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Is Their Strict Liability in Maryland for Defective Products Which are Leased?

In Maryland, liability of a lessor may NOT be imposed in a tort action via the doctrine of strict liability. Bona v. Graefe, 264 Md. 69, 285 A.2d 607 (1972). Restatement (Second) § 402A, quite simply, is not applicable to lessors.

Section 402A states:

(1) One who sells any product in a defective condition unreasonably dangerous to the
user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial
change in the condition in which it is sold.

(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his
product, and (b) the user or consumer has not bought the product from or entered into any
contractual relation with the seller.

In Maryland, liability of a bailor/lessor for hire of a chattel may be imposed in a tort action for negligence. In a negligence case, the plaintiff must prove not merely that the lessor failed to make proper inspections, but either that the lessor knew of a defect or that a reasonable inspection, if made, would have disclosed the defect. Bona v. Graefe, 264 Md. 69, 285 A.2d 607 (1972). Maryland Civil Pattern Jury Instruction 26:4 states that the lessor of a product “must use reasonable care to make it safe for its reasonably foreseeable usage, and this duty includes the giving of adequate warning of dangers which are not obvious to the user but are known, or through reasonable care should be known to the lessor.” Arguably, a lessor, at times may occupy a similar role/position to a retailer or non-manufacturing supplier. Maryland courts have held that where a seller or other non-manufacturing supplier is nothing more than a conduit between the manufacturer and a customer, the retailer ordinarily has no duty in a negligence to discovery the defects or dangers of a particular product. Eagle Picher Ind. v. Balbos, 326 Md. 179, 604 A.2d 445 (1992). The non-manufacturing supplier, however, may do something more than merely act as a conduit of goods, such as installation, and those additional acts may impose a higher standard of care upon the supplier; i.e., inspect or test the product. Id. (although the issues regarding improper installation were not made).

Beginning in 1995, liability of a bailor/lessor of a chattel may also be imposed in a tort action for breach of express or implied warranty. Maryland Code Annotated, Commercial Law Article, §§ 2A-210, 2A-212, and 2A-213 govern the extension of express and implied warranties to the leasing of goods. The official comment to Section 2A-210 notes that “all of the express and implied warranties of the Title on Sales (Title 2) are included in this Title (2A), revised to reflect the differences between a sale of goods and a lease of goods.”

Section 2A-210: Express Warranties
(1) Express warranties by the lessor are created as follows:

(a) Any affirmation of fact or promise made by the lessor to the lessee which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods will conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods will conform to the description.
(c) Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods will conform to the sample or model.

(2) It is not necessary to the creation of an express warranty that the lessor use formal words such as “warrant” or “guarantee”, or that the lessor have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the lessor’s opinion or commendation of the goods does not create a warranty.

(effective 1/95).

Section 2A-212: Implied Warranty of Merchantability
(1) Except in a finance lease, a warranty that the goods will be merchantable is implied in a lease contract if the lessor is a merchant with respect to goods of that kind.
(2) Goods to be merchantable must be at least such as:
(a) pass without objection in the trade under the description in the lease agreement;
(b) In the case of fungible goods, are of fair average quality within the description;
(c) Are fit for the ordinary purpose for which goods of that type are used;
(d) Run, within the variation permitted by the lease agreement, of even kind, quality, and quantity within each unit and among all units involved;
(e) Are adequately contained, packaged, and labeled as the lease agreement may require; and
(f) Conform to any promises or affirmations of fact made on the container or label.
(3) Other implied warranties may arise from course of dealing or usage of trade.

(effective 1/95).
Section 2A-213: Implied Warranty of Fitness for Particular Purpose
Except in a finance lease, if the lessor at the time the lease contract is made has reason to know of any particular purpose for which the goods are required and that the lessee is relying on the lessor’s skill or judgment to select or furnish suitable goods, there is in the lease contract an implied warranty that the goods will be fit for that purpose.

(effective 1/95).

Damages:

Importantly, in a breach of warranty case involving a lease, Section 2A-520 dictates that a party may recover both incidental and consequential damages resulting from the lessor’s default. Consequential damages include “any loss resulting from general or particular requirements and needs of which the lessor at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise”; and “injury to person or property proximately resulting from any breach of warranty.” (emphasis added).

For more information on the law of product liability in Maryland, please contact Jamison White at Silverman, Thompson, Slutkin & White.