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What Is Product Liability? - Definition & Laws

Lesson Transcript
Instructor: Ashley Dugger

Ashley has a JD degree and is an attorney. She has extensive experience as a prosecutor and legal writer, and she has taught and written various law courses.

Product liability refers to the legal responsibility of a business if it produces and/or sells a faulty good or service. Explore the definition and three different theories of product liability: breach of warranty, negligence, and strict liability. Updated: 09/26/2021

Product Liability

Many businesses sell or manufacture goods. Product liability is the legal responsibility imposed on a business for the manufacturing or selling of defective goods. This is one way our society enforces consumer protection, or the idea that consumers shouldn't be harmed by the products we buy. When a consumer is harmed by a product, that consumer can usually file a civil lawsuit in state court. All product liability laws are state laws and therefore vary by state.

But, in any jurisdiction, the consumer will need to choose a theory of liability under which to sue. This simply means that the consumer, or plaintiff, must base his or her cause of action on a recognized legal rule that would hold the business legally responsible.

In most jurisdictions, a plaintiff's cause of action must be based on one or more of these three different theories:

  • Breach of warranty
  • Negligence
  • Strict liability

Let's take a look at each of these theories individually.

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  • 0:06 Product Liability
  • 1:18 Breach of Warranty
  • 3:13 Negligence
  • 6:10 Strict Liability
  • 8:40 Lesson Summary
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Breach of Warranty

The first theory of product liability is breach of warranty. This theory concerns the seller's failure to fulfill the terms of a promise, claim, guarantee, or representation made about the product. This theory isn't used very often because it's based in contract law and assumes that a contract exists between the consumer and the seller. Therefore, the consumer must prove the existence of a contract or the existence of an agreement. This theory applies specifically to agreements made between a consumer and a seller.

There are three different types of warranties. The first type of warranty is an express warranty. This means the seller stated, or communicated, some sort of guarantee. For example, 'greener grass in 30 days' is an express warranty, whether or not the word 'guaranteed' is actually used.

The second type of warranty is an implied warranty of merchantability. This is an unwritten and unspoken guarantee that the product is fit for the ordinary purpose for which it's intended. For example, a lawnmower is normally used for cutting grass. If the lawnmower doesn't come with a blade or the blade is too dull, then the lawnmower won't be fit for its ordinary purpose.

The third type of warranty is an implied warranty of fitness. This is a guarantee that the product is fit for a particular, non-ordinary purpose. For example, let's say that Kay works at a pet store. Some customers come in looking for kitty litter to help clean up an oil spill at a local garage. Kay recommends several bags of kitty litter to soak up the oil and tells the customers that the litter will work. Once Kay makes this recommendation, she's made an implied warranty of fitness.

Negligence

The second theory of product liability is negligence. This is the failure to exercise reasonable care. Under a theory of negligence, the business either failed to do something they should've done or did something they shouldn't have done. The negligent party can be anyone within the business, including the designer, manufacturer, distributor, or seller.

Everyone in this chain of distribution has a duty to exercise reasonable care. The care must be shown toward anyone who is likely to be injured by the product. This includes the purchaser, his or her family members, any bystanders, and anyone who leases or holds the product. Notice that this is unlike breach of warranty, as that theory is limited to the relationship between consumers and sellers only.

Let's take a look at a real life example of product liability negligence. You may have heard of the 'McDonald's hot coffee case.' This case is entitled Liebeck v. McDonald's Restaurants.

Stella Liebeck was 79 years old and a passenger in her grandson's car when she purchased a cup of coffee at a McDonald's drive-through. After they parked so she could add cream and sugar, Liebeck placed the Styrofoam cup of coffee between her legs and removed the lid. When she did, she accidentally spilled the entire cup of coffee in her lap.

Within minutes, she'd suffered third-degree burns. She spent eight days in the hospital and underwent numerous skin-graft surgeries to her thighs and groin area. Research showed that McDonald's served its coffee at a much higher temperature than many other establishments and had received hundreds of injury reports. Many of these reports even involved children.

Liebeck initially asked McDonald's to pay only her actual and anticipated medical bills. This was a relatively reasonable $20,000. But, McDonald's refused to pay more than $800. At a jury trial, McDonald's was found liable based on a theory of negligence. Liebeck was originally awarded $160,000 to cover her expenses and another $2.7 million in punitive damages.

The judge then reduced this award to $640,000. Both parties appealed and later settled out-of-court for an undisclosed amount, though it's the multi-million dollar award that Liebeck never saw, and never asked for, that many people remember.

In this case, McDonald's both made and sold the product. But, keep in mind that negligence can apply to any of the parties in the chain of distribution, as long as the negligent party and the negligent act can be identified.

Strict Liability

Now, let's take a look at a third theory of product liability. It's strict liability. This means that a business will be held liable if its defective product causes injury, regardless of fault.

In most jurisdictions, strict liability generally requires the plaintiff to prove these elements:

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What Is Product Liability? - Definition & Laws Quiz

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McDonald's was held liable for injuries to customers caused by its coffee being too hot. Why was the liability based on the theory of negligence?

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