Running head: FIRST PERSONAL ASSIGNMENT



Writing Assignment #2: Cases

Ben Broxterman

MGMT 503- Business Law/Southwestern College

Elaine Fleetwood

7/22/2012

Writing Assignment #2: Cases

Case Problem A

Richard Jimenez was injured when a disc for the hand-held electric disc grinder he had purchased from Sears Roebuck shattered while he used the grinder to smooth down a steel weld. When Jimenez brought a strict liability lawsuit against Sears, the defendant argued that he had misused the grinder, and this misuse caused his injury. Assuming that Sears was right, what effect would this have in a state that has not adopted comparative negligence or comparative fault? What effect would it have in a comparative fault state?

In a strict liability lawsuit, “the defendant is liable even though he did not intend to cause the harm and did not bring it about through recklessness or negligence” (Mallor, et al, 2013). Thus, in this case, Jimenez is arguing that Sears may not have actually done anything wrong, but that they are still liable for the injuries he incurred while using their product. Mallor, et al, (2013) explains that when the defendant is a corporation, it can be assumed that the corporation can pass on the costs of any liability to the consumers in the form of higher prices. It is also premised that the risk associated with an activity, in this case the company’s production of a device that could be potentially dangerous, should be born by the person choosing to pursue that activity rather than other innocent people who are exposed to that risk. It could be argued here that the company produced a potentially dangerous device and that even though the Jimenez was using the device, he was in fact the innocent person who was exposed to that risk.

If the state this occurred in has not adopted comparative negligence or comparative fault, then the case could lean in favor of Sears. Comparative negligence is based on the premise that both parties may have been negligent in some way, and award damages proportional to the relative negligence of each party (Mallor, et al, 2013). Without this statue being in place, if it can not be established that Sears is 100% at fault, it might be difficult for Jimenez to recover any damages.

If, however, the case is tried in a state that recognizes comparative fault, it could be more likely that Jimenez will receive some form of compensation. If, for example, Jimenez sued for $50,000, and it was determined that Sears was 50% at fault for the injury, then Jimenez could be awarded $25,000. This would be under the assumption that this state operates under a pure, rather than a mixed, comparative negligence system. If the system was mixed, it would have to be established that Sears 50% or more at fault than Jimenez in order for the case to end in Jimenez’s favor.

Case Problem B

Spada, an Oregon corporation, agreed to sell Belson, who operated a business in Chicago, Illinois, two carloads of potatoes at "$4.40 per sack, FOB Oregon shipping point." Spada had the potatoes put aboard the railroad cars; however, he did not have floor racks used in the cars under the potatoes as is customary during winter months. As a result, there was no warm air circulating and the potatoes were frozen while in transit. Spada claims that his obligation ended with the delivery to the carrier and that the risk of loss was on Belson. What argument(s) would you make for Belson? What is your legal support for such argument(s)?

According to Mallor, et al (2013), if the sales contract lists that a shipment is “FOB destination,” then the seller must deliver the items to the selected destination and the seller is also responsible for the risk and expense of the items during transit. Therefore, the items would be at the expense of the seller. However, in this case, the contract stated that they are “FOB Oregon Shipping Point.” Items shipped FOB from the origination point place responsibility for deliver goods that conform to the contract, are properly prepared for shipment, and that reasonable contracts for transportation of the goods must be made by the seller on behalf of the buyer (Mallor, et al, 2013).

In this case, three points could be effectively argued in favor of Belson. First, it could be argued by Belson that the seller, Spada, had an obligation to provide viable potatoes to them as stated in the contract. Second, Belson could argue that the seller had the obligation to ensure that the potatoes were properly prepared for shipment, or in this case the floor racks were used to prevent freezing. This point is further driven home by the final argument that, under FOB terms, the seller had an obligation to act on the behalf of the buyer to make a reasonable contract for shipment of the goods- since the use of floor racks is common practice during winter months, this would be considered “reasonable” and therefore the lack of their use would be the fault of the seller, Spada. They should be held liable for the damages.

Case Problem D

Standard Candy Co., a Tennessee firm, produces candy bars, including one known as the "Goo Goo Cluster". The Goo Goo Cluster candy bar contains peanuts provided to Standard Candy by an outside supplier. When James Newton II purchased a Goo Goo Cluster and bit into it, he encountered what he claimed to be an undeveloped peanut. Newton maintained that biting the undeveloped peanut caused him to experience a damaged tooth as well as a recurring jaw-locking and hearing-loss problems. Newton sued Standard Candy and pleaded the following alternative claims: breach of the implied warranty of merchantability; negligent manufacture; negligent failure to warn; and strict liability. Concerning the breach of implied warranty and merchantability claim, what two tests might the court choose from in determining whether the Goo Goo Cluster Newton purchased was unmerchantable? Was the Goo Goo Cluster unmerchantable under either or both these tests? What would Newton need to establish in order to win on the other three claims (the two negligence claims and the strict liability claim)? On which of these three claims would Newton stand the best chance of succeeding? 

Newton makes a very complex and interesting case. An implied warranty is “a warranty created by operation of law rather than the seller’s express statements” (Mallor, et al, 2013). By suing for breach of implied warranty, Newton is attempting to make the case that, even though the seller didn’t expressly state a warranty, it is implied that they offer one simply by putting the product on the market. In order to prove that the product was unmerchantable, it would be subject to the following criteria. First, it would have to be proven that the seller is a merchant with respect to the kinds of goods sold, which in this case, given that the good was a candy bar and the manufacturer is a candy maker, would be easy to establish. Second, it would have to be established that the goods were fit for the ordinary purpose for which such goods are used (Mallor, et al, 2013). This does not necessarily mean that the goods are perfect, but rather that they meet the reasonable expectations of the average consumer. Again, this could probably be fairly easily established, as the average consumer would probably expect to have a fully edible, chewable candy bar. Under these two tests, it could be argued that the candy bar was unmerchantable.

In order to win on the strict liability claim, it would need to be established that the product was “in a defective condition unreasonably dangerous to the user or consumer” (Mallor, et al, 2013). Given the allegations of an underdeveloped peanut, this could classify as the “defective condition” which would need to be proven to support the strict liability claim. For the negligent failure to warn claim, it would have to be determined whether there is a reasonable foreseeability of the risk and the magnitude or severity of the harm, as well as the ease or difficulty of providing a warning and the likely effectiveness of a warning (Mallor, et al, 2013). In this case, being that eating a candy bar is, in the vast majority of cases, a relatively low-risk activity, it might be hard to argue that the manufacturer had a responsibility to warn consumers of the risks of eating the Goo-Goo Cluster. As far as the negligent manufacture claim, this one would also be difficult to prove because it would have to establish that the breach of duty was under the defendant’s control. It would seem as though the best chance of winning one of these claims would be to establish a strict liability claim against the manufacturer.

Reference

Mallor, J., Barnes, A., Bowers, T., & Langvaldt, A. (2013). Business Law: The Ethical, Global, and E-Commerce environment. New York, NY: McGraw-Hill Irwin.

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