Product-Liability Law

A product-liability case is one in which a manufacturer is held liable for injuries caused by a defective product. Product-liability law developed from the tort law and holds companies responsible for their wares on the grounds of negligence, strict liability, and warranty. A guarantee made from a product is a warranty. It may be a written (or spoken) promise made by the company about the product, or not written but created by operation of law when a seller enters into a contract.

Under strict product liability, a company may be held responsible for a defective product even if reasonable care was used in the product's manufacture and sale.

Contracts

Broadly defined, a contract is an exchange of promises enforceable by law. Most valid contracts are adhered by both parties. But when there is a breach of contract, three options are available to the damaged party. The first option, discharge, frees one party from fulfilling a contractual obligation when the other party violates the contract. The second option, damages, allows the injured party to sue for damages resulting from the other party's failure to live up to the contract's terms. The last option, specific performance, permits the injured party to demand performance, that is, fulfilment of the contract's terms.

Agency

Agency exists when one party (the principal) authorises another party (the agent) to act on his or her behalf. For example, a person who requests his or her stockbroker to buy stock is creating an agency relationship (empowering the stockbroker to act as an agent). When such authorisation is in written form, the document is known as a power of attorney. Agency is important in business because it permits the delegation of the authority to enter into a contract. The principal, however, is liable for any contracts made by an agent, so long as the agent is within the scope of his or her authority.