Brenkert Free Enterprise and Strict Products Liability

Brenkert – Free Enterprise and Strict Products Liability.

The Point:

The idea of holding manufacturers STRICTLY liable for defective products is not only consistent with a ‘free enterprise’ socioeconomic system, but is in fact required by that system in order to sustain the ‘equal opportunity of all to participate’ in the system of free enterprise.

The Strategy:

Part I: Set up the problem. Part II: Argue that Strict Products Liability is entailed by the conditions that must be satisfied in order to say we have a system of free enterprise, based on the need for an equal opportunity to participate. Part III: Alternate argument for the same conclusion; without strict products liability, our system of free enterprise would collapse.

Part I:

Strict Products Liability (SPL): manufacturers are liable for any harm that results from their products, irrespective of any contracts that might relieve them from responsibility, or any steps they’ve taken to satisfy the duty of care they owe to their consumers.

In other words, if a product harms a consumer in some way, and that harm can be shown to be a result of the manufacturing process, then the manufacturer is liable, irrespective of any action the manufacturer has taken.

The tension with respect to SPL is as follows:

On the one hand, businesses complain that the financial costs are prohibitive to doing business, and the doctrine itself is immoral because manufacturers are being held responsible for things over which they have no control.

By contrast, victims complain that they ought to be fully compensated for the injuries they suffer at the hands of defective products.

According to Brenkert, the discussions of this issue usually focus on the extent to which a business can/should be held liable, given the above tensions. The question he believes is not normally asked, but needs to be answered first is: ‘Is the doctrine of SPL rationally justifiable at all?’

Part II:

SPL is rationally justifiable in a free enterprise socioeconomic system.

A ‘free enterprise’ system is made up of at least the following seven rules:

1. It is motivated by profit 2. Dealings are competitive 3. Competition is free, hence devoid of coercion or deception 4. Dealings are reciprocal 5. Dealings involve the exchange of property 6. Economic markets do not constitute all of society 7. Law, morality and governments limit the types of markets

These are the rules, and someone will have to pay/be punished if and when the rules are violated, irrespective of the intent/actions of the offending party.

Businesses and consumers are engaged in competition, in the same way as people playing sports, only the competition is more complex, and the goal is to get the best deal for the lowest price.

The ultimate goal of this system is to provide the greatest benefit to all people engaged therein, following the ‘invisible hand’.

Since the goal of the system is to benefit everyone, it follows that the system must incorporate the idea of equal access to the system for all, so that each individual might have the opportunity to benefit.

If a participant in the system of free enterprise is harmed by a defective product, then that harm will undermine their ability to continue to participate in the market, through no fault of their own.

So the manufacturer must be required to compensate the victim to the extent that their ability to participate in the market is re-established. This is the only fair thing to do; just like it is only fair that the table-tennis host accept the denial of an ill-gotten point. The foundation for SPL is therefore ‘Compensatory Justice’, i.e., it is only fair to compensate the victims of defective products, since their losses arise through no fault of their own.

A system of free enterprise requires that ‘losers’ be minimally protected, to the extent that they remain capable of participating in the system.

So when someone is harmed and no longer able to participate, they must be compensated.

Compensatory justice seeks to protect those adversely affected by ‘the system’, by ensuring they are compensated for their injuries so they can continue to exercise their equal opportunity to participate.

The best means by which the requirements of compensatory justice can be satisfied in a free-market economy is SPL.

Part III.

New argument (by analogy), same conclusion.

P1: If fraud were a universalized practice in a free enterprise system, then the system would collapse; we can’t maintain trade if no one trusts anyone else.

P2: Allowing victims to absorb the costs of injuries that arise from defective products is analogously dangerous with respect to a free-market economy.

Recall that the goal of a free-market is to benefit all participants.

But if I must absorb the cost of injuries that occur from my interactions in the market and occur through no fault of my own, then it cannot be said that my participation in the market has been beneficial at all.

And if this happens every time a consumer is injured by a defective product, then the system threatens to be detrimental to all who participate therein.

P3: We therefore don’t want the consumer to be responsible for the cost of defective product injuries. P4: Nor do we want the government to provide compensation, because that would not be consistent with a free-market.

C: The only solution that can sustain the purpose of a free enterprise system as beneficial to us all and ‘free’, is that the manufacturer must pay the costs that arise from injuries caused by a defect in their product. They must absorb these costs irrespective of whether they could foresee the possibility of these injuries.

And this result can only be achieved with a system of Strict Products Liability.

Henningsen v. Bloomfield Motors Inc. and Chrysler Corporation.

Claus and Helen Henningsen buy a brand new 1955 Plymouth, Plaza “6”, Club Sedan on May 9th, 1955. On May 19th, Mrs. Henningsen is driving the newly purchased car to a social engagement when she heard a loud noise from ‘under the hood’, and suddenly the car veered ninety degrees into the concrete median. The car had 468 miles on the odometer.

The Henningsen’s sue both the Dealership (Bloomfield Motors), and the manufacturer (Chrysler) for the cost of the injuries sustained by Mrs Henningsen.

Chrysler seeks to defeat the Henningsen’s claim on the grounds that the purchase agreement signed by the Henningsen’s included a clause wherein they agreed to not hold Chrysler, or any of its agents (in this case Bloomfield Motors), liable.

On the back of the agreement, in fine, nearly illegible print, there is a clause that reads:

‘… This warranty being expressly in lieu of all other warranties expressed or implied, and all other obligations or liabilities on its part, and it neither assumes nor authorizes any other person to assume for it any other liability in connection with the sale of its vehicles…” (p. 238).

The Court says: You can’t do that, i.e., Chrysler can’t trick people into signing away their right to seek compensation for a defective product. Why? Because of the inequality of bargaining positions that exists between a car manufacturer and purchaser. Car manufacturers have the specialized knowledge to know when their products are defective, in a way that consumers rarely do.

So the manufacturer must be held liable, because they were in the best position to know whether the car was defective. And they can’t just sign that liability away.