BUSINESS LAW PROJECT

01 Oct BUSINESS LAW PROJECT

COURSE READINGS https://www.lawteacher.net/free-law-essays/contract-law/exploring-warranties-and-product-liability-contract-law-essay.php

cOURSE READINGS https://corporate.findlaw.com/litigation-disputes/product-liability-manufacturing-defects-vs-design-defects.html

Course Reading Link 1: https://saylordotorg.github.io/text_law-for-entrepreneurs/s20-products-liability

Course Reading Link 2: https://corporate.findlaw.com/litigation-disputes/product-liability-manufacturing-defects-vs-design-defects.html

Course Reading Link 3: https://www.lawteacher.net/free-law-essays/contract-law/exploring-warranties-and-product-liability-contract-law-essay.php

Purpose

The purpose of this project is to research, analyze and apply tort law, product liability law, agency and contract law and their associated potential risks and liabilities in business. The project requires you to identify and analyze legal issues and to make recommendations.

You will also develop skills in critical thinking to create an in-depth comprehensive analysis.

The project relates to the concepts covered in weeks 1-7.  You should refer to assigned materials in earlier weeks of the course, including Instructor Notes in Week 3 and other weeks.

Outcomes Met by Completing this Assignment:

• recommend appropriate actions in the business environment based on an understanding of sources of law, legal process and procedure, and available remedies
• analyze contractual rights, obligations, liabilities, and remedies in the business environment
• analyze tort rights, obligations, liabilities, and remedies in the business environment

Background:  Things are moving quickly for the GC owners.  They are almost ready to open operations.  GC will be purchasing EPI products exclusively for use in GC cleaning services and will be reselling some EPI products to the public.  The GC owners have some final concerns about these sales contracts and about potential liabilities that could arise from the use of EPI products.

Winnie and Ralph asked you to complete research and prepare some instructional materials to present in a memorandum for discussion among Winnie, Ralph, the GC owners, and you at a meeting.   You decide to create hypothetical scenarios for analysis and later discussion at the meeting.

Instructions:

Part I.  Use of EPI Products in GC Cleaning Services

Review the tort of product liability in week 3 Overview, Instructor Notes.

Review the scenario below and respond to the items following.

Scenario:  GC contracted to clean the ABC Industries, Inc. (ABC) office building using EPI cleaning products.  GC assigned several experienced GC employees to the job.  While cleaning the office windows with EPI’s Clear Light window cleaner, the cleaner left a sticky film on several of the windows.  The cleaner was used exactly according to product directions. The sticky film could not be removed except by scraping which left permanent scratches on the windows.  GC had used Clear Light many times before with no damage or problems.

ABC expects GC to pay to replace the windows and sues GC to recover costs of replacing the windows.  Note:  ABC sued only GC.

Analyze and discuss whether GC has any potential liability under product liability law for damage to the windows as described in the scenario:

1. Describe any possible product liability claim(s) for which ABC could sue GC and why/how the claim(s) could apply to GC.  

• 2-3 paragraphs minimum

1. Analyze and describe whether GC is likely to be found liable for the claim(s) identified in #1 above and why.

• 2-3 paragraphs minimum

1. Assume GC is found liable for the claim(s) identified in #1 above.  Does GC have any recourse to sue EPI to recover the costs for paid to ABC to replace the windows and why.

• 1-2 paragraphs minimum

Part II.  Agency

GC and EPI agreed that GC will purchase EPI products exclusively for use in GC cleaning services.  EPI and GC have drafted a standard sales contract to represent their agreement.  The contract terms for the sale of EPI cleaning products include:

• GC agrees to purchase all its cleaning product needs for three (3) years exclusively from EPI;
• The price for the purchased products will remain the same for GC for the three (3) year period;
• EPI grants permission to GC to resell any of the EPI-purchased products directly to customers, including businesses, via the GC website and its public retail store;
• GC will purchase cleaning products monthly that will be delivered via EPI trucks;
• EPI and GC have agreed on the price, payment terms, delivery dates and locations, etc. for delivery.

Scenario:  GC has a large supply of EPI products in its storage warehouse for use in cleaning services and to resell to customers. GC sold two (2) cases of Stain-Away carpet cleaning solution to Mark’s Carpet Cleaning, a sole proprietorship.   At the time of purchase, Mark told GC he will use Stain-Away to clean carpets for his clients and would like to purchase more Stain-Away from GC in the future.

1.  Analyze and explain whether the sale of Stain-Away to Mark, and Mark’s use of the product for his clients, creates an agency relationship with GC and why or why not.

Format

Memorandum

TO:  Winnie James, Ralph Anders

FROM:  (your name)

RE:      Sale and Resale of EPI Products

Part I.

1.

2.

3.

Part II.

1.

Instructor notes

 

Product Liability** 

Product liability, sometimes called strict product liability refers to cases in which a person is injured by a product, or use of a product because the product is defective in some way.  When a product is defective it may become abnormally dangerous although the product, when not defective, may be safe.

Definitions of a Defective Product in Product Liability

Products may become defective because of:

1) defective manufacture (so the product is “broken”, not perfectly made, i.e., a product is manufactured so that the electric wiring is improperly made/attached, etc. and may cause a fire or cause electric shock, or burn the user, etc.

2) failure to adequately warn of how to properly use a product, or potential dangers from misuse, i.e., a warning to not use an electric hair dryer in the shower,

3) defective design, i.e., an electric lawn mower on which the blade is not covered so that it can easily cut a foot when in use,

4) defective packaging, i.e., packaging for food that can be easily tampered with, and

5) breach of warranty of merchantability so that a product does not function for the purpose for which it was intended, i.e., a car that does not operate/drive (breach of warranty of merchantability does not always cause harm, except perhaps economic harm because a user paid for a product that does not work as intended).

A product can be simultaneously defective in several ways. For example, a car that does not operate/drive is not merchantable for its intended purpose but is also defectively manufactured in some way so that it does not operate.

Everyone in the chain of distribution (from manufacturer to consumer) may be liable for harm caused by a defective product.  The chain of distribution includes manufacturers, suppliers to manufacturers, lessors of a product, distributors of products from manufacturers to wholesalers, distributors to other middle-persons (such as vending machine product distributors, shippers, distribution to retailers and other sellers, consumers, and innocent bystanders who may be injured by another’s use of a defective product.

All parties in the chain of distribution may be sued for the injuries caused by a product, but not all these parties will necessarily be found liable.  For example, assume a toaster catches fire and burns a consumer who attempts to make toast.  Clearly, the toaster is defective because toasters should not catch fire.  An injured consumer could sue all in the chain of distribution, but probably only the manufacturer will be held liable.  The defect is likely due to faulty wiring inside the toaster, and this defect is not reasonably discoverable by others in the chain of distribution.

Parties Who Can Recover for Product Liability – Anyone injured by a product, including a product user, and usually an innocent third party bystander, can sue under product liability.  An injured party does not have to have a contractual relationship with anyone in the chain of distribution to sue for injuries. For example, assume a consumer is properly using his new gas grill at a tailgate party when the grill spontaneously explodes.  The consumer and two friends standing nearby are injured. Only the consumer has a contractual relationship (a sales contract created to purchase the grill from a retailer) with either the manufacturer or retailer, but all three injured parties may sue.  All will likely recover damages for injuries received from the defective grill.

Damages Recoverable for Product Liability – Typically, injured parties may collect damages to compensate for their personal injuries, such as medical costs.  Property owners may also collect damages to compensate for harm to their property, such as costs to repair a garage door damaged in a fire caused by a defective lawn mower.   So-called punitive damages, over and above actual compensation damages, may be awarded in some very serious cases to “punish” the manufacturer or others in the chain of distribution.  Punitive damages tend to be arbitrary and the trend in the courts is to limit punitive damages to only the most extreme cases.

Typically, consumers return defective products to the seller and a monetary refund for the product, rather than collecting the cost of the product in court.

Types of Product Defects:

1.  Defect in Manufacture

When the manufacturer fails to properly assemble, test, or check quality of a product, there may be a defect in manufacture.

For example, a cup of coffee containing a piece of metal is defective and abnormally dangerous as the metal could injure an unsuspected consumer drinking the coffee.  Or, an electric food processor is defective and abnormally dangerous if the top and blade fly off when the mixer is turned on.

2.  Defect in Design

When a product is designed so that faulty design causes the product to become dangerous, the product is defective.

For example, a power table saw is designed so a safety guard surrounding the blade can be removed and the saw will still operate.  This becomes abnormally dangerous and likely to injure users.  The safer design would have been for the saw to lock and not operate with the safety guard removed.