Business Law 2
Managers need to have a complete understanding of how law may affect their business. There are several areas in which a manager should be aware of the law. Managers, by no means, need to be lawyers but they should be able to grasp the basic concepts as to how their business may be affected by law. In today’s competitive business market, a company’s dollars need to be spent wisely. Knowing how business law may affect one’s organization can reduce costly court costs, lawyer’s fees and law suits.
One important area of business law that companies and their managers must be aware of is product liability. Product liability may affect an organization in many ways. First, managers and organizations need to know what product liability is. According to Managers and the Legal Environment, Fifth Edition, “product liability is the legal liability manufacturers and sellers have for defective products that cause injury to the purchaser, a user or bystander, or their property”. (Bagley & Savage, 2006, pp. 335). Once this is understood, it is then important to understand how any claims of product liability may be brought against an organization. There are three ways in which this can be done and they are: negligence, breach of warranty, and strict liability in tort.
Negligence is one of the most common forms of claims with product liability. According to Bagley & Savage, negligence occurs when a company or manufacturer does “not use reasonable
Business Law 3
care in designing or manufacturing its product or” does not “provide adequate warning”, which causes harm to the customer. (Bagley & Savage, 2006, pp. 336) Companies need to make sure that they are fully aware as to who can be part of a negligent claim. Manufacturers need to make sure that the product they make contains the appropriate warnings, even if they do not sell their product directly to the public. Manufacturers may be part of the claim even if the manufacturer’s customer is...