DOCSLIB.ORG

Punitive Damages in Products Liability Litigation

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Punitive Damages in Products Liability Litigation Michigan Law Review Volume 74 Issue 7 1976 Punitive Damages in Products Liability Litigation David G. Owen University of South Carolina Follow this and additional works at: https://repository.law.umich.edu/mlr Part of the Legal Remedies Commons, and the Torts Commons Recommended Citation David G. Owen, Punitive Damages in Products Liability Litigation, 74 MICH. L. REV. 1257 (1976). Available at: https://repository.law.umich.edu/mlr/vol74/iss7/2 This Article is brought to you for free and open access by the Michigan Law Review at University of Michigan Law School Scholarship Repository. It has been accepted for inclusion in Michigan Law Review by an authorized editor of University of Michigan Law School Scholarship Repository. For more information, please contact [email protected]. PUNITIVE DAMAGES IN PRODUCTS LIABILITY LITIGATION DAVID G. OWEN TABLE OF CONTENTS I. INTRODUCTION 1258 II. TuE DOCTRINE AND -FUNCTIONS OF PuNITIVE DAMAGES 1262 A. The Doctrine of Punitive Damages and Its Com- patibility with Theories of Products Liability ________ 1262 l. The Doctrine of Punitive Damages___ 1262 2. Compatibility of Punitive Damages Doctrine with Theories of Products Liability ___ 1268 a. Strict liability in tort ________ 1268 b. Warranty 1271 B. The Functions of Punitive Damages and Their Applicability to Products Liability Litigation _______ _ 1277 l. Punishment __________ _ 1279 2. Deterrence ---------------------------------- 1282 3. Law Enforcement ------------------------- 1287 4. Compensation 1295 III. COMPLICATING FACTORS IN AcmEVING THE OBJEC- TIVES OF PUNITIVE DAMAGES IN PRODUCTS LIABILITY LITIGATION -----------·--------- 1299 A. Vicarious Liability and the Innocent Shareholder____ 1299 B. Liability Insurance for Punitive Damages ______________ 1308 C. Measurement and Control of Punitive Damages Assessments ------------------------------- 1314 1. Measurement ______________ _ 1314 2. Control _________________ 1319 a. Judicial control over excessive awards _______ _ 1320 b. Control over total punishment in mass disaster litigation ____________ 1322 IV. DEVELOPING A STANDARD OF LIABILITY FOR THE RECKLESS MARKETING OF DEFECTIVE PRODUCTS ____ _ 1325 A. Classification of Recurring Forms of Flagrant Misconduct of Product Manufacturers ________________ 1325 I. Fraudulent-Type Misconduct_______________ 1329 2. Knowing Violations of Safety Standards____________ 1335 3. Inadequate Testing or Quality Control ___ 1339 4. Failure to Warn of Known Dangers ________________ 1345 5. Post-Marketing Failures to Remedy Known Dangers --------------------------- 1352 B. Toward a Standard of Responsibility ___________________ _ 1361 V. CONCLUSION _______________ 1371 1257 PUNITIVE DAMAGES IN PRODUCTS LIABILITY LITIGATION David G. Owen*t I. INTRODUCTION Manufacturers have a powerful hold over the means for discover­ ing and correcting product hazards.1 Through the processes of design, testing, inspection and collection of data on product safety performance in the field, the manufacturer has virtually exclusive access to much of the information necessary for effective control of dangers facing product consumers. Indeed, the strict principles of modem products liability law evolved in part to motivate manufac­ turers to use this information to help combat the massive problem of product accidents. 2 @ 1976 by David G. Owen. * Assistant Professor of Law, University of South Carolina. B.S. 1967; J,D. 1971, University of Pennsylvania.-Ed. t The author is grateful to Frampton Durban, Jean L. Perrin, Robert E. Stepp and William L. Todd, students at the University of South Carolina School of Law, for their valuable assistance, and to the many lawyers who supplied invaluable informa­ tion on the cases treated in this article. 1. See NATIONAL COMMISSION ON PRODUCT SAFETY, FINAL REPORT 3-4 (1970) [hereinafter NOPS FINAL REPORT]; 2 F. HARPER & F. JAMES, THE LAW OF TORTS 756-57 (1956); Kessler, Products Liability, 76 YALE L.J. 887, 927 (1967); Noel, Comparison of Strict Liability in Products Area and Auto Accident Reparations, in THE ORIGIN AND DEVELOPMENT OF THE NEGLIGENCE ACTION 79 (U.S. Dept. of Transp. 1970). 2. See, e.g., Montgomery & Owen, Reflections on the Theory and Administration of Strict Tort Liability for Defective Products, 27 S.C. L. REV. 803, 809-10 (1976); Morris, Negligence in Tort Law-With Emphasis on Automobile Accidents and Un­ sound Products, 53 VA. L. REv. 899, 908-09 (1967). The National Commission on Product Safety estimated in 1970 that 20 million Americans are injured in the home each year in product accidents. See NCPS FINAL REPORT, supra note 1, at 1. In addition, it has been estimated that as many as seven million workers annually are injured in product accidents on the job. Sec Weinstein, Twerski, Piehler & Donaher, Product Liability: An Interaction of Law and Technology, 12 DUQUESNE L. REv. 425 (1974), citing PRESIDENT'S REPORT ON OCCUPATIONAL SAFETY AND HEALTH (May 1972). A recent survey ')f the National Center for Health Statistics estimated that over 62 million accidents occurre, /1 this countzy in 1974. See NATIONAL SAFETY COUNCIL, ACCIDENT FACTS 2 (1975). Since the estimate of the National Commission on Product Safety excluded accidents from foods, drugs, cosmetics, motor vehicles, insecticides, firearms, cigarettes, radiological hazards, and certain flammable fabrics, NCPS FINAL REPORT, supra note 1, at 1 n.*, it may be conservatively estimated that the total annual figure for product acci­ dents exceeds 30 million injuries and perhaps is considerably greater. The National Safety Council has estimated the national cost of all accidents at $43.3 billion for 1974. See NATIONAL SAFE1Y COUNCIL, ACCIDENT FACTS 4 (1975). Approximating 1258 June 1976] Punitive Damages 1259 Most manufacturers, both from a desire to avoid liability and from a generalized sense of social responsibility, prudently use their resources to prevent excessively hazardous products3 from reaching or staying on the market. On occasion, however, manufacturers abuse their control over safety information and market defective products in flagrant disregard of the public safety. One manufac­ turer of color televisions, for example, included in each set a high voltage transformer it knew was prone to catch fire and, when informed that its sets were causing frequent fires, refused to spend the one dollar per unit it knew would eliminate the hazard. 4 In another case, a major drug company submitted fabricated test data to the Food and Drug Administration to obtain approval for the sale of a dangerous new drug. Approval was granted, and approximately 500 persons developed cataracts as a result. 5 The strict liability theory of modem product~ liability law explicit­ ly addresses ·the loss distribution problems ,that arise when an injury is caused by a defective product marketed by an "innocent" manufac­ turer, since liability is imposed even though the manufacturer has exercised due care. 6 But the principles of strict liability are ill­ equipped to deal with problems at the other end of the culpability scale where an · injury results when a manufacturer markets its products in intentional or reckless disregard for consumer safety. Nor has the criminal law filled this void. 7 A legal tool is needed that will help to expose this type of gross misconduct, punish those the figure for product accidents at one half the total for all accidents, the current annual cost of product accidents may exceed $20 billion. 3. "The most persistent issue in the law of torts is the determination of when an actor has imposed excessive risk of harm on another." C. FRIED, AN ANATOMY OF VALUES 257 (1970). See 0. HOLMES, THE CoMMON LAW 144-46 (1881). The hazards in a product are considered to be "excessive," for the purposes of this article, when the product is marketed in a "defective condition." The difficult issue of when a product's condition may properly be characterized as defective is beyond the scope of the present article. Roughly speaking, in this article, a product is considered to contain excessive hazards and thus to be defective if it is marketed in a condition that generates more· accident costs than social utility. Stated otherwise, a product is defective if the costs of improving its safety are less than the benefits resulting from the improvement. See note 169 infra and accompanying text. However, the principles of punitive damages developed in this article are of general application and are not dependent upon any particular definition of defectiveness. 4. See Gillham v. Admiral Corp., 523 F.2d 102 (6th Cir. 1975); notes 474-80 i11f ra and accompanying text. 5. See Toole v. Richardson-Merrell, Inc., 251 Cal. App. 2d 689, 60 Cal. Rptr. 398 (1967); notes 336-51 infra and accompanying text; cf. Roginsky v. Richardson­ Merrell, Inc., 378 F.2d 832 (2d Cir. 1967). 6. See RESTATEMENT (SECOND) OF TORTS§ 402A(2)(a) (1965). 7. See note 156 infra and accompanying text. 1260 Michigan Law Review [Vol. 74: 1257 manufacturers guilty of such flagrant misbehavior, and deter all manufacturers from acting with similar disregard for the public wel­ fare. The punitive damages remedy is such a tool. Whether punitive damages may appropriately and usefully be awarded in products liability litigation is a question that has remained remarkably unexplored by both courts8 and commentators. 0 The dearth of judicial analysis in this area can be explained in part by the important 1967 Second Circuit decision in Roginsky v. Richardson-Merrell, Inc. 10 Striking down a punitive damages award of
Load more

Recommended publications
  • Accord and Satisfaction Is Possible When Damages Are Liquidated
    Accord And Satisfaction Is Possible When Damages Are Liquidated Unmarketable Preston par some hoarders and harbour his Egypt so raving! Intergovernmental Keith andchunter sanguineous no empoisonment Winifield recalescesencases almost prevailingly wryly, thoughafter Greggory Reinhard outlash pillory earliest,his spitefulness quite vixenish. hallmarks. Oaten Army corps agued that common law administered by various meanings to determine if performance, liquidated damages and is possible existence of the petitioner believes that it is generally a necessary Satisfaction of an unliquidated or disputed debt also known only an ac-. Various affirmative defenses including accord and satisfaction. Be the intent of this language to kill an payment and satisfaction of all damages arising from. I eliminate to testimony that 30 in satisfaction of the 100 obligationis at least. What is quick accord? If an obligation to dare A pump be satisfied only by color and random to. Specific performance Liquidated damages Penal damages Rescission. Tent the scaffold of liquidated damages as land is for order to show miss it make be. Plaintiff's claim is barred by an overlook and satisfaction. The final claim and final cost although less likely be impact behavior subject it then often there late. In Accord Definition of trust Accord by Merriam-Webster. And without remainder on grant before September 30 2010 in schedule to liquidated damages. The employees a court-approved settlement is more likely more reflect a. The defendant to the consequences likely to label from default. Under such circumstances an escape and satisfaction may result from easy payment within a lesser sum among the creditor's claim even this sum not in excess water the balance concededly due consequence a liquidated claim among a creditor is rendered unliquidated.
    [Show full text]
  • Important Concepts in Contract
    Munich Personal RePEc Archive Practical concepts in Contract Law Ehsan, zarrokh 14 August 2008 Online at https://mpra.ub.uni-muenchen.de/10077/ MPRA Paper No. 10077, posted 01 Jan 2009 09:21 UTC Practical concepts in Contract Law Author: EHSAN ZARROKH LL.M at university of Tehran E-mail: [email protected] TEL: 00989183395983 URL: http://www.zarrokh2007.20m.com Abstract A contract is a legally binding exchange of promises or agreement between parties that the law will enforce. Contract law is based on the Latin phrase pacta sunt servanda (literally, promises must be kept) [1]. Breach of a contract is recognised by the law and remedies can be provided. Almost everyone makes contracts everyday. Sometimes written contracts are required, e.g., when buying a house [2]. However the vast majority of contracts can be and are made orally, like buying a law text book, or a coffee at a shop. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution). Contractual formation Keywords: contract, important concepts, legal analyse, comparative. The Carbolic Smoke Ball offer, which bankrupted the Co. because it could not fulfill the terms it advertised In common law jurisdictions there are three key elements to the creation of a contract. These are offer and acceptance, consideration and an intention to create legal relations. In civil law systems the concept of consideration is not central. In addition, for some contracts formalities must be complied with under what is sometimes called a statute of frauds.
    [Show full text]
  • Issues Paper 6: Damages for Late Payment Responses
    Insurance Contract Law SUMMARY OF RESPONSES TO ISSUES PAPER 6 Damages for Late Payment and the Insurer’s Duty of Good Faith This document summarises the responses to the Law Commissions’ Issues Paper 6: Damages for Late Payment and the Insurer’s Duty of Good Faith November 2010 THE LAW COMMISSION THE SCOTTISH LAW COMMISSION Joint Review of Insurance Contract Law SUMMARY OF RESPONSES TO ISSUES PAPER 6: Damages for Late Payment and the Insurer’s Duty of Good Faith CONTENTS Page NOTES ii PART 1: INTRODUCTION 1 PART 2: REFORMING THE LAW ON DAMAGES FOR LATE PAYMENT 3 PART 3: ELEMENTS OF OUR PROPOSAL 6 PART 4: QUANTUM OF DAMAGES 10 PART 5: IMPACT 13 i NOTES APPROACH TAKEN IN THIS PAPER Describing responses N.1 This paper describes the responses we have received to the proposals set out in Issues Paper 6: Damages for Late Payment and the Insurer’s Duty of Good Faith. We provide a short description of the current law in Part 1 and our proposals in outline throughout the document, but readers should refer back to the Issues Paper for a fuller explanation. N.2 This document aims to report the arguments raised by consultees. It does not give the views of the Law Commission or the Scottish Law Commission. COMMENTS AND FREEDOM OF INFORMATION N.3 We are not inviting comments at this stage. However, if having read the paper, you do wish to put additional points to the Commissions, we would be pleased to receive them. N.4 Please contact us: By email at [email protected], or By post, addressed to Christina Sparks, Law Commission, Steel House, 11 Tothill Street, London SW1H 9HL N.5 As the Law Commission will be the recipient of any comments, the Freedom of Information Act 2000 will apply and all responses will be treated as public documents.
    [Show full text]
  • Measure of Damages in International Law
    MEASURE OF DAMAGES IN INTERNATIONAL LAW CLYDE EAGLETON Writers have devoted but little attention to the measure of damages in international law; and the paucity of doctrine and precedent has embarrassed recent attempts to codify the law relating to the responsibility of states to such an extent that it is now a question as to whether this subject should be included in the code. Such a statement would be of great value to judges and arbitral tribunals because of the divergencies of theory which underlie the measuring of damages-which, indeed, lie at the foundation of international responsibility. It is contended, how- ever, that, because of contrariety of opinion, and the difficulties of statement, no effort should be made to state rules as to the measure of damages. It is hoped that presentation of some of the problems may be helpful, by leading to discussion which would pave the way for agreement. It would seem to be a universally recognized principle of law that an illegal act arouses an obligation to make reparation. Such is the definition given to responsibility in international law: "A state is responsible, as the term is used in this convention, when it has a duty to make reparation to another state for the injury sustained by the latter state as a consequence of an injury to its national." 1 And the Permanent Court of International Justice in the Chorzow Factory Case said: "As regards the first point, the Court observes that it is a principle of international law, and even a general conception of 1 DRAFT CONVENTION ON THE LAW OF RESPONSIBILITY OF STATES FOR DAMAGE DONE IN THEIR TERRITORY TO THE PERSON OR PROPERTY OF FOREIGN- ERs, RESEARCH IN INTERNATIONAL LAW (1929) 133 (also published, with same pagination, (1929) 23 Am.
    [Show full text]
  • The Case Against Equity in American Contract Law
    Columbia Law School Scholarship Archive Faculty Scholarship Faculty Publications 2020 The Case Against Equity in American Contract Law Jody S. Kraus Columbia Law School, [email protected] Robert E. Scott Columbia Law School, [email protected] Follow this and additional works at: https://scholarship.law.columbia.edu/faculty_scholarship Part of the Contracts Commons, Criminal Law Commons, Criminal Procedure Commons, and the Legal Remedies Commons Recommended Citation Jody S. Kraus & Robert E. Scott, The Case Against Equity in American Contract Law, 93 S. CAL. L. REV. 1323 (2020). Available at: https://scholarship.law.columbia.edu/faculty_scholarship/2537 This Article is brought to you for free and open access by the Faculty Publications at Scholarship Archive. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Scholarship Archive. For more information, please contact [email protected]. THE CASE AGAINST EQUITY IN AMERICAN CONTRACT LAW JODY P. KRAUS* & ROBERT E. SCOTT† The American common law of contracts appears to direct courts to decide contract disputes by considering two opposing points of view: the ex ante perspective of the parties’ intent at the time of formation, and the ex post perspective of justice and fairness to the parties at the time of adjudication. Despite the black letter authority for both perspectives, the ex post perspective cannot withstand scrutiny. Contract doctrines taking the ex post perspective—such as the penalty, just compensation, and forfeiture doctrines—were created by equity in the early common law to police against abuses of the then prevalent penal bond. However, when the industrial revolution pushed courts to accommodate fully executory agreements, and parties abandoned the use of penal bonds, the exclusively ex ante focus of the new contract law that emerged rendered the ex post doctrines obsolete.
    [Show full text]
  • Punitive Damage Awards in International Arbitration: Does the Safety Valve of Public Policy Render Them Unenforceable in Foreign States
    Loyola of Los Angeles Law Review Volume 20 Number 2 Article 6 1-1-1987 Punitive Damage Awards in International Arbitration: Does the Safety Valve of Public Policy Render Them Unenforceable in Foreign States Karen J. Tolson Follow this and additional works at: https://digitalcommons.lmu.edu/llr Part of the Law Commons Recommended Citation Karen J. Tolson, Punitive Damage Awards in International Arbitration: Does the Safety Valve of Public Policy Render Them Unenforceable in Foreign States, 20 Loy. L.A. L. Rev. 455 (1987). Available at: https://digitalcommons.lmu.edu/llr/vol20/iss2/6 This Notes and Comments is brought to you for free and open access by the Law Reviews at Digital Commons @ Loyola Marymount University and Loyola Law School. It has been accepted for inclusion in Loyola of Los Angeles Law Review by an authorized administrator of Digital Commons@Loyola Marymount University and Loyola Law School. For more information, please contact [email protected]. PUNITIVE DAMAGE AWARDS IN INTERNATIONAL ARBITRATION: DOES THE "SAFETY VALVE" OF PUBLIC POLICY RENDER THEM UNENFORCEABLE IN FOREIGN STATES? If a man shall steal an ox, or a sheep, and kill it, or sell it; he shall restorefive oxen for an ox, and four sheep for a sheep.1 I. INTRODUCTION The concepts of arbitration and punitive damages are ancient. In Greek mythology, the giant, Briareus, arbitrated a dispute between Po- seidon (God of the Sea) and Helios (God of the Sun) to fairly divide Corinth.' In the third millenium B.C., when two city-states disputed over borders, the leader
    [Show full text]
  • Fiduciary Remedy and Damages Survey
    ACTEC Fiduciary Litigation Committee Fiduciary Remedy and Damages Survey 50-STATE DAMAGES March 2018 In 2015, the Fiduciary Surcharge and Damages Sub-Committee distributed a twenty-six (26) question survey to ACTEC fellows regarding current case law, statutes and rules within each U.S. State on key issues relevant to financial remedies for trust and probate disputes. Separate topics related to damages and other remedies were presented to outline potential damage issues, followed by citations to language in Restatements, treatises, case law and other sources which may be followed by each State. Please direct any queries or comments regarding this 50-State Survey to Dom Campisi ([email protected]), Evans, Latham & Campisi, One Post Street, Suite 600, San Francisco, CA, 94104, (415) 421-0288. CONTRIBUTORS TO THE SURVEY Tracy Adamovich (Schiff Hardin)—New York Paul J. Barulich (Barulich Dugoni)—North Dakota, Oregon, South Dakota Kevin Bender (McGuire Woods)—Virginia David Benedetto (Vorys, Sater, Seymour and Pease)—Indiana Gerald Carp (Schiff Hardin)—New York T. Jack Challis (Polsinelli Shughart)—Missouri Patricia H. Char (K&L Gates)—Washington 2 William E. Davis (Jackson & Campbell)—District of Columbia Jane Gorham Ditelberg (Northern Trust)—Illinois W. Birch Douglas III (McGuire Woods)—Virginia Bruce K. Dudley (Wyatt, Tarrant & Combs)—Kentucky Danielle P. Ferrucci (Shipman & Goodwin)—Connecticut Lisa Forbes (Vorys, Sater, Seymour and Pease)—New Hampshire Lynn Foster (Univ. of Ark. at Little Rock School of Law)—Arkansas Stanbery Foster, Jr. (Williams, Kastner & Gibbs)—Washington Adam Gaslowitz (Gaslowitz Frankel)—Georgia Philip J. Halley (Husch Blackwell)—Wisconsin Bryon W. Harmon (Shipman & Goodwin)—Connecticut Frank N. Ikard, Jr.
    [Show full text]
  • The Enforceability of Contractual Clauses Excluding Sellers from Liability for Consequential Damages Under Section 2-719 of the Uniform Commercial Code
    Washington University Law Review Volume 58 Issue 2 January 1980 The Enforceability of Contractual Clauses Excluding Sellers from Liability for Consequential Damages Under Section 2-719 of the Uniform Commercial Code Lee Borgatta Washington University School of Law Follow this and additional works at: https://openscholarship.wustl.edu/law_lawreview Part of the Commercial Law Commons Recommended Citation Lee Borgatta, The Enforceability of Contractual Clauses Excluding Sellers from Liability for Consequential Damages Under Section 2-719 of the Uniform Commercial Code, 58 WASH. U. L. Q. 317 (1980). Available at: https://openscholarship.wustl.edu/law_lawreview/vol58/iss2/4 This Note is brought to you for free and open access by the Law School at Washington University Open Scholarship. It has been accepted for inclusion in Washington University Law Review by an authorized administrator of Washington University Open Scholarship. For more information, please contact [email protected]. NOTES THE ENFORCEABILITY OF CONTRACTUAL CLAUSES EXCLUDING SELLERS FROM LIABILITY FOR CONSEQUENTIAL DAMAGES UNDER SECTION 2-719 OF THE UNIFORM COMMERCIAL CODE I. INTRODUCTION A primary purpose and policy underlying the Uniform Commercial Code (UCC) is "to make uniform the law among the various jurisdic- tions."' In interpreting and applying section 2-719,2 however, the courts have reached inconsistent results on the enforceability of con- tractual provisions purporting to hold sellers harmless from liability for consequential damages for commercial losses3 when the buyer's exclu- sive and limited contractual remedy for the seller's breach of warranty 4 "fails of its essential purpose." 1. U.C.C. § 1-102(2)(c). All states, except Louisiana, have adopted article 2 of the UCC.
    [Show full text]
  • Adjudication of Claim for Damages Under Sections 73, 74 and 75 of Indian Contract Act, 1872
    Adjudication of claim for damages under Sections 73, 74 and 75 of Indian Contract Act, 1872 ∗ B. V. R. Sarma Introduction According to Oxford dictionary the term ‘damages’ are defined as ‘financial compensation for loss or injury’. In law, damages are money claimed by, or ordered to be paid to, a person as compensation for loss or injury Black’s Law Dictionary. In context of the Indian Contract Act, 1872 damages are referred in context to breach of contract i.e. a party's failure to perform some contracted-for or agreed- upon act, or his failure to comply with a duty imposed by law which is owed to another or to society. Breach of contract is a legal concept in which a binding agreement or negotiated for exchange is not respected by one or more of the parties to the contract by non-performance or interference with the other party's performance. On a breach of contract by a defendant, a court generally awards the sum that would restore the injured party to the economic position they expected from performance of the promise or promises. When it is either not possible or not desirable to award damages measured in that way, a court may award money / damages designed to restore the injured party to the economic position they occupied at the time the contract was entered, or designed to prevent the breaching party from being unjustly enriched. Parties may contract for liquidated damages to be paid upon a breach of the contract by one of the parties. Under common law, a liquidated damages clause will not be enforced if the purpose of the term is solely to punish a breach.
    [Show full text]
  • Of Indemnity
    Pepperdine Law Review Volume 20 Issue 4 Article 4 5-15-1993 An Ind. Run around the U.C.C.: The Use (or Abuse?) of Indemnity Paul J. Wilkinson Follow this and additional works at: https://digitalcommons.pepperdine.edu/plr Part of the Contracts Commons, Courts Commons, Jurisdiction Commons, Litigation Commons, and the Torts Commons Recommended Citation Paul J. Wilkinson An Ind. Run around the U.C.C.: The Use (or Abuse?) of Indemnity, 20 Pepp. L. Rev. Iss. 4 (1993) Available at: https://digitalcommons.pepperdine.edu/plr/vol20/iss4/4 This Comment is brought to you for free and open access by the Caruso School of Law at Pepperdine Digital Commons. It has been accepted for inclusion in Pepperdine Law Review by an authorized editor of Pepperdine Digital Commons. For more information, please contact [email protected], [email protected], [email protected]. An Ind.' Run Around the U.C.C.: The Use (or Abuse?) of Indemnity I. INTRODUCTION Depending upon one's perspective, a statute of limitations may seem either a harsh roadblock on the highway to justice or a comforting as- surance of limited liability. With respect to a claim for breach of war- ranty, however, the four-year statute of limitations under Uniform Com- mercial Code section 2-725 may, in certain circumstances, be neither.2 Recent cases show a clear conflict in how courts interpret the U.C.C. statute of limitations when a party brings an indemnity claim in a case otherwise governed by the code.' In jurisdictions that have yet to de- 1.
    [Show full text]
  • Note Why There Should Be a Duty to Mitigate Liquidated
    NOTE WHY THERE SHOULD BE A DUTY TO MITIGATE LIQUIDATED DAMAGES CLAUSES I. INTRODUCTION On May 15, 2008, the Massachusetts Supreme Judicial Court held that there is no duty for non-breaching parties to mitigate damages in the face of a liquidated damages clause.1 In 2002, Paul Minihane entered into a ten-year license agreement with NPS, LLC for two Club seats at Gillette Stadium, the home of the New England Patriots football team. 2 This agreement included a liquidated damages provision that allowed NPS, LLC to accelerate the balance of monies owed under the contract in the event of default. 3 Despite attending all but one game in the 2002 season, Minihane paid only two payments under the agreement, and NPS, LLC subsequently brought suit to enforce the acceleration clause. 4 On appeal, the issues were confined to determining whether the liquidated damages clause was valid and the amount of the damages award. 5 Although both parties briefed the issue of mitigation on the assumption that non-breaching parties had such a duty, 6 the Supreme 1. NPS, LLC v. Minihane, 886 N.E.2d 670, 675 (Mass. 2008). 2. Id. at 672. NPS, LLC is the developer of Gillette Stadium. Id. 3. Id. The acceleration clause read as follows: “In the event that Licensee shall not have cured the default or breach . , Owner may terminate the right of Licensee to the use and possession of the Club Seats and all other rights and privileges of Licensee under the Agreement and declare the entire unpaid balance of the License Fee (which for the purposes hereof shall include the total aggregate unpaid balance of the annual License Fees for the remainder of the Term) immediately due and payable, whereupon Owner shall have no further obligation of any kind to Licensee.
    [Show full text]
  • The Myth That Promisees Prefer Supracompensatory Remedies: An
    The Myth that Promisees Prefer SupracompensatoryRemedies: An Analysis of Contracting for Damage Measures Alan Schwartzt Courts will not enforce liquidateddamage clauses when a stipulatedsum exceeds (i) the harmthat the promiseecould reasonablyexpect to suffer from breachor (ii) the actualharm that breach turned out to cause.' Courtstradition- ally have not awardedpunitive damages "for a breachof contractunless the conduct constitutingthe breachis also a tort for which punitive damagesare recoverable."2Courts also will not grant specific performance"if damages would be adequateto protectthe expectationinterest of the injuredparty," nor will courts enforce contractsthat accordpromisees a right to specific relief.3 These threerules sharethe goal of limitinga promisee'srecovery to his lost expectation.The liquidateddamage rule preventsthe promiseefrom contracting for a supracompensatoryremedy, and the punitivedamage rule preventscourts from awardingsuch a remedy.The specific performancerule achievesthe law's goal indirectly.A promiseewho has a rightto specific performancecan compel the promisor to perform even when the promisor'sloss from performance would exceed the promisee'sgain. A promisorcan purchaseher freedom,but sophisticatedpromisees sometimes will demandmore thantheir expectation as the price.Permitting specific performanceonly whendamages could not protect the expectation interest limits the ability of promisees to obtain supracom- pensatorypayments by threateningto seek specific relief. The ban on "specific performanceclauses" prevents a promiseefrom obtaining by contractthe power that the general specific performancerule aims to abolish. t William K. TownsendProfessor of Law, Yale Law School; Professor,Yale School of Organization & Management. Earlier versions of this article were presented at the 1989 Canadian Conference of CommercialLaw Professorsand a Symposiumon ContractTheory at Tel Aviv Law School held in March 1990. Peter Cramtonmade very helpful suggestions.
    [Show full text]