THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory

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Business Ethics MGT610

LESSON 36

The main objections to the contractual theory maintain that the assumptions on which the

theory is based are unrealistic. Manufacturers do not deal directly with consumers. They do

deal indirectly with them through advertisements, however, and promoters of the theory argue

that advertisements forge the indirect contractual relationship between seller and the buyer.

Another objection to the theory points out that consumer can freely agree to purchase a product

without certain qualities. Manufacturers can be released from normal contractual obligations

simply by disclaiming that the product is safe and reliable. Disclaimers can, in effect, nullify all

of the seller's contractual duties.

Finally, critics of this theory point out that the assumption that buyer and seller meet on equal

ground is false. Buyers and sellers are not equally skilled; the seller is in a much stronger

position than the buyer. Sellers only have to know their own products, while buyers need to

know about every sellers' products for every commodity they purchase.

Another objection to the theory points out those consumers can freely agree to purchase a

product without certain qualities. Manufacturers can be released from normal contractual

obligations simply by disclaiming that the product is safe and reliable. Disclaimers can, in

effect, nullify all of the seller's contractual duties.

Finally, critics of this theory point out that the assumption that buyer and seller meet on equal

ground is false. Buyers and sellers are not equally skilled; the seller is in a much stronger

position than the buyer. Sellers only have to know their own products, while buyers need to

know about every sellers' products for every commodity they purchase.

6.3 The Due Care Theory

The due care theory of the manufacturer's duties to consumers is based on the idea that

consumers and sellers do not meet as equals and the consumer's interests are particularly

vulnerable to being harmed by the manufacturer, who has a knowledge and an expertise that the

consumer lacks. Because manufacturers are in a more advantaged position, they have a duty to

take special care to ensure that the products they offer do not harm the consumers' interests.

The doctrine of caveat emptor is here replaced with a weak version of the doctrine of caveat

vendor. Let the seller take care. Because consumers must rely on the expertise of the

manufacturer, they have a duty not only to deliver a product that lives up to the express and

implied claims they make about it. They have a duty to exercise due care to prevent others from

being injured by the product, even if they explicitly disclaim such responsibility.

Due care must enter into the product's design, choice of materials and construction methods,

quality control, and warnings attached to it. Failure to exercise due care in these areas is a

breach of the manufacturer's moral duties. This theory rests on the principle that agents have a

moral duty not to harm or injure others. The principle can be defended by the ethics of care, of

course, but rule utilitarianism, Kant, and Rawls can all also be used as a solid basis for the

theory.

Business Ethics MGT610

Manufacturers' responsibilities to exercise due care extend to the following three areas:

1. Design - a product's design should not conceal any dangers, should incorporate all

feasible safety devices, and use adequate materials. The design should additionally be

well tested to ensure that consumers will use the product properly.

2. Production - the manufacturing process must be controlled to eliminate any

defective items, identify weaknesses, and ensure that unsafe economizing

measures are not taken.

3. Information - the firm should fix labels, notices, and instructions on the product

warning of all potential dangers involved in using or misusing the item.

Manufacturers must also take into consideration the capacities of the persons who they expect

will use the product. If the possible harmful effects of using a product are serious or if they

cannot be adequately understood without expert opinion, then sale of the product should be

carefully controlled.

There are three difficulties with the due care theory. The basic problem with it is that there is

no way to determine when one has exercised enough due care. Every product involves some

small risk; if all risks were eliminated, few if any products would be affordable. Secondly, the

theory assumes that the manufacturer can indeed discover all the risks attendant upon using a

product before it is actually used and this may not be possible. Finally, the theory is to some,

paternalistic, assuming that the manufacturer alone should make the important decisions about

the level of risk the consumer should bear. Perhaps such decisions should be left up to

consumers, who can decide for themselves whether or not they want to pay for additional safety

measures.

Key Terms

brand loyalty

The result of effective advertising campaigns on

consumers, which gives large corporations control

over a major portion of the market.

caveat emptor

"let the buyer beware."

caveat vendor

"let the seller beware."

commercial advertising

Communication between a seller and potential

buyers that is publicly addressed to a mass

audience and is intended to induce several

members of this audience to buy the seller's

products.

contractual theory (of a The view that the relationship between a business

seller's duties)

and its customers is a contractual one; the moral

duties to the customer are those created by this

contract.

disclaimer

A statement made by a seller explicitly

disclaiming that the product is reliable,

serviceable, or safe.

Business Ethics MGT610

due care theory (of a the theory that, since consumers must depend on

seller's duties)

the greater expertise of the manufacturer, the

manufacturer not only has a duty to deliver a

product that lives up to the express and implied

claims about it, but also has a duty to exercise due

care to prevent others from being injured by the

product--even if the manufacturer explicitly

disclaims such responsibility.

duty not to coerce

The duty of a seller not to take advantage of

gullibility, immaturity, ignorance, or any other

factor that might reduce the buyer's ability to make

a rational choice.

duty not to misrepresent

The duty of a seller not to deliberately deceive the

buyer into thinking something about a product that

the seller knows is false.

duty of disclosure

The duty of a seller to inform the buyer of any

facts about the product that would affect the

decision to purchase it.

duty to comply

According to the contractual theory, the seller has

a duty to carry through on any implied claims he

knowingly makes about the product.

free riders

Individuals who acquire a benefit paid for by

others who desire the same benefit.

implied claim

A claim about the quality or character of a product

that is knowingly, though not explicitly, made by a

seller.

implied warranty

The indirect contractual relationship made

between a company and its customers by its

advertisements.

maintainability

The ease with which a product can be repaired and

kept in operating condition.

market

approach

to Consumer safety is seen as a good that is most

consumer protection

efficiently provided through the mechanism of the

free market whereby sellers must respond to

consumer demands.

physical privacy

Privacy with respect to a person's physical

activities.

production costs / selling With reference to advertising, production costs are

costs

the costs of the resources consumed in producing a

product; selling costs are the additional costs of

resources that do not go into changing the product

but rather are invested in persuading people to buy

it.

product safety

Implied and express claims that refer to the degree

of risk associated with using a product.

psychological privacy

Privacy with respect to a person's inner life.

Business Ethics MGT610

rational utility maximizer A person who has a well-defined and consistent

set of preferences, and who is certain how

personal choices will affect those preferences.

reasonable risk

A risk that is known and judged to be acceptable

by the buyer.

reliability

The probability that a product will function as the

consumer is led to expect.

right to privacy

The right of persons to determine what, to whom,

and how much information about themselves will

be disclosed to other parties.

selling costs

The additional costs of resources that do not go

into changing the product, but are invested instead

in persuading people to buy the product.

service life

The period of time during which a product will

function as effectively as the consumer is led to

expect it to function.

social costs theory (of a The theory that the duties of the manufacturer

seller's duties)

extend far beyond those imposed by contractual

and due care duties; manufacturers should pay the

cost of any injuries sustained through any defects

in their products, even when they exercise due

care and have taken all reasonable precautions.

(Related to the legal doctrine of strict liability.)

strict liability

A legal doctrine that holds that manufacturers

must bear the "external" costs of injuries resulting

from unavoidable defects in the design of an

artifact constitute part of the costs society must

pay for producing and using an artifact.

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