Deck 10: Warranties and Products Liability

Question 1

What does Latin phrase "caveat emptor" mean?

A) Risk goes to the seller.
B) Let the buyer beware.
C) Let the emperor decide.
D) Let the court decide.
E) Let the seller beware.

Answer 1

B

Question 2

Which of the following is NOT a type of warranty recognized by Article 2 of the UCC?

A) Warranties of title.
B) Express warranties
C) Implied warranties of fitness for a particular purpose.
D) Warranties of information content.

Answer 2

D

Question 3

Eileen is driving down the road during the first nice spring day in Michigan. The car's top is down and Eileen is daydreaming of the idyllic warm summer days soon to arrive. All of a sudden, another car pulls out in front of Eileen. Eileen didn't see the car right away because she had her mind on other things. A thunderous collision ensues. Eileen sues the other driver and the jury finds that Eileen was 25% responsible for the accident. The jury awards damages of $100,000. Explain the doctrines of contributory and comparative negligence, and Eileen's recovery under each.

Answer 3

Contributory negligence was once the majority rule, but today applies only in a minority of states. This doctrine provides that if both the plaintiff and the defendant were negligent and the plaintiff's negligence is a though not necessarily the sole) proximate cause of his or her injuries, the plaintiff receives no recovery.
Comparative negligence also known as comparative fault) applies in the majority of states. This doctrine provides that if the plaintiff and the defendant were both negligent, plaintiff's recovery will be reduced by his or her relative degree of fault. Thus, if the plaintiff was 30% at fault and the defendant 70% at fault, the plaintiff will recover 70% of his or her damages, but will not recover for the 30% of his or her damages attributable to his or her own lack of due care. In a pure comparative fault system, the plaintiff will always recover for the portion of the injury attributable to the defendant.
Thus, under a contributory negligence doctrine Eileen would have no recovery, and under a comparative negligence doctrine she would recover $75,000 $100,000 x 75%).

Question 4

Explain the concept of privity of contract as it relates to products liability theory and how the concept has evolved since MacPherson v. Buick Motor Co.

Question 5

Jim goes to Carol's Computer Center CCC) to buy a new laptop. While he is there, the saleswoman gives him a sheet of paper listing the warranties for all the laptops. Jim is a tram driver for Walt Disney World in the Goofy parking lot. He asks the saleswoman if the laptop he is thinking about buying will stand the heat of an Orlando summer in the Goofy lot. After she thinks for a minute about how hot it likely gets on a Walt Disney World tram during the summer in Orlando, she tells him that the laptop should be fine for Jim's intended purpose. Jim buys the laptop and uses it to help people keep track of where they parked. One day, while cruising around Goofy 8, Jim's laptop overheats and catches on fire. He is outraged, and he takes the laptop to CCC. CCC refuses to take the laptop back, because it wasn't approved for use in sweltering heat. Does Jim have any recourse?

A) Yes, but only if CCC is a merchant.
B) Yes, because the saleswoman knew what use Jim intended to put the computer and warranted that the computer would work for him.
C) No, he would have to contact the manufacturer of the computer, not the store where he bought it.
D) No, because the manufacturer couldn't normally expect that its computer would be used in such extreme circumstances.

Question 6

You work for an accounting firm and you are doing an audit of a publicly traded company. Explain how the Article 2 UCC warranties cover the claims and representations your firm makes in the course of its audit.

Question 7

Any merchant seller of goods impliedly warrants the merchantability of goods, even if the seller did not manufacture the goods. Which of the following is NOT one of the requirements for a good to be "merchantable?"

A) The goods must pass without objection in the trade under the contract description.
B) The goods must be fit for the ordinary purpose for which they were sold.
C) The goods must conform to any promises or affirmations of fact made on the label.
D) All of these are requirements for goods to be "merchantable."

Question 8

To recover under a negligence theory in tort, a plaintiff must show all of the following EXCEPT:

A) That the defendant failed to comply with her legal duty.
B) That the defendant owed a legal duty to the plaintiff.
C) That the defendant's failure to exercise due care was the proximate cause of the plaintiff's injuries.
D) That defendant and plaintiff were in privity.

Question 9

The Restatement Third) of Torts imposes a post-sale duty to warn on sellers if a reasonable person in the seller's position would provide such a warning. Which of the following is NOT a factor the Restatement uses to evaluate the reasonable person standard?

A) The seller knows or reasonably should know that the product poses a substantial risk of harm to persons or property.
B) Those in need of a warning can be identified and reasonably be assumed to be unaware of the risk of harm.
C) The risk of harm is sufficiently great to justify the burden of providing a warning.
D) The cost of the warning to the seller is less than the cost of the potential harm to the buyer.

Question 10

Which of the following is NOT a way in which a merchant can limit an implied warranty?

A) Refuse to talk to the buyer about warranties.
B) By standard trade usage that limits the warranty.
C) Course of performance that limits the warranty.
D) Sell the good "as is" with no warranties.

Question 11

Diane owns and operates a wedding dress emporium. Laura, a bride-to-be, goes to the store to purchase a dress for the big day. Laura picks out a designer dress and heads off happy, knowing that she now has the perfect dress. During the wedding, however, the dress becomes increasingly frayed and torn. The seams are coming undone and the sequins are falling off in droves. During Laura's dance with her father, a sleeve comes off and a strap tears. Laura is devastated and the wedding is a fiasco. There was no express warranty because Diane did not make any express claims about the dress. Was there an implied warranty?

Question 12

Rikki's Pizza Parlor wished to purchase a used commercial pizza oven. Bubba's Pizza Shop had one for sale. Rikki visited Bubba's restaurant and examined the oven. Rikki explained to Bubba that she had only been in the restaurant business for 6 months, that her restaurant was doing much better than she had expected, that her current pizza oven had insufficient capacity to meet her demand, and that she needed a commercial pizza oven capable of baking up to 30 pizzas an hour. Bubba replied, "Well, you are in luck. This has been a great pizza oven for me, and I'm only getting rid of it because I want an even bigger one myself. I've been in the pizza business for 20 years, and I've really gotten to know ovens."

Question 13

The Magnuson-Moss Federal Warranty Act applies to written warranties on consumer products. The Act does not address oral warranties, nor does it apply to products sold for resale or for commercial purposes. Which of the following was NOT one of Congress' goals in passing the Act?

A) Ensure consumers could get complete information about warranty terms and conditions.
B) Promote competition on the basis of warranty.
C) Require companies to provide consumer warranties.
D) Ensure consumers could compare warranty information prior to purchase.

Question 14

You stop by Krazy Jim's House of Pancakes and Computers for some breakfast and to peruse the latest in computer technology. After politely reminding Jim that the maple syrup should already be on the table, you proceed to talk to him about the latest computer model in the store window. Jim describes the computer as "an excellent computer" and proceeds to tout its virtues. After a short stack and some coffee, you take Jim at his word and go home full and carrying a new computer. In retrospect, buying a computer at a pancake restaurant never really did make sense, and of course, the computer is hardly "excellent."
e.g., "this computer is well-designed." In such instances, the courts will often consider the relative knowledge of the parties involved. If the buyer is not knowledgeable about the seller's goods, the courts are more likely to treat the statement as one of fact that creates an express warranty. If the buyer knows as much or almost as much about the goods as the seller, the courts are more likely to treat the statement as one of opinion that does not create an express warranty.
Here, the court might say that Jim was an expert and you relied on his opinion, but his statement does not really seem definite enough to give rise to an express warranty.

Question 15

What is the difference, if any, between implied and express warranties?

A) Implied warranties arise automatically and express warranties require an affirmative act or statement by the seller.
B) Only merchants can create implied warranties, while anyone can create an express warranty.
C) Implied warranties do not involve any communication from the seller to the buyer.
D) There is no difference; they are simply different sections of the UCC.

Question 16

Which of the following is NOT one of the factors used to determine if a seller has created an express warranty?

A) The seller makes an affirmation of fact or a promise regarding the goods.
B) The seller provides a description of the goods.
C) The seller provides a model or sample of the goods.
D) The buyer relies on the seller's affirmations or promises.

Question 17

Clyde Clydeford is an expert in Stradivarius violins. In fact, Clyde has an excellent collection and is considered the best violist in the world at playing "The Devil Went Down To Georgia" by Charlie Daniels. Drawn by Clyde's reputation, Nick Stradivarius, a distant relative of the great violin designer, seeks out Clyde to buy one of his prized violins. Nick tells Clyde that he would like a violin that will allow him to perfect his "fiddlin'" with his traveling country music band. Clyde is reluctant to sell a Stradivarius to such an obvious rube, but the money is right so he decides to go through with the sale. Nick, relying on Clyde's expertise, asks him which violin he should purchase. Clyde talks to Nick about several of the violins and finally recommends a specific one. Nick purchases the violin and leaves happy, knowing that he now owns a piece of his family's distant history and a fine instrument that will help him perform better on stage. When Nick actually uses the violin in a performance he is shocked to hear the horrible sound emanating from his bow. It turns out that Clyde sold him a violin that is fit for a small practice room, so the sound doesn't resonate properly on a large stage. Nick is furious. Is there any implied warranty of fitness for a particular purpose Nick can rely on?

A) Yes, because sale of a Stradivarius violin carries with it the implied term that the violin will be suitable for performances.
B) No, because only a merchant can create an implied warranty of fitness for a particular purpose and Clyde is not a merchant.
C) Yes, because Nick relied on Clyde and his expertise in Stradivarius violins.
D) No, because Nick should have known which violin to buy because he presumably has some knowledge in the area.

Question 18

All of the following are defenses to a products liability action EXCEPT:

A) Comparative negligence.
B) Disclaimer of warranty.
C) Voluntary assumption of risk.
D) The state-of-the-art defense.

Question 19

Tony owns and operates a company that sells giant novelty "we are number 1" foam hands. Tony is updating his store to sell giant novelty "we are number two" foam hands and has decided to sell his old display equipment. Tony, being an astute businessman, comes to you for your legal advice. He is worried that an implied warranty of merchantability will attach to his sale. He is concerned because he did not manufacture the display equipment and he does not to give any warranties. Does Tony have to worry about the implied warranty of merchantability?

A) Yes, because the implied warranty of merchantability arises automatically.
B) Yes, but only if the buyer asks about the warranty and Tony makes an affirmation.
C) No, because the implied warranty of merchantability does not arise automatically.
D) No, because he is not a merchant of display equipment so the warranty of merchantability does not apply.

Question 20

Larry Larcenous sells used autos at Larry Larcenous' Auto Land. On April 1, Larry sells a used Lexus SC 430 hardtop convertible, with a 4.3-liter, 300-horsepower V8 with all-aluminum construction to Gerald Gullible. The sales price was only $45,000, a steal for such a fine automobile! Like all deals too good to be true, it turns out that this deal was also. The police stop Gary less than a week later because the car's original owner reported it stolen. The title Larry received when he originally bought the car is a fake. Obviously, Gary is upset and wants to get his money back. Larry counters that Gary cannot have his money back because Larry didn't know about that the car was stolen and he exercised due care in buying the car. Who wins?

A) Gary, because Larry violated UCC § 2-312, warranty of title.
B) Larry, because he exercised due care in purchasing the car the first time.
C) Gary, but only if he can show that Larry is a merchant as defined by UCC § 2-104.
D) Larry, because the UCC does not apply once a sale is final.

Question 21

Explain whether the following statement is true or false, and why: