CONCEPT REVIEW:

There are several types of defenses available in product liability suits, including disclaimers, and both traditional and comparative principles. Damages in product liability suits come in three main varieties: basis-of-the-bargain, consequential, and punitive. Different types of product liability suits activate varying defenses and damages.

Comprehension Case

Suppose that Shackelford Space Systems (SSS), a low-cost provider of launch capabilities for getting payloads into orbit, signs a contract with Teleworld, a supplier of telecommunications satellites used by media outlets around the world. During the launch, a malfunction occurs and one of the rocket motors disconnects early and damages a nearby residence, causing harm to the occupants and forcing the Father, Jim, to miss work for three weeks. Because of the malfunction, the satellite does not achieve the proper orbit and as a result loses much of its functionality. Under the contract between SSS and Teleworld, SSS inserted language attempting to disclaim the warranties of merchantability and fitness for a particular purpose.

1) Suppose that Jim, the Father of the household hit by the SSS rocket engine, sues SSS. SSS asserts a no-privity in tort cases defense. How will the court likely hold?

2) Suppose that Teleworld sues SSS over the botched launch and resulting misplacement of their satellite in orbit. Specifically, Teleworld asserts breaches of SSS's warranties of merchantability and fitness for a particular purpose. SSS argues that these warranties were disclaimed. What two strategies will Teleworld use, and which side has the better argument? [Assume that the disclaimer did not use the word "merchantability," but did make both disclaimers conspicuous, and that both Teleworld and SSS are large firms of 500 or more employees.]