{"id":2557,"date":"2015-12-14T06:30:04","date_gmt":"2015-12-14T06:30:04","guid":{"rendered":"https:\/\/courses.candelalearning.com\/waymakerintromarketing1xmaster\/?post_type=chapter&p=2557"},"modified":"2024-05-13T20:15:47","modified_gmt":"2024-05-13T20:15:47","slug":"reading-product-liability","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/waymakerintromarketingxmasterfall2016\/chapter\/reading-product-liability\/","title":{"raw":"Reading: Product Liability","rendered":"Reading: Product Liability"},"content":{"raw":"

Introduction<\/h2>\r\nProduct liability is\u00a0the legal liability a manufacturer or trader incurs for producing or selling a faulty product.\r\n\r\nThere is not a single federal law or code that covers all product liability. Fourteen states have adopted the Uniform Commercial Code, which governs business transactions between states. Specifically, Article 2 of the code includes the requirements\u00a0for contract formation and breach, which are important in many product liability cases. In general, product liability laws come about as a result of\u00a0civil court cases being prosecuted at the state level.\r\n\r\nThe courts are increasingly holding sellers responsible for the safety of their products. The U.S. courts generally maintain\u00a0that the producer of a product is liable for any product defect that causes injury in the course of normal use. Liability can even result if a court or a jury decides that a product\u2019s design, construction, or operating instructions and safety warnings make the product unreasonably dangerous to use.\r\n

Types of Product\u00a0Defects<\/h2>\r\nThere are three types of product defects that incur product liability: design defects, manufacturing defects, and defects in marketing.\r\n

Design Defects<\/h3>\r\nDesign defects exist before the product is manufactured. There is something in the design of the product that is inherently unsafe, regardless of how well it is manufactured. Since\u00a0\"product\" is\u00a0one of the primary elements of the marketing mix, the marketer bears responsibility for ensuring that the design results in a product that is safe and that the product will fulfill the promises of the other aspects of the marketing mix such as promotional commitments.\r\n\r\n[caption id=\"attachment_2935\" align=\"alignright\" width=\"250\"]\"Red, Hoverboard[\/caption]\r\n\r\nLet's look at a current\u00a0example of a\u00a0product design going awry. One of the hottest holiday gift items in\u00a02015 is the hoverboard self-balancing scooter. The premium models often cost more than $1,000, but several companies have created less expensive versions by using lower-cost board components. One expensive component that has been\u00a0downgraded in the cheaper models is the rechargeable lithium-ion battery. Many less expensive boards use a lower-quality (and lower-priced) mass-produced battery cell. These cheaper batteries are more likely to have quality issues that might\u00a0cause them to break and burst into flame when they are repeatedly bumped, which is a regular\u00a0occurrence during the normal use\u00a0of\u00a0the scooter. After more than ten\u00a0reported fires, the\u00a0U.S. Consumer Product Safety Commission opened a case to investigate the hoverboard fires.\r\n

Manufacturing Defects<\/h3>\r\nManufacturing defects occur while a product is being\u00a0constructed, produced, or assembled. Specifically, when a\u00a0product departs from its intended design, even though all possible care was exercised in the preparation and marketing of the product[footnote]Restatement of Torts, Third, Apportionment of Liability (2000)[\/footnote], it is a manufacturing defect. The\u00a0manufacturer may\u00a0be very careful with the design, the material selection, the development\u00a0of the manufacturing process, and the\u00a0quality-assurance guidelines. Nevertheless,\u00a0if a poorly manufactured product leaves\u00a0the manufacturers facility and causes injury when used for any of its intended purposes, then there is a\u00a0defect in manufacturing.\r\n\r\n\"Photo\r\n\r\nIt might\u00a0seem that manufacturing defects occur only in product sales and not in the service industry, but there's a very well-known case in\u00a0this category: the McDonald's coffee case.\r\n\r\nOn February 27, 1992, a seventy-nine-year-old woman named Stella Liebeck went to\u00a0McDonald's with her grandson, Chris. They got the coffee, and Chris pulled into a parking space so that Stella could add cream and sugar. Since the car had a curved dash and lacked cup holders, Stella put the cup between her knees and removed the lid. When she did, the cup fell backward, burning her\u00a0groin, thighs, genitalia, and buttocks.\u00a0Liebeck was taken to the hospital, where it was discovered that she had third-degree burns on 6 percent of her body and other burns on 16 percent of her body. She required multiple skin grafts and was in the hospital for eight days.\u00a0Liebeck spent two years recovering from the injury, lost 20 percent of her bodyweight after the accident, and was left permanently scarred by the ordeal.\r\n\r\nLiebeck wrote a letter to McDonald\u2019s asking them to pay her medical bills, which totaled around\u00a0$10,500 in 1992 (approximately\u00a0$16,110 today). The company\u00a0offered her $800.\u00a0Liebeck and McDonald\u2019s exchanged several more letters, but the company refused to increase their $800 offer, so Liebeck hired a law firm.\r\n\r\nLiebeck's\u00a0lawyers conducted a study of coffee temperatures. They discovered that coffee brewed\u00a0at home is usually served at 135\u2013145\u00b0F and coffee served at most fast-food restaurants is in\u00a0the 160\u2013175\u00b0F range. McDonald\u2019s, however, served its coffee at 190\u00b0F, which\u00a0can cause third-degree burns on human skin after two to seven seconds of contact. No safety study of any kind was undertaken by either McDonald\u2019s or the consultant who recommended the hotter temperature.\r\n\r\nMoreover,\u00a0Liebeck\u2019s lawyers also discovered more than\u00a0seven hundred other burn claims\u2014many of them for third-degree burns\u2014from McDonald\u2019s customers between\u00a0February 1983 and March 1992. In court, McDonald\u2019s quality-control manager, Christopher Appleton, testified that McDonald\u2019s served around 20 million cups of coffee a year and that seven hundred incidents during\u00a0nine years was statistically insignificant. While this was factually accurate, the jury did not like to hear that McDonald's considered seven hundred burned customer to be insignificant.\r\n\r\nThe jury found in Liebeck's favor. They awarded her $200,000 in compensatory damages, but that\u00a0amount was later reduced to $160,000 because they felt that the spill was 20 percent Liebeck\u2019s fault. The jury made headlines when it came to the punitive damages, however, which they settled\u00a0at\u00a0$2.7 million. The jurors defended\u00a0the\u00a0amount, saying that it was\u00a0to punish the company for its callous attitude toward\u00a0Ms. Liebeck and the\u00a0700+ other McDonald's customers\u00a0who had suffered burns. Although it sounds like a lot, $2.7 million represented only two days' worth of McDonald's coffee sales, and\u00a0the jurors felt that was\u00a0fair.\r\n\r\nThe judge agreed, accusing McDonald\u2019s of \u201cwillful, wanton, and reckless behavior\u201d for ignoring\u00a0all the customer complaints.\r\n\r\nMcDonald's process for making\u00a0coffee constituted\u00a0a manufacturing defect, which resulted in many customer injuries and generated\u00a0significant product liability for the company.\r\n

Marketing Defects<\/h3>\r\nMarketing defects result from flaws in the way a product is marketed. Examples include\u00a0improper labeling, poor or incomplete\u00a0instructions, or inadequate safety warnings. Often marketing defects are referred to as a \"failure to warn.\"\u00a0It is important for the marketer to think not only about the warnings that the user might need\u00a0when using the product as intended but also about other, potentially dangerous uses for which the product was not intended.\r\n\r\nFor example, fabric used in children's sleepwear must meet certain flammability requirements to prevent the risk of injury from fires. Certain\u00a0comfortable children's clothing that\u00a0does not\u00a0meet the flammability requirement can be confused with sleepwear. For this\u00a0reason, such clothing will often contain a warning label that reads,\u00a0\"Not intended for sleepwear.\"\r\n\r\nOver time,\u00a0product liability has shifted more\u00a0to the side\u00a0of\u00a0the injured product user. Consumer advocates like Ralph Nader argue that, for too long, product liability favored producers at the expense of the product user. They assert\u00a0that it's\u00a0the threat of lawsuits and huge settlements and restitutions that force companies to make safe products. While a discussion of all aspects of product liability is beyond the scope of this course, it is clear that liability has and will continue to have a tremendous impact on consumers and manufacturers alike. These two groups are not the only ones affected, either. Retailers, franchises, wholesalers, sellers of mass-produced homes, and building-site developers and engineers are all subject to liability legislation.","rendered":"

Introduction<\/h2>\n

Product liability is\u00a0the legal liability a manufacturer or trader incurs for producing or selling a faulty product.<\/p>\n

There is not a single federal law or code that covers all product liability. Fourteen states have adopted the Uniform Commercial Code, which governs business transactions between states. Specifically, Article 2 of the code includes the requirements\u00a0for contract formation and breach, which are important in many product liability cases. In general, product liability laws come about as a result of\u00a0civil court cases being prosecuted at the state level.<\/p>\n

The courts are increasingly holding sellers responsible for the safety of their products. The U.S. courts generally maintain\u00a0that the producer of a product is liable for any product defect that causes injury in the course of normal use. Liability can even result if a court or a jury decides that a product\u2019s design, construction, or operating instructions and safety warnings make the product unreasonably dangerous to use.<\/p>\n

Types of Product\u00a0Defects<\/h2>\n

There are three types of product defects that incur product liability: design defects, manufacturing defects, and defects in marketing.<\/p>\n

Design Defects<\/h3>\n

Design defects exist before the product is manufactured. There is something in the design of the product that is inherently unsafe, regardless of how well it is manufactured. Since\u00a0“product” is\u00a0one of the primary elements of the marketing mix, the marketer bears responsibility for ensuring that the design results in a product that is safe and that the product will fulfill the promises of the other aspects of the marketing mix such as promotional commitments.<\/p>\n

\"Red,<\/p>\n

Hoverboard<\/p>\n<\/div>\n

Let’s look at a current\u00a0example of a\u00a0product design going awry. One of the hottest holiday gift items in\u00a02015 is the hoverboard self-balancing scooter. The premium models often cost more than $1,000, but several companies have created less expensive versions by using lower-cost board components. One expensive component that has been\u00a0downgraded in the cheaper models is the rechargeable lithium-ion battery. Many less expensive boards use a lower-quality (and lower-priced) mass-produced battery cell. These cheaper batteries are more likely to have quality issues that might\u00a0cause them to break and burst into flame when they are repeatedly bumped, which is a regular\u00a0occurrence during the normal use\u00a0of\u00a0the scooter. After more than ten\u00a0reported fires, the\u00a0U.S. Consumer Product Safety Commission opened a case to investigate the hoverboard fires.<\/p>\n

Manufacturing Defects<\/h3>\n

Manufacturing defects occur while a product is being\u00a0constructed, produced, or assembled. Specifically, when a\u00a0product departs from its intended design, even though all possible care was exercised in the preparation and marketing of the product[1]<\/sup><\/a>, it is a manufacturing defect. The\u00a0manufacturer may\u00a0be very careful with the design, the material selection, the development\u00a0of the manufacturing process, and the\u00a0quality-assurance guidelines. Nevertheless,\u00a0if a poorly manufactured product leaves\u00a0the manufacturers facility and causes injury when used for any of its intended purposes, then there is a\u00a0defect in manufacturing.<\/p>\n

\"Photo<\/p>\n

It might\u00a0seem that manufacturing defects occur only in product sales and not in the service industry, but there’s a very well-known case in\u00a0this category: the McDonald’s coffee case.<\/p>\n

On February 27, 1992, a seventy-nine-year-old woman named Stella Liebeck went to\u00a0McDonald’s with her grandson, Chris. They got the coffee, and Chris pulled into a parking space so that Stella could add cream and sugar. Since the car had a curved dash and lacked cup holders, Stella put the cup between her knees and removed the lid. When she did, the cup fell backward, burning her\u00a0groin, thighs, genitalia, and buttocks.\u00a0Liebeck was taken to the hospital, where it was discovered that she had third-degree burns on 6 percent of her body and other burns on 16 percent of her body. She required multiple skin grafts and was in the hospital for eight days.\u00a0Liebeck spent two years recovering from the injury, lost 20 percent of her bodyweight after the accident, and was left permanently scarred by the ordeal.<\/p>\n

Liebeck wrote a letter to McDonald\u2019s asking them to pay her medical bills, which totaled around\u00a0$10,500 in 1992 (approximately\u00a0$16,110 today). The company\u00a0offered her $800.\u00a0Liebeck and McDonald\u2019s exchanged several more letters, but the company refused to increase their $800 offer, so Liebeck hired a law firm.<\/p>\n

Liebeck’s\u00a0lawyers conducted a study of coffee temperatures. They discovered that coffee brewed\u00a0at home is usually served at 135\u2013145\u00b0F and coffee served at most fast-food restaurants is in\u00a0the 160\u2013175\u00b0F range. McDonald\u2019s, however, served its coffee at 190\u00b0F, which\u00a0can cause third-degree burns on human skin after two to seven seconds of contact. No safety study of any kind was undertaken by either McDonald\u2019s or the consultant who recommended the hotter temperature.<\/p>\n

Moreover,\u00a0Liebeck\u2019s lawyers also discovered more than\u00a0seven hundred other burn claims\u2014many of them for third-degree burns\u2014from McDonald\u2019s customers between\u00a0February 1983 and March 1992. In court, McDonald\u2019s quality-control manager, Christopher Appleton, testified that McDonald\u2019s served around 20 million cups of coffee a year and that seven hundred incidents during\u00a0nine years was statistically insignificant. While this was factually accurate, the jury did not like to hear that McDonald’s considered seven hundred burned customer to be insignificant.<\/p>\n

The jury found in Liebeck’s favor. They awarded her $200,000 in compensatory damages, but that\u00a0amount was later reduced to $160,000 because they felt that the spill was 20 percent Liebeck\u2019s fault. The jury made headlines when it came to the punitive damages, however, which they settled\u00a0at\u00a0$2.7 million. The jurors defended\u00a0the\u00a0amount, saying that it was\u00a0to punish the company for its callous attitude toward\u00a0Ms. Liebeck and the\u00a0700+ other McDonald’s customers\u00a0who had suffered burns. Although it sounds like a lot, $2.7 million represented only two days’ worth of McDonald’s coffee sales, and\u00a0the jurors felt that was\u00a0fair.<\/p>\n

The judge agreed, accusing McDonald\u2019s of \u201cwillful, wanton, and reckless behavior\u201d for ignoring\u00a0all the customer complaints.<\/p>\n

McDonald’s process for making\u00a0coffee constituted\u00a0a manufacturing defect, which resulted in many customer injuries and generated\u00a0significant product liability for the company.<\/p>\n

Marketing Defects<\/h3>\n

Marketing defects result from flaws in the way a product is marketed. Examples include\u00a0improper labeling, poor or incomplete\u00a0instructions, or inadequate safety warnings. Often marketing defects are referred to as a “failure to warn.”\u00a0It is important for the marketer to think not only about the warnings that the user might need\u00a0when using the product as intended but also about other, potentially dangerous uses for which the product was not intended.<\/p>\n

For example, fabric used in children’s sleepwear must meet certain flammability requirements to prevent the risk of injury from fires. Certain\u00a0comfortable children’s clothing that\u00a0does not\u00a0meet the flammability requirement can be confused with sleepwear. For this\u00a0reason, such clothing will often contain a warning label that reads,\u00a0“Not intended for sleepwear.”<\/p>\n

Over time,\u00a0product liability has shifted more\u00a0to the side\u00a0of\u00a0the injured product user. Consumer advocates like Ralph Nader argue that, for too long, product liability favored producers at the expense of the product user. They assert\u00a0that it’s\u00a0the threat of lawsuits and huge settlements and restitutions that force companies to make safe products. While a discussion of all aspects of product liability is beyond the scope of this course, it is clear that liability has and will continue to have a tremendous impact on consumers and manufacturers alike. These two groups are not the only ones affected, either. Retailers, franchises, wholesalers, sellers of mass-produced homes, and building-site developers and engineers are all subject to liability legislation.<\/p>\n\n\t\t\t

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Candela Citations<\/h3>\n\t\t\t\t\t
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