E-Commerce and Products Liability:
A Primer on Exposure at the Speed of Light
Marshall S.
Shapo
Kurtis B.
Reeg
I.
Introduction
Product sellers face both promise and peril as they
move into the world of electronic commerce (E-commerce). The promise is obvious: global markets beckon
at the speed of light.
This
article addresses one of the evolving legal perils associated with such market
activity: the vulnerability of sellers to a range of products liability law
that matches the worldwide market. Its
analysis concentrates on the common law of the individual states that comprise
the United States -- the major hub of E-commerce. However, it is also worth noting that the
broad parameters of products liability law across the industrialized world
provide, at least theoretically, considerable room for consumer litigation.[1] Thus, this analysis of United States law will
recommend courses of action that may be prudent for global e-marketers who wish
to minimize the risk of liability for products that allegedly caused
injury. Because the law of E-commerce is
only now in the birth process, however, the recommendations offered are
necessarily predictive.
It is first
necessary to define products liability, a concept that has come to symbolize
some of the most worrisome aspects of law for enterprises. In common parlance, products liability is
liability imposed on sellers, under a variety of theories, for injuries or
damages associated with products. In the
United States, this kind of liability originated with judge-made law. In other countries, however, and to some
recent extent in the United States, liability is grounded in legislation. The bases for liability are several and
diverse in theory. Liability may arise
from specific representations by the seller, even when made without negligence
or higher degrees of fault. Liability
also may stem from careless conduct by the seller (i.e., negligence) in the
process of designing, manufacturing or selling goods. Most controversial with respect to design
claims, liability may be premised on an allegation that a product is
dangerously defective, even if the injured person cannot prove fault.
The most
direct form of products liability arises from a seller’s representations. These may appear on the labeling or packaging
of the product, and also in a variety of media and promotional forms.
A. Express Warranty
1. Actionable Language
The
simplest type of representation is the express warranty. Essentially a creature
of contract law, an express warranty under the Uniform Commercial Code is
“[a]ny affirmation of fact or promise made by the seller to the buyer which
relates to the goods and becomes part of the basis of the bargain.”[2]
The
language of this definition appears to contemplate a direct transaction between
the parties -- an exchange of money for goods based on an agreement about the
character and quality of goods and price.
Even historically, however, the deal did not have to be face to face; an
express warranty could be created by a document sent by post.
a. No Privity Hurdle
With the development of products liability law
over the last generation, a seller at the top of an extended distribution chain
can be liable on an express warranty even if the document containing that
language passes through a number of intermediaries. Thus, for example, representations in an
owner’s manual for a product may constitute express warranties.[3]
Indeed,
advertisements may be construed as express warranties to “ultimate consumers”
who buy the product from an intermediate seller. On this point, Rogers v. Toni Home Permanent Co.,[4]
is a landmark case. In its 1958
decision, the Ohio Supreme Court spoke of “glowing” descriptions of the “worth,
quality and benefits” of products presented in advertisements. The court concluded that warranties in
advertisements (and on labels) were “inducements to the ultimate consumers,”
for which the manufacturers should “be held to strict accountability” as to
consumers who purchased products “in reliance on such representations” and were
injured by defects in the products.[5] In a more recent case involving a sales
brochure for a grain storage building, another court emphasized that the
defendant’s representations told the “ultimate customers,” not the dealers,
that “its designs will be tailor-made and of highest quality.”[6]
The Ohio
court’s language in Rogers demanding
“strict accountability” underscores the fact that express warranties are a
commercial-law version of strict liability. Having once established the
warranty, the plaintiff need only demonstrate that the product breached the
warranty; the plaintiff need not show fault on the part of the manufacturer.
Since
courts now accept that printed warranties can leap distributional boundaries,
it seems illogical that courts would construct barriers against express
warranties presented in electronic form.
These communications are the electronic equivalent of print documents,
reducible to hard copy simply by engaging a printer. The verbal content of the warranty itself is
identical, whether presented in electronic
or conventional print form. Beyond the
close parallels to warranties in conventional contract documents, warranty
language on the Web presents strong analogies to all manner of pre-Web media. Since the warranty can be printed out, it is
like a newspaper ad. Because the
warranty is electronically transmitted, it is similar to radio and
television. And, since it may be
introduced by bright color logos, it is like the billboards, a medium viewed by
courts as symbolic of the power of modern advertising.[7]
b.
Warranties in Multiple Media
Rules
governing the point at which a statement becomes an express warranty in
E-commerce presumably will parallel those that govern printed purchase
orders. Yet some issues may arise
regarding a claimant’s efforts to allege a functional integration of electronic
documents with those originally found in print form. In this regard, a recent Michigan case dealt
with two different pieces of paper involved in the purchase of an industrial
strap. Consider, for example, the
following words and symbols in an electronic price quotation from the
seller: “800 # Break #380
Strength.” A specification on a separate
paper created by the buyer states: “AVE
BREAKING STRENGTH: 800 LBS.” For those
who might view the melding of two paper documents as pushing the envelope to
derive a warranty, it may be even more a stretch to combine a seller’s
e-document with a buyer’s printed one.
Yet, in principle, it would appear that the analysis should be the
same. On facts closely analogous to
these, the Michigan court concluded that the evidence would permit a finding of
breach of express warranty “that the strapping was to have an average breaking
strength of eight hundred pounds.”[8] Among other lessons, this decision offers that
quantitative precision in a statement can form the principal touchstone for
liability.
c.
Generalities: Puffs and More
The nature
of advertisements in electronic form offers another potentially interesting set
of issues. Much advertising takes the
form of imprecise generalities -- in TV commercials, on billboards, or in
headline catchwords found in the print media. Like the law of fraud, the law
governing express warranties has a term for generality that falls on the
nonliability side of the line:
“puffery.” Colorful compressed
slogans designed to draw consumers are likely to garner leeway from the courts,
which will be reluctant to qualify these slogans as express warranties.
Nevertheless, as concerns E-commerce, courts must not
only confront whether there is a contextual or substantive difference between
electronic representations and those initially communicated in print, but also
whether there are differences between electronic representations and those made
orally. While social-science researchers
may debate for some time whether the same words make a different impression in
E-commerce than they do in more traditional media, there certainly is evidence
that people are more likely to remember what they see than what they hear. The glitz of the computer screen may provide
a boost to the enforcement of liability theories against E-commerce business
operations.
In 1965,
for example, the Arkansas Supreme Court held that the term “A-1” was an express
warranty.[9] In 1971, the Oklahoma Supreme Court went so
far as to say that a statement representing that a station wagon was in “A-No.
1 condition” and could be relied on “because it had been a family car” might
constitute a “fraudulent misrepresentation.”[10] Hopefully, courts in the 21st Century will be
no more likely to find that such language constitutes an express warranty in
print and electronic media (including the Web) than they are in face-to-face
interactions. Increasingly, consumers
and the judiciary discount such language because of growing customer
sophistication, jaded perceptions of strict liability, and the continuing
drumbeat of state and federal tort reform.
d. “Red-flag” Words.
To be sure,
there are some words that are risky for sellers to use, whether Web-related or
not. High on the list of red-flag words
is the term, “safe.” By itself, the
term may well be viewed as an express warranty, particularly as to products for
which the consumer’s focused interest is accident-free performance. For example, the court found liability in an
emotionally charged case when a vaporizer, intended for use by children, tipped
over and caused disfiguring burns.[11] The word “safe” even generated liability for
a device used to help unskilled golfers improve their game. The little-used theory of non-fault
misrepresentation in section 402B of the Restatement (Second) of Torts prevailed to support liability in that
instance.[12]
Obviously,
the use of other words that virtually insure the safety of a product include
“guarantee” and “warranty.” Those words
are likely to expose sellers to relatively expansive remedies. Thus, a tire manufacturer was unsuccessful in
arguing that the words “guaranteed for 36,000 miles . . . against blowout”
promised only to provide a replacement tire if a blowout occurred. In recognizing this language as an express
warranty of quality so as to support a finding that the disclaimer was
unconscionable, the court reversed a directed verdict for the defendant
sellers. It declared that if the defendants
did “not want to be liable for consequential damages, they should not expressly
warrant . . . tires against blowouts.”[13]
Another
example of the perils of using “guarantee” language in the Web setting occurred
in a grisly case involving the failure of an automatic transmission, resulting
in injuries inflicted by a driverless automobile. Beyond providing a written “[L]ifetime
[G]uarantee” that accompanied the transmission, the defendant had extolled its
“Coast-to-Coast Ironclad Guarantee” in national advertising (including
newspaper ads and radio commercials).
Upholding a jury finding of express warranty, the court remarked that
“[a]dvertising may be the basis of or form a part of an express warranty.”[14] With the Internet now situated as a vehicle
for national advertising, it is reasonable to expect that courts will transfer
these holdings to E-advertising.
The
interpretive breadth to which courts may stretch express warranty and similar
concepts is evident in a case involving Honda Motors. Honda’s advertisements for its all-terrain
vehicles “extolled the use of all-terrain vehicles in general,” and featured
“representations concerning the safety of all-terrain vehicles and, without
being model-specific, portrayed all-terrain vehicles as being suitable for use
by the entire family -- including small children.” The court concluded that such advertising
provided a basis for suit under Restatement section 402B, assuming that Honda’s
“advertising about all-terrain vehicles in general . . . contained misrepresentations
applicable to all Honda all-terrain vehicles,” including the one that seriously
injured the 12-year-old plaintiff.[15]
To this
extent the Honda case and the vaporizer case make the same point:
representations of safety about products that may be used by or for children
flash warning signals to the courts. In
reversing a judgment for the manufacturer in the ATV case, the court referred
to the fact that the defendant had "represented that all-terrain vehicles
could be operated by young children."[16] Given the law’s solicitude for children, it
would appear that Web advertisers act as much to their peril with respect to
child-directed representations as do advertisers in any other medium.
2. Reliance
Requirement
a.
Stronger and Weaker Versions
A
continuing battleground for express representations involves the question whether the plaintiff must demonstrate
reliance to make out a case. One Uniform
Commercial Code (hereinafter UCC) comment on express warranty implies a strong
requirement of individualized reliance, stating that “‘[e]xpress’ warranties
rest on ‘dickered’ aspects of the individual bargain.”[17] Although this statement places a significant
burden on consumers, sellers must reckon with comment 3, which declares that
“[i]n actual practice affirmations of fact made by the seller about the goods
during a bargain are regarded as part of the descriptions of those goods; hence
no particular reliance on such statements need be shown in order to weave them
into the fabric of the agreement.”[18] Beyond that, comment 3 also requires that
“any fact which is to take such affirmations, once made, out of the agreement
requires clear affirmative proof.” Indeed, there is established authority for
the proposition that "[i]t is unnecessary that the buyer actually
rely" on any statement that is a "description of the goods, other
than a seller's mere opinion of the product."[19]
Electronic
sellers may find that the “dickered bargains” comment is a powerful tool for
defense when the representations, on which plaintiffs premised their suit, do
not appear in the Web materials that allegedly stimulate the sale. Illustrative of the obstacles posed for
buyers by the reliance requirement is a case involving the purchase of paneling
that contained urea formaldehyde. The
purchase was made before the buyer received a letter from the seller’s
president stating that the chemicals used in the paneling were
“non-toxic.” The letter came in response
to an inquiry placed by the plaintiff when he began to suspect that the paneling
had caused respiratory problems. The
court rejected the suit, ruling that the letter “formed no part of the basis of
the sale” because the purchase had preceded receipt of the letter.[20]
A
Washington decision involving vehicles used by youngsters exhibits an even more
uncompromising reliance requirement. In
that case, two young children sued under section 402B for injuries that
occurred while riding a trail mini-bike.
The court determined that the Restatement did “not apply where the
representation is not known, or there is indifference to it, and it does not
influence the purchase or subsequent conduct .”[21]
b.
Particular Reliance Unnecessary
The
range of judicial views on the reliance requirement is illustrated by the opinions
of the federal district court and the Third Circuit Court of Appeals in the
celebrated Cipollone cigarette
case. District Judge Sarokin, quoting
comment 3 for the proposition that “no particular reliance . . . need be
shown,” labeled “the [u]ltimate inquiry” as whether an affirmation is part of
the "‘fabric of the agreement.’” He
then held that a buyer “need not show particular reliance to establish this
fact.”[22] Judge Sarokin drew from various Code comments
the proposition that section 2-313 “centers on whether the agreement or bargain
. . . objectively viewed, contains the affirmations or promises — not on
whether a buyer’s purchasing decision, subjectively viewed, depends on the
statements.”[23] This led him to conclude that “a statement
in an advertisement becomes part of the basis of the bargain, if,
objectively viewed, the statement would tend to induce the purchase of the
advertised product.”[24] However, “[w]hether or not the statement
actually induced a particular purchase is not relevant to a determination of whether the statement may constitute an
express warranty.”[25]
c.
Compromise Positions
The
Third Circuit Court of Appeals adopted a somewhat different approach. It was not persuaded by the manufacturer’s
contention that the plaintiff must show reliance. The court of appeals observed that the
manufacturer had “fail[ed] to explain how reliance can be relevant to ‘what a
seller agreed to sell.’”[26] Yet it also could not agree with the district
judge’s “purely objective theory,” noting that such a theory “fails to explain
how an advertisement that a buyer never even saw becomes part of the ‘basis of
the bargain.’”[27] Instead, the appellate court’s interpretation
of New Jersey law steered a middle course: “[a] plaintiff effectuates the
‘basis of the bargain’ requirement . . . by proving that she read, heard, saw
or knew of the advertisement containing the affirmation of fact or promise.”[28]
According
to the Third Circuit, the trial court’s jury instructions had not required the
plaintiff to prove that his decedent had “read, seen, or heard the
advertisements at issue,” and did not allow the defendant to prove that if she
had, she did not believe their assurances of safety.[29]
Nevertheless, the Third Circuit declined to order a directed verdict for the
manufacturer on the express warranty claim, indicating that the jury should be
asked whether the decedent “disbelieved the advertisements.” This inquiry was “distinct from 1) whether
she should have disbelieved the advertisements, and 2) whether it would have
been unreasonable to smoke had [the manufacturer] not been advertising that
smoking was safe.”[30]
Another search for
the middle ground appeared in Ladd v.
Honda Motor Co.,[31] a
Tennessee decision involving serious injuries to the 12-year-old user of an
all-terrain vehicle who had been allowed to operate the vehicle by his uncle
(the owner) and his father. The court
drew on advertisements that “represented that all-terrain vehicles could be
operated by young children,” which it
found “materially influenced” the decisions of the uncle and the father.[32]
d. Disagreements Summarized
There are strong cross-currents in the law about
the existence and nature of a reliance requirement for express statements that
turn out to be misstatements. On the one
hand, there is considerable logical force in the rhetorical question tendered
by UCC commentators: “Why should one who has not relied on the seller’s
statement have the right to sue?”[33] On the other hand, echoing the lament of some
commentators that “the reliance requirement may disappear altogether,”[34] a
Tenth Circuit opinion cited several decisions to support the majority rule that
it is “unnecessary to require reliance from the buyer before a statement by the
seller can be considered an express warranty.”[35]
e. Advice
to Sellers
The comments to section 2-313 disclose a logic
not altogether clear. It is certainly
not unreasonable to interpret the comments as requiring that the consumer
specifically perceive the statement at issue, as opposed to proving simply that
the advertiser launched a statement over the wires or into print that had a
natural tendency to persuade consumers to buy its product. Moreover, on the tort side, section 402B
specifically requires that the consumer show “justifiable reliance.”[36]
However, with the
law concerning E-commerce largely undeveloped, advertisers are advised to
assume that what they sow on the Web with intent to sell may generate a
presumption of reliance by injured consumers.
The risk-averse advertiser must assume that any express warranty is
vulnerable to claims by a range of people who have not specifically relied on
it. If anything, the vastness of the Web
environment will expand this field of liability. Furthermore, courts may not sympathize with efforts to cabin responsibility
for misstatements intended to persuade
large audiences of people across the oceans.
On the flip side, sellers will contend that they should be shielded from
what amounts to unlimited liability, perhaps citing Mr. Justice Cardozo’s
concerns about “liability in an indeterminate amount for an indeterminate time
to an indeterminate class.”[37]
The most basic caution is that E-marketers avoid
unqualified safety language, including all variants of the word “safe.” They should avoid as well any broad warranty-guarantee
language, unless the seller is fully prepared to stand behind a product, save
whatever limitation can legally circumscribe a warranty. As to whether particular words or phrases
cross the line beyond sellers’ “puffery,” probably the best advice is that
sellers must use common sense with a certain degree of risk aversion. Seeking counsel’s advice on breadth or limits
of selling language is surely in order.
If language can be
read to suggest particular performance standards, some courts may construe that
same language as an express warranty or an actionable misrepresentation. In an interstate market, cautious sellers
should assume that they are subject to judgment by the lowest common
denominator — that is, the most expansive interpretation applicable.
B.
Other Nonfault Liabilities
Sellers should
also remember that liability under the doctrines of express warranty and
nonfault misrepresentation is liability without fault. Over a period of time
extending to the early days of the Republic, courts have imposed liability for
misrepresentation under various labels, without requiring fault on the part of
the defendant. As early as 1839, in an
era when the Supreme Court was more inclined to insert itself into the common
law than in the days of the Internet, the Court spoke in broad terms of the
basis for liability in a case involving the sale of a mine: “even if the party innocently misrepresents a
fact by mistake, it is equally conclusive; for it operates as a surprise and
imposition on the other party.”[38] In some cases of misrepresentation, as with
mistake, the remedy may be nothing more than rescission; but there is liability
nevertheless.[39] It is worth emphasizing that, whether
discussing express warranty liability or misrepresentation without fault, all
the plaintiff need show is that the statement at issue turned out to be false;
the seller’s good faith in making the statement will not save him.
C. Fraud
In addition to
various types of nonfault liability for misrepresentation, there is a
substantial body of law that imposes liability for culpable misstatements of
fact. Most of the legal controversy in
this area arises over application of the law of fraud or deceit. The central element of that doctrine is the
requirement that the defendant have made its misrepresentation with “scienter,”
i.e., knowingly, or at least in reckless
disregard of its truth or falsity.[40] Although courts usually hold plaintiffs to
a high standard of proof for fraud, some
decisions have broadly defined scienter.
An extreme example occurred when an Ohio court imposed liability on a
broker for fraud because he represented that a home had tile walls, as opposed
to a thin veneer of masonry that concealed earth, clay and straw. The conduct constituted fraud because the
defendant’s assertion was unqualified, without “knowledge as to whether his
assertion [was] true or false.”[41]
Such a literal application of the scienter definition warns E-sellers to
carefully investigate the truth of any assertion. The uncomfortable parallels between fraud and
nonfault misrepresentation theories may spell liability.
1.
Misleading by Nondisclosure
Sellers should also be careful about misleading
promotion of a product because of what the product image conceals. It is hornbook law that there is no liability
for failing to disclose vital facts about a product if there has been no query
about the existence of those facts. The
classic example is termites: if the buyer does not ask, the seller need not
tell.[42] Yet, there may be liability for the failure
to disclose matters “necessary to prevent [the seller’s] partial or ambiguous
statement of the facts from being misleading.”[43] Courts are most likely to impose liability
for “fraudulent concealment” when there is evidence of active cover-up or
stonewalling tactics. Illustrative is a
case in which the manufacturer of a control knob on an LPG water heater became
aware of explosions that occurred when the knob stuck, did not report these
incidents to the Consumer Product Safety Commission, and instructed its
personnel to handle such occurrences with “the foregone conclusion that we are
not involved.”[44]
The eruption of
tobacco litigation has also occasioned one decision that virtually ratifies a cause
of action for nondisclosure that nicotine is addictive. In that case, the court found an underlying
act -- the defendant’s manipulation of the level of nicotine in its
products. Although the plaintiff’s
pleading initially lacked sufficient particularity, the court granted leave to
amend, noting that the plaintiff had “all but sufficiently pleaded common law
fraud by nondisclosure.”[45]
Obviously, one
party to a sale need not disclose all the particulars of a matter that is vital
to the other. The other party retains the burden to inquire about matters that
ordinarily are not disclosed unless asked. However, when physical safety is
involved, the margin for nondisclosure begins to shrink. As has been the case with sexually
transmittable diseases,[46]
sellers of chattels are well advised to inform consumers about known risks of
product injury.
2.
Punitive Damages
When a seller’s misstatement or decision to
withhold material information approaches willfulness or recklessness, if not
more culpable conduct, punitive damages become a possibility. Of course, the label on the action is not
crucial; rather, it is the nature of the conduct. To warrant punitive damages,
the defendant’s behavior must meet relevant legal standards. In that regard, it may not be sufficient to
equate relatively innocent behavior with scienter because it consisted of an
unqualified assertion. However, even a
claim under the strict liability label may support punitive damages if the
defendant sold a product with actual knowledge of its dangers.[47]
D.
Negligent Misrepresentation
Negligent
misrepresentation is a hybrid doctrinal creature that struggles for existence
in the world of tort theory. In recent
years, it has become something of a staple in consumer pleadings, although
there is relatively little focused appellate treatment or judicial definition
of the theory. Negligence is a
well-established, broad category of tort law, and courts often have difficulty
affixing the general negligence definition to the specific act of misrepresentation
as a separate doctrine. However, in
theory, there should be no difficulty defining a separate classification of
negligent misrepresentation that simply occupies a place on the spectrum of
culpability ranging from fraud to innocent misrepresentation. As the Colorado Supreme Court has observed,
negligent misrepresentation is an “independent tort claim” that exists
“independent of any principle of contract law.”[48]
1. Economic Loss
To avoid liability for personal injuries under
negligent misrepresentation, E-sellers (like others) must meet the ordinary
standards of prudence when investigating the bases of product claims. Courts may not welcome claims for negligent
misrepresentation involving economic loss, but they may define economic loss
rather broadly. In this regard, two
cases involving agricultural products are significant because each denied
liability in a legal atmosphere that had favored claimants who sued for
nonfraudulent misrepresentation. In the
first, the Sixth Circuit Court of Appeals rejected a claim by a watermelon
grower that use of a soil fumigant in the manner recommended by the seller’s
representative had destroyed his crop.[49] At issue was Michigan law, which had
effectively imposed liability without fault for misrepresentation in the early
20th Century.[50] However, in the last decade of this century,
Michigan law had come to oppose tort liability for “economic loss caused by a
defective product purchased for commercial purposes,” requiring such buyers to
sue under the Uniform Commercial Code.[51] The Sixth Circuit’s decision drew on later
state precedent, concluding that Michigan law would “bar any recovery for
economic losses based upon the tort of negligent misrepresentation.”[52] The court observed, inter alia, that “the UCC
contains a specific remedy for misrepresentation or fraud.”[53]
In another farm
products case involving a product advertised to protect tomatoes against frost
(Frostguard®), the Tennessee Supreme Court continued to narrow liability.[54] A 1966 decision dealing with a poorly
functioning tractor had made Tennessee a leader in imposing liability for
innocent misrepresentations under section 402B of the Restatement (Second).[55] But a quarter century later, the Tennessee
court in Brooks Farms overruled the
earlier case, concluding that suits would not lie for “pecuniary loss based on innocent misrepresentation.”[56] Still later, answering certified questions
focused on negligent misrepresentation in the Frostguard® case, the Tennessee
court invoked the Brooks Farms
decision against a farmer who sued for crop damage. Noting that “the plaintiffs sued for
‘economic damages resulting from lost profits,’” the court summarized Tennessee
law, observing that “product liability claims resulting in pure economic loss
can be better resolved on theories other than negligence.”[57] What makes this pair of cases particularly
interesting is that the damage claimed in each could have been characterized as
property damage, since there was physical injury to the crops.[58]
Like other
sellers, electronic sellers may reasonably assume that many jurisdictions will
refuse to impose tort liability for economic loss arising from
misrepresentation that is no more than negligent, effectively restricting
plaintiffs to claims under the UCC.
Thus, sellers would be well advised to muster Code defenses, providing
disclaimers and limitations of liability in their electronic sales documents.[59] However, plaintiffs might still opt for
negligent misrepresentation in those jurisdictions inclined to provide a rather
full spectrum of liability for economic loss arising from statements that turn
out to be untrue.
The staple theory
of tort litigation is negligence. The
legal formulae for defining negligence vary, but they coalesce around the
concept of conduct that falls below the standard of reasonably prudent care
under the circumstances. Some courts
associate the standard with various economic formulae, finding negligence when
the cost of the plaintiff’s injury exceeds the cost of preventing the accident.
Whatever the
specific verbal formula, the negligence standard applies across the board to
all forms of activity associated with the making of products. This includes the requirement of reasonable
care in designing the product, in fashioning warnings for the product, and in
manufacturing it, including the selection of quality control standards.[60] Generally, a seller is held to the
reasonableness test when investigating the risks of the product, including
risks that become apparent while the product is on the market.[61] With respect to all these activities, the
test for seller conduct when selling the product presumably will not differ,
whether selling on or off the Web.
Therefore, it is sufficient to briefly summarize only the major elements
involved in the determination of whether a Web seller has been negligent.
A. Balancing
Tests
Under a negligence standard, sellers who design
products are subject to a balancing test, as to both design and the process of
manufacture. As indicated above, this
may consist of balancing the costs of injury against the costs of
precaution. Another form of balancing
compares the utility of a product with its risks. Tests of both kinds imply quantitative
elements that are subject to comparison.
However, since sellers can only roughly calculate the dollar costs of
risk or accident before the event, these tests provide rough guidelines at
best. At the first cut of risk
management, common sense is a good check on whether consumer exposure to a
particular risk or set of risks is prudent.
When a seller is in doubt, the advice of counsel is desirable, even
though the lawyer often will use trained intuition rather than computer
projections.
B. State
of the Art
A checkpoint often employed for determining
whether a seller has designed a product according to standards of reasonable
care is the phrase “state of the art.”
This phrase has some chameleon tendencies. In some states, it may be equated with
“customary industry practice.”[62] Other jurisdictions make a sharp distinction
between the two concepts. The Iowa
Supreme Court, for example, has stressed that “custom and practice” is “not the
same as state of the art,” the latter being “a defense to a design defect
claim.”[63]
The practical
consequences of this distinction may be considerable: the fact that a defendant
has followed industry custom may not save it from liability. The classic pronouncement on this point is
Learned Hand’s declaration that “common prudence” is not necessarily the
measure of “reasonable prudence,” punctuated by his oft-quoted declaration that
“[c]ourts must in the end say what is required; there are precautions so
imperative that even their universal disregard will not excuse their omission.”[64] Other definitions of state of the art include
“the level of relevant scientific, technological and safety knowledge existing
and reasonably feasible at the time of design,”[65]
“the best data reasonably available at the time,”[66]
“the aggregate of product-related knowledge which may feasibly be incorporated
into a product,”[67]
and “the aggregate of product-related knowledge existing at any given point in
time.”[68]
C. The
E-environment
As noted earlier, there would appear to be no
significant difference in the application of the general negligence standard
between Web-generated sales and products sold by other means. However, the liability of E-sellers may
depend on the character of any Web representations, particularly those designed
to arrest surfers with catchy phrases that might imply a product is
particularly advanced in its technology.
In E-commerce, the factual environment to which the negligence test is
applied may include the background of the electronic representations used to
market the product, and whether they independently constitute express
warranties or misrepresentations otherwise actionable under tort theories. Of course, this “background noise” by itself
might not distinguish the potential legal consequences of sales on the Internet
from those fostered by traditional media, concerning which courts often
consider the representational background of product sales.[69] If sales on the Web carry any potential for
expanded liability, the distinction is likely to lie in an amorphous,
indefinable “fast track” or “new age” penumbra that suggests superior technological
advancement.
D. Failure
to Warn
The character of Web representations also may
generate an aura of safety that affects judicial decisions about whether a
seller has been negligent in failing to warn of particular product
dangers. Where the seller has used
unqualified language connoting safety, such as “safe” or “guarantee,”[70]
this result is not surprising. However,
even more general approbations of product capabilities may tilt courts toward
plaintiffs who claim that sellers did not warn, or did not warn
adequately. The stronger the
commendation of a product in Web advertising, the more likely a court will
conclude that a particular risk deserved mention (or stronger mention than was
given).
How can E-sellers
avoid liability for failure to warn? At
least two situations require attention.
Where the electronic document is the entire contract, the seller should
provide a statement that specifically identifies the hazard at issue. The type of language required would
presumably be that required in any print document.
In situations
where the purchase is made in response to an advertisement or a truncated
purchase order, but a full contract document which contains an adequate warning
is forthcoming, the shorter E-document should prominently reference the
warnings of the fuller document. A
lesser alternative places a conspicuous short warning in the E-document, for
which one analogy is the standardized single-sentence warnings that now
accompany cigarette advertisements.
E. Prominence
of Warning
Related to the prominence of cautionary language
is the adequacy of any warning as positioned within the document or as
type-set. With respect to how warnings
are positioned, a disappointed consumer who clicked to signify acceptance
without printing out the contract document might contend that screen
limitations prevented her from appreciating any emphasis. With respect to type face, sellers must
consider how to distinguish such a warning, especially if the purchaser’s
printer has different fonts than the seller’s.
Warnings should be
fashioned according to the potential theory of liability, i.e., express
warranty, implied warranty, or negligent failure to warn. For example, where the document that
persuades the purchaser to buy contains an express warranty related to safety,
the drafter must take special pains to devise warning language that negates or
qualifies that promise or affirmation.
Thus, even with the advent of E-commerce, warning issues are likely to
pervade the products liability landscape.
V.
As do sellers who
use traditional media, E-sellers face the risk that a court will hold them
strictly liable in tort for a product defect.
Under the standard formulation, such a defect is one that makes a
product “unreasonably dangerous to the user or consumer.”[71] This form of strict liability shares several
common features with negligence.
A. The
Flawed Product
If a specific product unit turns out to have a
manufacturing flaw (a feature or side effect which the seller would not have sold
had it known of that problem), then the seller is likely to be strictly liable,
at least for personal injury or damage to other property. That result will obtain in most jurisdictions
under the theory of implied warranty of merchantability, as well as strict tort
liability. Indeed, courts have
frequently achieved the same outcome under the negligence label, often
manipulating proof rules to do so. The
method of sale is not likely to affect liability exposure for product flaws
under any theory.
B. Design
Defects
Employing a variety of verbal formulae, many
jurisdictions also impose strict liability for unreasonably dangerous products
when the product unit at issue is exactly the product the manufacturer intended
to sell. Not afflicted with a manufacturing
defect, the product is the subject of a suit for “design defect.” Opinions diverge about how “strict” the
liability is that courts impose under the label of design defects. Some analysts insist that judicial reasoning
is virtually identical on both theories of strict liability and negligence for
design defects. Basically, both theories
are tantamount to negligence.[72]
C. Failure
to Warn
There is a parallel disagreement about whether
there exists a viable separate cause of action in strict liability for failure
to warn. Case law in some states equates
the strict liability and negligence theories; other states distinguish
them. As applied in some jurisdictions,
the version of strict liability is so uncompromising that the defendant’s
knowledge about the hazards of its product is irrelevant to the determination
of liability related to warnings.
Illustrative of
this position is a Montana case involving an herbicide in which the defendants
argued that they did not know the cancer-causing properties of the product when
they marketed it. They offered
state-of-the-art evidence to support their contention that it was not feasible
for them to have warned at the time.
Answering a certified question, the Montana court rejected the
defendant’s attempt to introduce state-of-the-art evidence “where alternative
designs did not exist and a product’s dangers were undiscovered or
undiscoverable at the time of manufacture.”[73] To hold otherwise, the court declared, “would
inject negligence concepts into Montana’s strict products liability law and
eviscerate the public policy underlying strict products liability law.”[74] In a case in which the defendants pressed the
argument that “state-of-the-art evidence [was] admissible because Montana law
recognizes the state-of-the-art defense in failure to warn claims,”[75]
the court did not differentiate its answer to the certified question “as among
manufacturing defect, design defect, or failure to warn cases.”[76]
Where courts take this
approach, and a hazard is truly undiscoverable at the time of marketing, there
is, by definition, no practical way to avoid liability for failure to
warn. When the theory is applied this
way, it is true strict liability.
D. Overlap
of Design and Warnings
In practice, the categories of design defect and
failure to warn may substantially overlap.
Suits for failure to warn explicitly target a lack of relevant, material
information about a product hazard.
Moreover, suits for design defect often entail at least an implicit
claim that the seller should have done more in providing such information. This is clearly the case in those
jurisdictions that either partially or completely rely on a “consumer
expectations” test for design defect.
Presumably, the provision of adequate information about the dangers of a
product would undermine a claim that the product disappointed the consumer’s
expectations. By comparison, one would
expect that courts would put less weight on the informational content of a product
sale under a “balancing” test, like those that employ the terminology of
risk/utility or cost/benefit analysis.
E. Product
Image
Sellers who seek to avoid strict liability must
tailor their risk avoidance to the particular category of strict liability. This might entail adopting better quality
control to minimize manufacturing defects, or building more safety into
designs. One of the most effective
avoidance strategies may lie in critical review of product promotion, since the
representational background of product sales influences judicial decisions even
where liability theories do not depend on specific product representations.[77] Determinations of strict liability, like
those of negligence, are often tied to the character of product advertising, even
when the advertising does not constitute an express warranty or an actionable
misrepresentation. However product
promotion is filtered through liability theories, many courts consider the
image of products presented to the consumer.
Thus, sellers in nationwide and international E-markets are well-advised
to scrutinize the features and qualities with which their advertising endows
their products. It sometimes may be
prudent to soften the enthusiasm in words or pictures or to provide warnings
where advertising could be considered insufficiently qualified as to safety.
VI.
One might expect a
period of development in the law regarding sellers’ efforts to contractually
avoid liability with respect to E-sales.
The basic law for conventional written documents is clear enough, since
it is generally enshrined in the Uniform Commercial Code. Whatever new problems may arise are likely to
occur because of the electronic form itself, with respect to documents that are
self-contained on the Web, and when sellers employ two different contractual
media (as in sales initiated by Web transmissions that make reference to later
printed documents).
A. The
Code Basis
The principal foundation for disclaimers is
familiar to commercial and consumer lawyers; it is section 2-316 of the Uniform
Commercial Code. To disclaim implied
warranties of merchantability in a written document, a seller must mention
merchantability and do so conspicuously; disclaimers of the implied warranty of
fitness “must be by a writing and conspicuous.”[78] The Code provides several specific examples
of the relative ease and spareness with which sellers may disclaim. Language like “as is” or “with all faults,”
“which in common understanding calls the buyer’s attention to the exclusion of
warranties and makes plain that there is no implied warranty,” will suffice to
exclude all implied warranties.[79] Moreover, sellers may exclude or modify
implied warranties “by course of dealing or course of performance or usage of
trade.”[80] Specifically with respect to the fitness
warranty, sellers need only say that “[t]here are no warranties which extend
beyond the description on the face hereof.”[81]
B. Conspicuousness
It is thus initially simple to choose words that
will disclaim, electronically or otherwise.
However, the requirement of conspicuousness will often lend itself to
factual questions, requiring some attention to the prominence of disclaimers. Print size, headings and placement within a
document are all important factors in the determination of whether a disclaimer
is conspicuous. In an illustrative
decision refusing to enforce a disclaimer, the court noted that the clause was
smaller in print than other language on an order form, and the format of the form
could lead a reader to “reasonably conclude that there was little to the
document, other than the statement of the order and delivery dates.”[82]
Risk-averse
companies selling at the click of a mouse may want to assess the limitations of
screen reading as contrasted with the perusal of hard copy. For example, sellers wishing to disclaim
should attend to conspicuousness where type face may not appear identically on
recipients’ screens, or may not print out
in recipients’ fonts as it appears on the seller’s copy or screen. Thus, sellers may need to use various devices
to assure that disclaimers draw the purchasers’ attention, including prominent
placement, the use of capital letters, and the use of symbols that are universal
across software programs.
C. Disclaimer
in the Contract Document
Prudent sellers also will make sure that
disclaimer language appears in the Web transmission of a document that purports
to embody the entire agreement. In a
federal case involving an “otherwise conspicuous” disclaimer appearing in an
instruction manual delivered two weeks after the sale of a spray rig, the court
refused enforcement on grounds that the disclaimer “did not form a part of the
basis of the bargain.”[83] That same ruling obtained in a Massachusetts
case involving a warranty exclusion that did not appear in the purchase and
sale agreement or the service policy, but was printed on an unnumbered page
after the index of an owner’s manual.
The court determined that this language was “not effective to limit the
defendant’s liability for negligence.”[84]
D. Effects
of E-environment on Comprehension
One feature of E-commerce that has not yet been
tested with respect to disclaimers (or any other known feature of contracting),
is the communicative effect of the electronic environment on purchasers, apart
from the physical limitations of the screen.
It may take some time to accumulate the behavioral research necessary to
determine what differences, if any, exist with respect to comprehension of
computer messages as contrasted with print or other forms of electronic
messaging. Particularly in the case of
people who have been conditioned for many years to non-computer transmission of
information, it is at least worth asking whether there are significant
differences in absorption and understanding that affect liability.
E. The
Pace of Web Life and Conflicting Messages
Sellers may be vulnerable to arguments that
disclaimers were insufficiently conspicuous, or not otherwise sufficiently
powerful -- especially in an environment where the Web
itself has added an increment of pressure to transactions and the manner in
which they arise. Even judges,
themselves hurried by the insistent demands of E-transmissions, may tilt toward
unsympathetic construction of disclaimers.
A South Dakota decision, entered before the advent of the Web, suggests
a tone for the future. The court there
refused to enforce a disclaimer for defective cattle vaccine that was not
typographically emphasized and resided on the last page of a pamphlet that
“extol[led] the virtues and effectiveness of the vaccine.”[85] It expressed “doubt that a busy rancher would
pour over the last few lines of the paragraph after earlier being assured of
the safety and effectiveness of the vaccine, the directions for its use, and
the steps to be taken should an anaphylactic reaction occur”[86] —
which was not the problem that afflicted the plaintiff’s animals.
In various
decisions, most notably within the insurance context, courts have invoked the
proposition that writers of exclusion clauses must assure that “he who runs can
read.”[87] Where Web culture has accelerated life well
beyond its traditional pace, case law implies not only strictures that courts
may force on E-commerce disclaimers, but the linkage between the character of
the affirmative representation and the disclaimer. These cases also suggest the close parallel
between the care necessary when drafting exclusions for E-commerce and that
required when fashioning warnings for the Web environment.
F. Successful
Disclaimers
Different facts will necessarily breed different
conclusions. Some exclusionary language
has been particularly successful. In one
case, a utility sued Westinghouse for serious damage to an electrical turbine
that occurred when a blade broke. The
plaintiff adduced a proposal by Westinghouse, later attached as an appendix to
the sales contract, which said that the turbine was “reliable,” was “designed
to ‘eliminat[e] . . . resonant conditions at the operating design speed,’” and
would ‘“provide reliable performance over extended time periods.’”[88] Though the court conceded that this
“language, standing alone, might well be construed to create a warranty” that
the turbine “blades would not crack due to resonance,”[89] a contract provision argued otherwise. The contract provided that, “[i]n the event
of any conflict between basic Contract Document and Appendices, the basic
Contract Document shall prevail.”[90]
When considered together with a disclaimer and a limitation of liability
clause, the court “simply [could not] believe that the Contract’s parties
intended the Proposal’s language to create an express warranty of unlimited
duration.”[91] Thus, careful draftsmanship may overcome
judicial wariness of disclaimers that conflict with other statements, especially
when the buyer is equally sophisticated.
Nevertheless, the prudent E-seller must be mindful of any disparities.
G. Limitations
of Liability
The suggestion that sellers should consider the
actual impact of disclaimers on purchasers applies as well to limitation of
liability clauses. Section 2-719 of the
Uniform Commercial Code allows sellers
to provide substitute remedies and to “limit or alter the measure of damages .
. . as by limiting the buyer’s remedies to return of the goods and repayment of
the price or to repair and replacement of non-conforming goods or parts.”[92]
Numerous decisions
apply limitations of liability rigorously against consumers. A federal appellate court, reviewing an
herbicide case, stressed that the farmer-purchaser had “read the label and
chose not to return the product but to use it.”[93] Using a rudimentary contract analysis, it
would not allow the farmer to escape his bargain.[94]
At the same time,
it should be noted that section 2-719 contains traps for sellers. Specifically, it provides consumer remedies
“[w]here circumstances cause an exclusive or limited remedy to fail of its
essential purpose.”[95] Additionally, it has been argued that this
clause is cumulative to the formal requirements that the Code imposes on disclaimers.[96]
Whatever stance
courts assume regarding limitation of liability clauses, sellers are prudently
advised to make such clauses effective in the Web environment. In that regard, the advice is analogous to
advice about disclaimers: employ
unambiguous language and formats that highlight the limitations. Since limitations of liability are typically
more subtle and technical than the ordinary disclaimer, it is especially
important that sellers draw the attention of buyers.
H. Apportioning
Liability Among Sellers
Finally, the same requirements for crisp
delineation of duties and conspicuous placement are likely to apply to sellers
who seek to transfer liability burdens to other sellers. Those fashioning contractual agreements for
indemnity or other apportionments of liability on the Web should observe the
need for even greater clarity and more prominent positioning than that
necessary in traditional contract environments.
VII.
When
considering the standards for both selling and disclaiming that may govern
E-sellers, courts are confronted with an important set of normative issues
concerning the duties of both sellers and purchasers. What obligations should govern sellers who profit from Web business when
dealing with unsophisticated buyers who may not comprehend “clear” messages?
Conversely, what responsibilities to read and reflect should regulate buyers
who benefit from the economics of E-commerce?
This tension
between sellers and buyers permeates both private litigation and the larger
arena of public law. The tort law of
this century, as a regulator of individual conduct, has featured a constant
struggle over the moral responsibility of both alleged wrongdoers and
claimants. Illustrations recur in cases
involving reciprocal conduct by both parties, ranging from simple slip and fall
cases to products liability litigation involving sophisticated machines.
In the realm of
public regulation, the battle of ideas sometimes involves overtly political
visions of values and empirical judgments.
On the one hand, a much-valued economic freedom permits the use of
time-tested selling techniques to persuade a range of buyer populations. On the other hand, and in constant tension,
concerns surface about meaningful choice among persons who are ill-equipped to
deal with highly technological sales techniques. As always, the developing law will continue
to reflect competing and evolving ideas of responsibility that reside in the
minds of consumers, legislators and judges.
It bears repeating
that a potential wild card in the liability law of E-commerce is the empirical
reality of buyer behavior. It is
reasonable to expect that the next few years will produce research findings
about whether the Web environment affects the mental capacity and behavior of
readers accustomed to other forms of seller communication. This may generate useful information about
whether users respond differently on the Web to language and symbols
traditionally communicated through other media.
How will the law
of products liability skew in the Web millenium? This article has sought to
offer some suggestions about the imminent future in this accelerating
frontier. For sellers in cyberspace, the
authors are unwilling to say that the only thing “to fear is fear itself.” With
reasonable and sensible precautions, however, the realistic fear of liability
can be minimized to tolerable (if not always exculpatory) levels.
ENDNOTES
[1] See,
e.g., Marshall S. Shapo, Comparing
Products Liability: Concepts in European
and American Law, 26 Cornell Int’l
L.J. 279 (1993); Mark A. Behrens & Daniel H. Raddock, Japan’s New Product Liability Law: The Citadel of Strict Liability Falls, But
Access to Recovery is Limited by Formidable Barriers, 16 W. Pa. J. Int’l Bus L. 669 (1996).
[2] U.C.C. § 2-313(1)(a).
[3] See,
e.g., Kinlaw v. Long Mfg. N.C., Inc., 259 S.E.2d 552, 557 (N.C. 1979)
(tractor).
[4] 147 N.E.2d 612 (Ohio 1958).
[5] Id.
at 615-16.
[6] Touchet Valley Grain Growers, Inc. v.
Opp & Seibold Gen. Constr., Inc., 831 P.2d 724, 731 (Wash. 1992).
[7] See,
e.g., Scheuler v. Aamco Transmissions, Inc., 571 P.2d 48, 51 (Kan. Ct. App.
1977) (quoting 2 Lewis R. Frumer &
Melvin I. Friedman, Products Liability ¶ 16.04[4][a], at 3-223 (noting
that manufacturers advertise “on labels, on billboards, on radio and T.V., in
newspapers and magazines,” and in brochures provided to dealers to pass on to
customers)).
[8] Scott v. Illinois Tool Works, Inc.,
550 N.W.2d 809, 814 (Mich. Ct. App.1996) (finding breach of an express warranty
based upon price quotation with both handwritten and typewritten terms plus
specification on separate paper created by plaintiff’s employer).
[9] Loe v. McHargue, 394 S.W.2d 476,
476-78 (Ark. 1965).
[10] Morris Chevrolet, Inc. v. Pitzer, 479
P.2d 958, 959-61 (Okla. 1971).
[11] See,
e.g., McCormack v. Hankscraft Co., 154 N.W.2d 488 (Minn. 1967).
[12] Hauter v. Zogarts, 534 P.2d 377 (Cal.
1975).
[13] McCarty v. E.J. Korvette, Inc., 347
A.2d 253, 262 (Md. Ct. App. 1975).
[14] Scheuler v. Aamco Transmissions, Inc.,
571 P.2d 48, 51 (Kan. Ct. App. 1977).
[15] Ladd v. Honda Motor Co., 939 S.W.2d
83, 99 (Tenn. Ct. App. 1996).
[16] Id.
at 100.
[17] U.C.C. § 2-313 cmt. 1.
[18] Id.
cmt. 3.
[19] See,
e.g., Martin v. American Med. Sys., Inc., 116 F.3d 102, 105 (4th Cir.
1997), referring to Daughtrey v. Ashe, 413 S.E.2d 336, 338-39 (Va. 1992), in
which the court says that "any fact which is to take such affirmations,
once made, out of the agreement requires clear affirmative proof."
[20] Schimmenti v. Ply Gem Indus., Inc.,
549 N.Y.S.2d 152, 154 (App. Div. 1989). Cf.
Wheeler v. Sunbelt Tool Co., 537 N.E.2d 1332, 1341 (Ill. App. Ct. 1989),
arising out of an accident attributed to an allegedly defective tool. The court rejected the suit when the
plaintiff and his employer either did not see, or could not remember seeing, a
warranty-instruction pamphlet before the accident.
[21] Baughn v. Honda Motor Co., 727 P.2d
665, 668 (Wash. 1986).
[22] Cipollone v. Liggett Group, Inc., 693
F. Supp. 208, 213 (D.N.J. 1988), aff’d in
part and rev’d in part, 893 F.2d 541 (3d Cir. 1990), aff’d in part and rev’d in part, 505 U.S. 504 (1992).
[23] Id.
at 214.
[24] Id.
[25] Id.
[26] Cipollone v. Liggett Group, Inc., 893
F.2d 541, 567 (3d Cir. 1990), aff’d in
part and rev’d in part, 505 U.S. 504 (1992).
[27] Id.
[28] Id.
[29] Id.
at 569.
[30] Id.
at 570.
[31] 939 S.W.2d 83 (Tenn. Ct. App. 1996).
[32] Id.
at 100.
[33] James
J. White & Robert S. Summers,
Uniform Commercial Code 334 (4th ed.1995).
[34] Id.
[35] Lutz Farms v. Asgrow Seed Co., 948
F.2d 638, 645 (10th Cir. 1991).
[36] Restatement
(Second) of Torts § 402B (1965).
[37] Ultramares Corp. v. Touche, 174 N.E.
441, 444 (N.Y. 1931).
[38] Smith v. Richards, 38 U.S. (138 Pet.)
26, 36 (1839).
[39] See
generally Marshall S. Shapo, The Law
of Products Liability ¶ 2.04 (3d ed. 1994).
[40] The classic source is Derry v. Peek,
14 App. Cas. 337 (H.L. 1889).
[41] Pumphrey v. Quillen, 135 N.E.2d 328,
331 (Ohio 1956).
[42] See,
e.g., Swinton v. Whitinsville Sav. Bank, 42 N.E.2d 808 (Mass. 1942).
[43] Restatement
(Second) of Torts § 551(2)(b) (1977).
[44] Holmes v. Wegman Oil Co., 492 N.W.2d
107, 109 (S.D. 1992).
[45] Witherspoon v. Philip Morris, Inc.,
964 F. Supp. 455, 460-61 (D.D.C. 1997).
[46] See,
e.g., Kathleen K. v. Robert B., 198 Cal. Rptr. 273 (Ct. App. 1984).
[47] See
Fischer v. Johns-Manville Corp., 512 A.2d 466, 470-75 (N.J. 1986).
[48] Keller v. A.O. Smith Harvestore
Prods., Inc., 819 P.2d 69, 72 (Colo. 1991).
[49] Bailey Farms, Inc. v. Nor-Am Chem Co.,
27 F.3d 188 (6th Cir. 1994).
[50] See,
e.g., Aldrich v. Scribner, 117 N.W. 581 (Mich. 1908).
[51] Neibarger v. Universal Coops., Inc., 486 N.W.2d 612, 618 (Mich.
1992).
[52] Bailey
Farms, 27 F.3d at 191.
[53] Id.
at 192.
[54] Ritter v. Custom Chemicides, Inc., 912
S.W.2d 128 (Tenn. 1995).
[55] Ford Motor Co. v. Lonon, 398 S.W.2d
240 (Tenn. 1966).
[56] First Nat’l Bank of Louisville v.
Brooks Farms, 821 S.W.2d 925, 930 (Tenn. 1991).
[57] Ritter,
912 S.W.2d at 133. See generally Kurtis B. Reeg & Marshall S. Shapo, The Economic Loss Rule: Easier to State Than
to Apply, 18 Leader’s Prod. Liab. Law & Strategy 5 (1999).
[58] See
Ritter, 912 S.W.2d at 132 (quoting federal appellate court’s description of
“extensive damage to . . . crops”); Bailey Farms, Inc. v. Nor-Am Chem Co., 27
F.3d 188, 190 (6th Cir. 1994) (allegation that fumigant “destroyed” crop).
[59] See
infra, text accompanying notes 78-96.
[60] For a discussion of negligent
misrepresentation, see supra, text
accompanying notes 42-53.
[61] This duty certainly requires sellers
to make changes in new units of a product line once they have information in
hand about unreasonable risks. Some
jurisdictions have suggested that sellers may need to warn users of already
marketed products about their risks. See Restatement
(Third) of Torts: Products Liability § 10 (1998). However, courts have generally drawn the line
against requiring sellers to recall and retrofit products whose dangers have
only become apparent over time, absent a regulatory order. See
id. § 11.
[62] See,
e.g., Note, Product Liability Reform
Proposals: The State of the Art Defense, 43 Alb. L. Rev. 941, 945-46 (1979).
[63] Hillrichs v. Avco Corp., 514 N.W.2d
94, 98 (Iowa 1994).
[64] The T.J. Hooper, 60 F.2d 737, 740 (2d
Cir. 1932).
[65] Potter v. Chicago Pneumatic Tool Co.,
694 A.2d 1319, 1347 (Conn. 1997).
[66] Menne v. Celotex Corp., 861 F.2d 1453,
1472 (10th Cir. 1988).
[67] Product
Liability of Reform Proposals, supra
note 62, at 946.
[68] Id.
[69] See
generally Marshall S. Shapo, A
Representational Theory of Consumer Protection: Doctrine, Function, and Legal
Liability for Product Disappointment, 60
Va. L. Rev. 1109 (1974).
[70] See
supra, text accompanying notes 11-16.
[71] Restatement
(Second) of Torts § 402A (1965).
[72] See,
e.g., Sheila Birnbaum, Unmasking the
Test for Design Defect; from Negligence [to Warranty] to Strict Liability to
Negligence, 33 Vand. L. Rev.
539 (1980).
[73] Sternhagen v. Dow Co., 935 P.2d 1139,
1147 (Mont. 1997).
[74] Id.
[75] Id.
at 1141.
[76] Id.
at 1142.
[77] See
generally Shapo, supra note 69.
[78] U.C.C. § 2-316(2).
[79] Id.
§ 2-316(3)(a).
[80] Id.
§ 2-316(3)(c).
[81] Id.
§ 2-316(2).
[82] Anderson v. Farmers Hybrid Cos., 408
N.E.2d 1194, 1200 (Ill. App. Ct. 1980).
[83] Bowdoin v. Showell Growers, Inc., 817
F.2d 1543, 1545 (11th Cir. 1987).
[84] Omni Flying Club, Inc. v. Cessna
Aircraft Co., 315 N.E.2d 885, 888 (Mass. 1974).
[85] Pearson v. Franklin Labs, Inc., 254
N.W.2d 133, 141-42 (S.D. 1977).
[86] Id.
at 142.
[87] See,
e.g., Bauman v. Royal Indemnity Co., 174 A.2d 585, 589 (N.J. 1961) (citing
Anderson v. Fitzgerald, 4 H.L.C. 484, 510, 10 Eng. Rep. 551, 561 (1853)).
[88] Arkwright-Boston Mfgrs. Mut. Ins. Co.
v. Westinghouse Elec. Corp., 844 F.2d 1174, 1180 (5th Cir. 1988).
[89] Id.
at 1181.
[90] Id.
[91] Id.
at 1182.
[92] U.C.C. § 2-719(1)(a).
[93] Hill v. BASF Wyandotte Corp., 696 F.2d
287, 292 (4th Cir. 1982).
[94] See
id. (plaintiff “cannot defeat the warrantor’s expressed intention to limit
remedy by a privately held intention not to accept the limitation while
accepting and using the product”).
[95] U.C.C. § 2-719(2).
[96] See
Note, Legal Control on Warranty Liability
Limitations Under the Uniform Commercial Code, 63 Va. L. Rev. 791, 807 (1977).
(Authors’ bios)
Marshall
S. Shapo is Fredric P. Vose Professor at the Northwestern University School of
Law and of counsel to Sonnenschein, Nath & Rosenthal, Chicago. He is the
author and editor of more than fifteen books on tort law, products liability
and safety regulations. These include Tort
and Injury Law (2d ed. Lexis, 2000), Basic
Principles of Tort Law (West 1999), Law
School Without Fear (with Helene Shapo)(Foundation Press 1996) and The Law of Products Liability (3d ed.
1994), as well as the forthcoming treatise International
eCommerce: Business and Legal Issues (CCH). Professor Shapo served as
reporter for the A.B.A. Special Committee on the Tort Liability System and as
Adviser to the Restatement (Third) of
Torts: Products Liability.
Kurtis
B. Reeg (use photo & bio from his article in Summer 2000 issue – p. 534. However, change firm name to
Kohn, Shands, Elbert, Gianoulakis & Giljum, LLP.).