Abstract
When strict products liability first appeared on the scene some thirty-five years ago, it was heralded as a boon to consumers whose claims to compensation had hitherto been frustrated by the law of sales. Warranty law, it was said, worked fairly well in purely "commercial" transactions, but tort law did a better job in cases where ordinary consumers suffered personal injuries or property damage from defective products. To be sure, defenders of warranty law pointed out that the newly-drafted Uniform Commercial Code (the "Code" or "U.C.C.") was much more consumer friendly than the old Uniform Sales Act. Nevertheless, the proponents of strict liability prevailed, and to this day strict liability in tort remains the pre-eminent theory of products liability.
However, as the present century draws to a close, academic support for the existing tort-based system of strict products liability appears to be receding. Indeed, some legal commentators have begun to suggest that the current products liability system be scrapped and replaced with something better. These fertile minds have been responsible for a number of novel and ingenious proposals but, surprisingly, almost no one has suggested sales law as a possible alternative to strict liability. I will attempt to remedy this oversight by taking a fresh look at the Uniform Commercial Code's warranty provisions.
This article is divided into five parts. Part I examines the shortcomings of the current tort-based system of products liability. In this portion of the article, I contend that strict liability does not necessarily promote product safety, nor does it distribute product-related risks fairly or efficiently. Finally, I conclude that the present system of products liability is outrageously expensive to administer, distributing less than fifty cents on the dollar to the victims of product-related injuries.
In Part II, I argue that products liability should be viewed as a form of insurance. In addition, I contend that products liability law should abandon its traditional concern with product safety, broad risk-spreading, and corrective justice, and instead focus on providing consumers with warranty/insurance protection against product-related injuries at the lowest possible cost.
Part III examines some of the basic features of the Uniform Commercial Code and identifies several assumptions that underlie the notion that a contract-based products liability system can adequately protect consumer interests. The first assumption is that a contract-based liability regime will rely primarily on express warranties, running directly from producer to consumer, to carry out this insurance function. The implied warranty of merchantability, even when modified or limited, requires buyers to purchase a socially-mandated level of warranty or insurance protection whether they desire it or not. Express warranties, on the other hand, allow the parties to allocate product-related risks in a way that maximizes their utility. The second assumption is that consumers have sufficient knowledge and bargaining power to avoid being swindled or coerced by producers. This assumption is supported by studies that focus on the behavior of markets, concluding that producers respond to consumer preferences with respect to warranty/insurance protection.
Part IV examines some of the Code's potential shortcomings. One concern is privity of contract. According to traditional doctrine, warranty protection extends only to the original buyer and not to other parties who may be injured by the product. Although the privity requirement has lost much of its force during the past thirty years, it still can be troublesome. Another problem is the Code's notice provision, which requires buyers to notify sellers of breach of warranty within a reasonable time or lose their right to sue. If this requirement was rigorously enforced it could strip unsophisticated consumers of the warranty/insurance protection for which they bargained.
Disclaimers and warranty limitations constitute another pitfall. While these concepts can serve a useful and benign purpose by allowing the parties to adjust the level of insurance coverage provided, they also can operate in an oppressive manner against ignorant or economically-disadvantaged buyers. The Code's statute of limitations is another sticking point. Unlike the statute of limitations in tort cases, which begins to run when the plaintiff's injury occurs, or in some cases, when the injury is discovered, a breach of warranty claim under the Code's statute of limitation typically begins to run as soon as the goods are delivered. Because this limitation period is relatively short, it may run out before any injury occurs, thereby leaving the victim without a remedy.
In Part V, I consider whether the problems described in part IV are serious enough to require correction. The first issue is privity. Because I envision a system of express warranties issuing directly from producers to consumers, I conclude that both vertical privity and horizontal privity requirements ought to be eliminated for consumer-related warranty claims. In the absence of privity requirements, the parties themselves can decide warranty coverage issues. A second concern is the notice requirement of U.C.C. section 2-607 (3)(a). Although this provision is useful and reasonable in commercial transactions, it may serve as a trap for the unwary consumer. Therefore, I recommend eliminating the notice requirement in transactions between producers and ordinary consumers.
A third area of controversy involves disclaimers and limitations on remedies. These contractual devices are essential to the furnishing of efficient levels of insurance protection by producers. I assume that competitive forces within the market will discourage producers from scaling back their insurance coverage without a corresponding reduction in product prices. If this does not occur, however, the courts can invalidate exculpatory provisions by invoking the Code's unconscionability provisions.
The final, and most intractable, problem is the Code's statute of limitations. The Code's four-year date-of-sale rule may be too short where personal injury claims are involved. On the other hand, the date-of-injury and discovery doctrine approaches employed by tort law may keep the producer on the hook for too long. I conclude that the traditional date-of-sale rule be retained. With the exception of automobiles and major appliances, most consumer goods have relatively short useful lives and producers can offer express warranties for future performance under section 2-725 (2) for products that present long-term risks to their users.
Therefore, I conclude that the Uniform Commercial Code, with certain minor changes, might indeed be preferable to the present tort-based system, particularly if we view products liability as an insurance mechanism rather than as an instrument of accident cost avoidance or unlimited risk distribution.
Document Type
Article
Publication Date
Summer 1998
12-16-2014
Repository Citation
Richard C. Ausness, Replacing Strict Liability with a Contract-Based Products Liability Regime, 71 Temple L. Rev. 171 (1998).
Notes/Citation Information
Temple Law Review, Vol. 71, No. 2 (Summer 1998), pp. 171-215