THEORIES OF PRODUCT LIABILITY:

Three theories—due care, contractual, and strict liability—are commonly used to

determine when a product is defective and what is owed to victims who have been
harmed by defective products. Each appeals to different grounds for its ethical
justification.

A. THE DUE CARE THEORY

According to this theory, manufacturers are obligated to take all reasonable precautions
to ensure that their products are free of defects likely to cause harm. This theory finds its
legal expression in tort law, according to which persons are liable for injury to others if
the injury results from negligence. Negligence is defined as falling below the care that a
“reasonable person” would take to protect others from injury. We are all required to
exercise due care to avoid injury to others, but a manufacturer can be assumed to know
more than the average person about its product and thus can be legally required to
exercise a greater degree of care. The standard of due care applies to design, materials,
production, quality control, packaging, and information provided to users.

 The concept of Negligence:

Under Due care theory; manufacturers must take precautions that are more severe than
the “reasonable person”; but how to determine the extent of such obligation?

- Generally courts have developed a flexible standard for due care that is derived from
the definition of negligence in which negligence involves the interplay of :
(1) The probability of harm,
(2) The severity of the harm, and
(3) The burden of protecting against the harm.
- Thus; manufacturers have a greater obligation to protect consumers when injury is
more likely to occur; and when the cost of avoiding injury is relatively minor. However;
these conditions are not sufficient to decide negligence in all cases.

 Disadvantages of Due Care Theory:

- As a legal doctrine, the due care theory is difficult to apply for two reasons . First, it
focuses on the conduct of the manufacturer rather than on the condition of the product.
Second, manufacturer can get released from responsibility by claiming that an injured
consumer contributed to the injury or assumed the risk of injury.
Third; it is based on negligence; which is very hard to prove.
Fourth; the Theory assumes that all manufacturers are able to discover /or/ estimate all
types of risks resulting from their products. However:
a. There are always unexpected risks that might occur.
b. Most of the injuries cannot be predicted unless the product is used & exchanged
by the consumers for a long period of time.

For these reasons the due care theory cannot stand alone today in product liability cases;
there are easier ways for injured consumers to secure compensation.

B. THE CONTRACTUAL THEORY

- According to the contractual theory, the obligations of a manufacturer to a consumer are

contained in an implicit or explicit sales contract. Common implicit contractual
obligations include an implied warranty of merchantability and an implied warranty of
fitness, according to which the seller implies that the product.

1. Is of an acceptable level of quality,

2. fits for the purpose for which it is ordinarily used, and
3. Is free from dangerous defects.
- The ethical basis for the contractual theory is fairness in commercial dealings. Both
parties to the contract must enter into the contract freely and have adequate information
about the product in question.

- But even when the manufacturer is unaware of a defect, the cost of any accident ought
to be borne by the manufacturer because the product was sold with the understanding that
it posed no hazards except those revealed to the consumer.
  Disadvantages of the Contractual Theory:

First, the theory is based on the assumption that there’s a direct sale contract between the
manufacturer and the consumer. But, in fact most products are sold through retailers and
not directly from the manufacturer.
Second,the understandings in sales agreements are not very precise, so the theory leaves
consumers with little protection except in the case of grossly defective products.
Third, written contracts may sharply limit the right of an injured consumer to be
compensated, especially if the product is sold with an explicit condition that rejects any
type of warranty.
Fourth; the freedom to enter into a contract with the manufacturer is not always
applicable because consumers will find themselves obliged in some cases to purchase
certain products that are not totally safe due to the lack of other alternatives.
Fifth; there is no equal bargaining power between the manufacturer and the consumer.

These problems are illustrated in the case of Henningsen v. Bloomfield Motors (p.236),
in which the sales contract warranty, located in paragraphs that were difficult to read and
not highlighted in any way, was specifically limited to the replacement of defective parts
and did not include liability for personal injuries resulting from defective parts. The court
ruled that considerations of justice overrode an otherwise valid contract. In addition to the
“sharp bargain” that has been made, the consumer lacked the power to bargain for a
better warranty (most manufacturers offered the same warranty) and lacked the ability to
inspect the car for defects.

C. STRICT LIABILITY

- This third theory, now gaining wider acceptance in the U.S.A courts, holds that
manufacturers are responsible for all harm resulting from a dangerously defective
product, even when due care has been exercised and all contracts observed. The mere fact
that a product is put into the hands of consumers in a defective and potentially dangerous
condition is sufficient for holding the manufacturer liable.

Strict liability does not require that a victim of an accident be in a direct contractual
relation with the manufacturer.
Strict liability can be justified by appealing either to efficiency—securing the greatest
amount of protection at the lowest cost—or equity— distributing the costs of injuries
fairly. Both arguments recognize that certain costs are involved in preventing accidents
and in dealing with the consequences of accidents that do occur. Insofar as manufacturers
avoid the cost of reducing accidents, this cost is passed along to consumers, who pay for
the injuries that result. So how can the total cost to both manufacturer and consumer be
reduced to the lowest possible level? And how should the cost be distributed between
manufacturers and consumers? On the basis of efficiency, manufacturers ought to bear the
cost of preventing accidents insofar as they are able to protect consumers at less cost. On
the basis of the equity argument, manufacturers again ought to be primarily responsible
because they generally make profits on the sale of their products.

 Disadvantages (problems) of Strict Liability Theory:

First; that it ignores the determination of who is at fault for an injury. Strict liability thus
forces manufacturers and consumers to give up a right they have in the due care theory,
namely the right not to be forced, when they are not at fault, to contribute to the
compensation of accident victims.

Advocates of strict liability respond that everyone benefits from its method of paying
compensation, because:

a) This method ensures that all victims of accidents from defective products will be
compensated at the lowest overall cost, AND
b) There will be fewer accidents because manufacturers will take more precautions.
On the other hand, product liability covers many different types of accidents, and the
most efficient or equitable system for one kind of accident may not be so for another.

Second, The application of this Theory will increase the number of Law suits against the
manufacturers because consumers will sue the manufacturer asking them to pay
compensation for every small injury resulting from their products. (and the consumer will
be able to win all these lawsuits even if the manufacturer succeeded to prove that he had
exercised Due Care)

Third; The assumption that passing on the costs of all injuries to the manufacturers will
reduce the number of accidents is not always correct because on the contrary; this theory
will increase the consumer carelessness in dealing with the product leading to an augment
in consumers’ injuries.

Fourth; the threat of liability suits can stifle manufacturers’ innovation.

- For these reasons, many business leaders have pressed for uniform product
liability laws and upper limits on awards to injured consumers.

***************

IV. CASE SUMMARY, QUESTIONS AND OBJECTIVES

Case 10.3 – Page 242: The Ford-Firestone Brawl

Ford Motor Company and the Firestone Tire and Rubber Company had a close
business relationship for well over a century. This relationship, which dated to the
founders of the companies, was put under considerable stress during 2000 and 2001.
The popular Ford SUV, the Explorer, had several reports of rollover which resulted in
over 200 deaths. The two companies had long known that the coupling of the
Explorer with the particular standard Firestone tire was unstable. Both Ford and
Firestone were tracking warranty claims and both companies claimed that the central
fault within the unstable vehicle was primarily the result of the other’s contribution.
Thus, Firestone argued that the Explorer had too narrow a wheelbase for safe
operation, while Ford argued that the ATX, ATX II, and Wilderness tires were too
light and possessed a design flaw that caused cracking in the treads. The central issue
was determined to be the design flaw of the Explorer itself, and Firestone walked
away from a contract and relationship that supplied it with nearly 40% of its
worldwide profits, because it argued that trust had been broken and without that trust
a continuing business relationship was impossible.

Case Questions

1. Why might Ford have decided to continue with the production of the Explorer
SUV despite its own studies showing that the vehicle was unstable?
2. How might Firestone have learned from the Ford/Goodyear schism of four years
previously?
3. What might account for the fact that Ford continued to claim that the problem was
a tire issue even as it prepared to replace all of the tires on its vehicles through recall?