Liability for Defective Advice from an Expert System

An expert system can be considered to have two major components. First, there is its knowledge base. This is the portion of the system that contains specialized knowledge and expertise about its domain of application.
In commercial law, liability is a form of business ownership in which business owners are legally responsible for no more than the amount that they have contributed to a venture. [1]


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A contract is an agreement between two or more parties to do, not do, or promise something. Contracts can come in many forms — they can be oral or written, implied or express, and legally enforceable or not. [2]
Negligent misstatement relates to a representation of fact, which is carelessly made, and is relied on by another party to their disadvantage.
The harm of Negligent Misstatements
A false statement of fact made honestly but carelessly. A statement of opinion may be treated as a statement of fact if it carries the implication that the person making it has reasonable grounds for his opinion. However, a negligent misstatement is only actionable in tort if there has been breach of a duty to take care in making the statement that has caused damage to the claimant. There is no general duty of care in making statements, particularly in relation to statements on financial matters. Responsibility for negligent misstatements is imposed only if they were made in circumstances that made it reasonable to rely on them (Hedley Byrne v Heller & Partners Ltd [1964] AC 465 (HL); Caparo Industries plc v Dickman [1990] 2 AC 605 (HL)). If a negligent misstatement induces the person to whom it was made to enter into a contract with the maker of the statement, the statement may be actionable as a term of the contract if the parties intended it to be a term or it may give rise to damages or rescission under the Misrepresentation Act 1967. [3]
It has long been recognized that liability in Tort might arise from negligent actions, but liability for negligent misstatements and negligent advice has been less well accepted by the courts. A negligent misstatement might be defined as a representation of fact, carelessly made, which is relied on by the claimant to his disadvantage. Where the misstatement or advice is Fraudulent, this is a different matter; such misstatements may amount to the tort of deceit. In derry v peek 1888, the house of lords held that Dishonesty was an essential element of deceit, and that mere carelessness would never suffice. This judgement was taken, perhaps wrongly, to indicate that there could be no liability in tort for negligent statements; but since this judgement predated the seminal donoghue v stevenson 1932, there was no well-developed law of negligence at the time. Consequently, it is not entirely surprising that this conclusion was reached. [4] Especially where physical damage is involved, courts may disregard a contract in which a customer expressly assumes the risk of the supplier’s negligence. Negligence, when proven, can thus surmount almost any legal obstacle the suppliers erect. As courts and legislatures become less tolerant of negligent corporate behaviour, any business that is judged negligent will likely pay for actual damages, possibly be assessed punitive damages, and may even face regulatory or criminal proceedings. Therefore, the only secure protection is not to be negligent.
Defence of the Liability
Products liability involves the defence of manufacturers and sellers of allegedly defective products. I defend companies who are sued by injured plaintiffs due to alleged defects in the design or manufacture of a product. Generally, the injured parties claim that additional safety features should have been included or that a necessary part was improperly manufactured or installed on a product. [5]
When a products liability claim is filed, we will work with you to prepare an intelligent, vigorous and strategically aggressive defence. We will obtain the information and documentation necessary to effectively evaluate the merits of the claim and promptly analyze the strengths and weaknesses of your adversary’s case and of your own. We will analyze insurance coverage issues and prepare and prosecute, to trial if necessary, insurance claims for any coverage you may have. [6]
Not only can making a claim secure the compensation you deserve and help recover the costs of any treatment, but it can also help draw attention to the negligent manufacturer or retailer. By doing so, you may be able to prevent others from having to endure a similar experience. Where there are several incidents of personal injury related to a particular product, the manufacturer should issue a product recall. [7]
Manufacturers are responsible for products sold to consumers and the safety of their customers is paramount. You should seek advice if a defective product has caused you personal injury as you may be entitled to claim compensation. The Consumer Protection Act 1987 makes manufacturers or importers of products into the EU strictly liable for personal injury caused as a consequence of any product defect. [8]
For a claim based on tort law, the claimant will need to show that the defendant was negligent and in breach of its duty to take reasonable care in relation to the product. The claimant will also need to overcome other assertions by the defendant, for example that the defect in question was unforeseeable. [9]
The harm of defection
There are broadly speaking two approaches which could be adopted to the issue of “defectiveness”. On one view it could be said that a product is defective when it does not live up to the expectations of consumers. On the other hand a product could be said to be defective when the product is in a condition which is unreasonably dangerous to persons or to their property. The 1987 Act appears to be closer to the tort standard than the contract standard. The safety of the product is not such as persons generally are entitled to expect; and for those purposes “safety”, in relation to a product, shall include safety with respects to products comprised in that product and safety in the context of risks of damage to property, as well as in the context of risks of death or personal injury. [10]
Third Parties
Third-party liability insurance protects the insured from legal liability claims presented by third parties. It can be difficult to determine who party to a contract is when it is a three way relationship. For instance, there is a legal contract between International Water Service and Pennine Water. There is also a legal contract between Pennine Water and its customers. The three or more roles in the contract are different from two roles in the contract. In this case, there is no legal contract between International Water Service and the customers of Pennine Water. The case that relate to third parties is The Salvage Association v CAP Financial Services Ltd [1995]. The more important factor that I must pay attention is ‘reasonable care and skill’ in this case. For example, if we will develop this system, we must supply some compilers who have sufficient experience in the skill. If we send some no-sufficient compilers, IWS has the liability when the system is defective. So the supplier, if acting in the course of a business, will carry out the service with: ‘reasonable care and skill’.
There is another important aspect in third parties. It is Privity of Contract. Privity of Contract is a doctrine of contract law that prevents any person from seeking the enforcement of a contract, or suing on its terms, unless they are a party to that contract. Suppose there are a customer, an agent and a manufacturer. There is a subcontract between agent and manufacturer. Moreover, there is a contract between agent and customer. So we can give a definition to privity of contract. Privity refers to a connection or bond between parties to a particular transaction. Privity of contract is the relationship that exists between two or more parties to an agreement. Privity of estate exists between a lessor and a lessee, and privity of possession is the relationship between parties in successive possession of real property.
[1] Legal liability
[2] What is a contract
[3] Negligent misstatement
[4] Negligent misstatement
[5] Practice Insights: Products Liability Law
[6] Products Liability Law
[7] Making a Defective Product Claim
[8] Defective Products Liability Claim
[9] What is product liability?
[10] Insite Law
[11] David Bainbridge ‘Introduction to Information Technology Law’ (2008)
Donoghue v Stevenson
On 26 August 1928, Donoghue cost 30 minutes to Paisley by a tram. At about 8:50 pm, she was in the Wellmeadow Cafe with her friend. Her friend ordered and paid for a pear, ice and an ice-cream drink. The owner uses a tumbler to contain ginger beer and ice cream. Donoghue drank some and her friends lifted the bottle to pour the remainder of the bottle. Then, they found there is a snail which was in a state of decomposition dropped out of the bottle into the tumbler. Donoghue complained soon and her doctor diagnosed her as having gastroenteritis and being in a state of severe shock. On 9 April 1929, Donoghue brought an action against David Stevenson who is the water manufacturer in Paisley. Donoghue claimed 500 pounds as damages for injuries sustained.
Caparo Industries plc v Dickman
A company called Fidelity plc, which is a manufactures of electrical equipments, was the target of a takeover by Caparo Industries plc. Fidelity did not run well. In March 1984 Fidelity had issued a profit warning, which had halved its share price. In June 1984, the annual accounts were done with the help of the accountant Dickman. Caparo found that Fidenlity’s accounts were in an even worse state than had been revealed by the directors or the auditors.
Hedley Byrne & Co Ltd v Heller & Partners Ltd
Hedley Byrne was a firm of advertising agents. Easipower Ltd is a customer who put in a large order. Hedley wanted to check the information, which includes financial position and credit-worthiness. Heller & Partners Ltd replied in a letter that was headed, “without responsibility on the part of this bank”. Easipower said that consider good for its ordinary business engagements.
Derry v peek (1888)
The defendant tram company advertised in its prospectus that it would employ steam power, and intimated that it had the authority of the Board of Trade to do so. In the end, the Board refused consent to steam power, and the company was wound up. The claimant investor brought an action in the tort of deceit, which ultimately failed in the HouseOfLords. While there was no doubt that the defendants’ claim was unfounded, the House held that deceit required actual Dishonesty — Negligence, however culpable was not enough.

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