new tort.
Liability can be based on:
Negligence; 
Misrepresentation; 
Strict Liability; 
Warranty Theory. 
S29. Product Liability
Negligence.
Claim based on a manufacturer’s breach of the reasonable standard of care.
Due Care Must Be Exercised in: design, selection of materials, using appropriate production process, assembling and testing, adequate warnings, inspection, and testing. 
S30. Product Liability
Negligence.
Privity of Contract Not Required. No privity of contract required between Plaintiff and Manufacturer. Liability extends to any person’s injuries caused by a negligently made (defective) product.
S31. Product Liability
Misrepresentation.
Occurs when fraud committed against consumer or user of product. Fraud must have been made knowingly or with reckless disregard for safety.
Plaintiff does not have to show product was defective.
S32. Strict Product Liability
Strict Liability holds people liable for results of their acts, regardless of their intentions or exercise of reasonable care.
S33. Strict Product Liability
Strict Liability and Public Policy.
Consumers should be protected from unsafe products;
Manufacturers and distributors should be liable to any user of the product;
Manufacturers, sellers and distributors can bear the costs of injuries. 
SS34-35. Strict Product Liability
Requirements for Strict Liability:
1. Product must be in defective condition when sold.
2. Defendant is in the business of selling the product.
3. Product must be unreasonably dangerous.
4. Plaintiff must be physically harmed
5. Defective condition must be proximate cause of injury.
S36. Strict Product Liability
Requirements for Strict Liability.
- Proving a Defective Condition.
- Plaintiff does not need to show product or in what manner the product become defective.
- But plaintiff must show product was defective and “unreasonably dangerous” to the user. 
S37. Strict Product Liability
Requirements for Strict Liability.
- Unreasonably Dangerous Products.
- The product was dangerous beyond the expectation of the ordinary consumer.
- A less dangerous alternative was economically feasible for the manufacturer, but the manufacturer failed to produce it.
S38. Product Defects—Restatement (3rd) of Torts
- Three types of product defects:
- Manufacturing Defects. 
- Design Defects. 
- Warning Defects.
S39. Product Defects—Restatement (3rd) of Torts
Manufacturing Defects.
Occurs when a product “departs from its intended design even though all possible care was exercised in the preparation and marketing of the product.”
S40. Product Defects—Restatement (3rd) of Torts
Design Defects.
Product is manufactured correctly, but defect is based on design.
Test for Design Defects: plaintiff must show defendant’s failure to use a reasonable alternative design rendered the product not reasonably safe. 
S41. Product Defects—Restatement (3rd) of Torts
Design Defects.
Factors to be Considered.
Magnitude and probability of foreseeable risks.
Relative advantages and disadvantages of product.
Most courts use “risk-utility” analysis.
S42. Product Defects—Restatement (3rd) of Torts
Inadequate Warnings.
Content: a product may be defective because of inadequate warnings or instructions.
Liability based on foreseeability that proper instructions/labels would have made the product safe to use. 
S43. Product Defects—Restatement (3rd) of Torts
Product Defects—Restatement (3rd) of Torts
Inadequate Warnings.
CASE 12.2 Johnson v. Medtronic, Inc. (2012).
Obvious Risks: no duty to warn.
S44. Strict Product Liability
Other Applications of Strict Liability.
Virtually all courts extend strict liability to injured bystanders.
Strict liability also applies to suppliers of component parts.
S45. Defenses to Product Liability
Preemption.
Government regulations preempt claims for product liability.
Assumption of Risk.
Some courts do not allow AR to be used in strict product liability claims. 
S46. Defenses to Product Liability
Product Misuse.
Plaintiff does not know the product is dangerous for a particular use.
Comparative Negligence (Fault).
Defendants may be able to limit damages by apportioning fault. 
S47. Defenses to Product Liability
Commonly Known Dangers.
Knowledgeable User.
S48. Consumer Law
S49. Consumer Law
Deceptive Advertising.
Occurs if a reasonable consumer would be misled by the advertising claim.
Puffery: Vague generalities and obvious exaggerations are permissible and not considered deceptive.
Half-Truths: information is true, but incomplete.
S50.Consumer Law
Deceptive Advertising.
Bait and Switch Ads: the advertising of a product at an attractively low price to lure customers in to buy more expensive items. 
S51. Consumer Law
Deceptive Advertising.
Online Deceptive Ads: same rules apply. To satisfy the “clear and conspicuous” requirement, disclosures must be close (only hyperlink if lengthy).
CASE 12.3 Hypertouch, Inc. v. ValueClick, Inc. (2011). What makes an email deceptive?
S52. Consumer Law
Deceptive Advertising.
Federal Trade Commission (FTC) Actions. The FTC can:
Issue cease and desist orders. With respect to a particular product or advertisement.
With regard to multiple product orders.
Impose counter-advertising.
S53. Consumer Law
Telemarketing Sales Rule (TSR).
FTC’s TSR requires a telemarketer to identify the seller, described the product being sold, and disclose all material facts related to the sale.
Do Not Call registry.
S54. Consumer Law
Labeling and Packaging.
Labeling must be accurate, and must use words that are easily understood by the ordinary consumer.
Fuel Economy on Automobiles.
Food Labeling.
Menu Labeling Regulations.
S55. Consumer Law
Sales.
FTC and many states require that consumers have a three business day “cooling-off” period during which they can cancel their purchase without obligation. 
S56. Consumer Law
Protection of Health and Safety.
Food and Drugs.
Pure Food and Drugs Act (1906), then Federal Food, Drug and Cosmetic Act (1938), enforced by Food and Drug Administration.
S57. Consumer Law
Protection of Health and Safety.
Consumer Product Safety.
Consumer Product Safety Act (1972) regulates matters affecting consumer safety; established the Consumer Product Safety Commission.
S58. Consumer Law
Protection of Health and Safety.
Health Care Reforms.
2010, Congress passed the Patient Protection and Affordable Care Act.
Expanded Coverage for Children and Seniors.
Controlling Costs of Health Insurance.
S59. Credit Protection
Consumer Credit is protected by:
Truth in Lending Act.
Fair Credit Reporting Act.
Fair Debt Collection Practices Act.
Wage Garnishment.
S60. Credit Protection
Truth-in-Lending Act.
TILA is basically a disclosure law. Requires all consumer lenders to compute the cost of a loan the same way and to advertise it as an Annual Percentage Rate (APR). 
S61. Credit Protection
Truth-in-Lending Act.
Equal Credit Opportunity: requires that credit be extended without regard to race, sex, color, national origin, age, or marital status.
S62. Credit Protection
Truth-in-Lending Act.
Credit Card Rules: limits consumer liability to $50 for credit card debt in cases of stolen cards.
Amendments to Credit-Card Rules (2010).
S63. Credit Protection
Fair Credit Reporting Act.
Limits the activities of credit reporting agencies.
Consumers have the right to access information contained about them in a credit reporting agency’s files and to require credit reporting agencies to delete unverifiable information.
S64. Credit Protection
FACT: combat identity theft.
Created the National Fraud Alert system so that consumers can place fraud alert in their credit files.
Requires credit companies to give customers free credit reports each year.
Gives victims of identity theft some assistance.
S65. Credit Protection
Fair Debt-Collection Practices Act.
Requires collectors provide validation notice to the debtor, at the time of first contact.
Prohibits collection agencies from:
Contacting debtor at work.
Contacting third parties about payments.
S66. Credit Protection
Fair Debt-Collection Practices prohibits collection agencies from:
Using harassment or intimidation or employing false misleading information.
Contact debtor after notice of payment refusal.