The debate between shareholder primacy and stakeholder theory concerns the legal obligations of corporate directors. Introduction A corporation is never just a machine for making money. It is a legal institution, a social system, and a vehicle for allocating power, risk, and responsibility. That is why one of the most important debates in corporate governance continues to divide scholars, executives, regulators, and investors: should corporations exist primarily to maximize shareholder value, or should they balance the interests of all the people and institutions affected by their actions? This debate is commonly framed as shareholder primacy vs. stakeholder theory. Shareholder primacy says the corporation's central obligation is to its owners, the shareholders. Stakeholder theory says the corporation owes duties to a wider circle of affected parties, including employees, customers, suppliers, creditors, communities, and sometimes society at large. This is not a purely academ...
Negligence, Strict Liability & Product Liability
Last Verified: 2026-09-08 | Author: Kateule Sydney | Published by Kat-Syd Resources Hub
Product liability law has evolved from the historic barrier of privity of contract to establish the duty of care owed by manufacturers to consumers
Summary: Playbook 2 examines the law of negligence, strict liability, and product liability under common law. It covers the elements of negligence, duty of care, breach, causation, and damages, as well as defenses like contributory negligence and assumption of risk. The playbook also explores strict liability for abnormally dangerous activities and product liability theories, comparing the Restatement (Second) and (Third) approaches to tort law.
📚 Torts & IP Series:
📘 Playbook 1: Intentional Torts
⚖️ Playbook 2: Negligence & Product Liability
🔒 Playbook 3: IP, Privacy & Internet Law
Chapter 1 — The Elements of Negligence
1.1 Defining Negligence
Negligence is a tort that requires the plaintiff to prove that the defendant failed to exercise reasonable care, resulting in harm. It is the failure to exercise the standard of care that a reasonable person would exercise in similar circumstances, resulting in harm to another.
There are four elements to a negligence claim:
- Duty — The defendant owed a legal duty to the plaintiff.
- Breach — The defendant breached that duty.
- Causation — The defendant's breach caused the plaintiff's injury.
- Damages — The plaintiff suffered actual harm or damages.
Under common law, the plaintiff bears the burden of proving each of these four elements on the balance of probabilities.
Chapter 2 — Duty of Care and Foreseeability
2.1 The Neighbour Principle
The modern law of negligence was established by the landmark case of Donoghue v Stevenson [1932] AC 562. In this case, the House of Lords established the "neighbour principle" and the concept of a duty of care that exists outside of a contract.
Lord Atkin famously stated that a manufacturer owes a duty to the ultimate consumer of their products. This duty arises when products are sold in a form that shows they are intended to reach the consumer without any reasonable possibility of intermediate examination.
2.2 The Scope of the Duty
The duty of care is not limited to the original manufacturer. It extends to wholesalers, distributors, assemblers, retailers, and anyone else handling the product, to the extent that their negligent activities contribute to a fault in the product and a consequent injury.
The duty is owed to any person who is so closely and directly affected by the act that the defendant ought reasonably to have them in contemplation as being so affected. This includes the ultimate user of the product or anyone else sufficiently near to the product to be affected by the fault.
Chapter 3 — Breach of Duty and the Reasonable Person Standard
3.1 The Standard of Care
Breach of duty is determined by the reasonable person standard: whether the defendant failed to act as a reasonable person would in similar circumstances. In product liability cases, the standard of care exacted of manufacturers is the duty to use reasonable care in the circumstances and nothing more.
However, the duty of care can grow more exacting. The duty of care of which the duty to give warning is an aspect grows more exacting with the degree of injury or damage arising from its misuse, and accordingly the reach of foreseeability is extended further as the circumstances may reasonably require.
3.2 High Duty of Care
In some cases, the standard of care may be so high that it approximates to or almost becomes strict liability. For products that are dangerous but beneficial to society, courts may impose a high duty to warn the consumer of the danger.
This is particularly relevant for pharmaceuticals and other products where there is an unavoidable risk that a small percentage of users will sustain serious complications. The high duty to warn reflects the public policy of protecting consumers and spreading the risk of harm.
Chapter 4 — Actual and Proximate Cause
4.1 Establishing Causation
Causation has two components in negligence law:
- Actual Cause (But-For Cause): The harm would not have occurred without the defendant's conduct. In product liability cases, the claimant must prove that the damage would not have occurred but for the alleged defect.
- Proximate Cause (Legal Cause): The harm was a foreseeable consequence of the defendant's conduct.
Causation is often a key issue in product liability claims. Claimants frequently rely on circumstantial evidence and expert evidence to support allegations of defect and causation.
Chapter 5 — Defenses to Negligence
5.1 Contributory Negligence and Assumption of Risk
Defendants in negligence actions can rely on several defenses:
- Contributory Negligence: Historically a complete bar to recovery in some common law jurisdictions, but most now use comparative negligence. In England and Wales, damages are reduced under the Law Reform (Contributory Negligence) Act 1945.
- Comparative Negligence: Damages are reduced in proportion to the plaintiff's fault.
- Assumption of Risk: The plaintiff voluntarily encountered a known danger. This defense is rarely successful in product liability cases involving consumers, as fairness requires the consumer to bear appropriate responsibility for proper product use to prevent careless users from being subsidized by more careful users.
In product liability claims, the burden of proof remains with the claimant. However, the evidential position may develop during proceedings, and where such evidence is sufficiently cogent, a defendant may be required to advance an alternative explanation.
Chapter 6 — Strict Liability and Abnormally Dangerous Activities
6.1 The Rule in Rylands v. Fletcher
Strict liability in tort law originated with the rule in Rylands v. Fletcher (1868). The rule states that a person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril.
Courts in the United States and other common law jurisdictions have applied this rule to activities involving abnormally dangerous substances. In some jurisdictions, such as Scotland, the rule has been described as a heresy which ought to be extirpated, preferring to determine liability for dangerous activities on the basis of fault.
6.2 The Abnormally Dangerous Activity Doctrine
The Restatement of Torts defines an abnormally dangerous activity as one that:
- Is not of common usage, and
- Creates a foreseeable and highly significant risk of physical harm even when reasonable care is exercised by all actors.
A person found to have carried on such an activity will be subject to strict liability for physical harm resulting from that activity. However, the doctrine has not been uniformly adopted across common law jurisdictions. The Law Commission and courts in England have expressed serious misgivings about the adoption of any test for the application of strict liability involving a general concept of especially dangerous or ultra-hazardous activity.
Chapter 7 — Product Liability Theories
7.1 The Three Theories of Liability
Product liability claims may be brought under three main theories:
Negligence — The plaintiff must prove the manufacturer failed to exercise reasonable care in designing, manufacturing, or warning about the product. The four elements of negligence (duty, breach, causation, damages) apply, with the manufacturer held to the standard of a reasonable manufacturer. Donoghue v Stevenson established the duty of care owed to the ultimate consumer.
Warranty — Claims based on express or implied warranties of merchantability and fitness for a particular purpose.
Strict Liability — Liability without proof of negligence. Manufacturers are liable if a product is defective and causes injury, regardless of care taken. The landmark case of Greenman v. Yuba Power Products, Inc. (1963) established strict liability in tort for defective products, eliminating the need for privity of contract. The purpose of strict liability is to insure that the costs of injuries resulting from defective products are borne by the manufacturers that put such products on the market rather than by the injured persons who are powerless to protect themselves.
References:
Manufacturer Liability Doctrines - Law Gratis
Manufacturer Liability Doctrines - Law Gratis
7.2 Historical Evolution
The development of product liability in common law jurisdictions was historically hindered by the requirement of privity of contract. A consumer had no direct claim against a manufacturer if there was no contractual relationship.
This barrier was first overcome by Donoghue v Stevenson [1932] AC 562, which established a duty of care in tort outside of contract. The decision impacted well beyond product liability cases and underpins the whole of the modern law of negligence.
In the United States, strict liability was further developed in Escola v. Coca-Cola Bottling Co. (1944), where Justice Traynor wrote a landmark concurring opinion stating that if public policy demands that a manufacturer be responsible for their products regardless of negligence, there is no reason not to fix that responsibility openly and gradually. This position was later affirmed in Greenman v. Yuba Power Products, Inc. (1963).
Chapter 8 — The Restatement (Second) and (Third) of Torts
8.1 Restatement (Second) of Torts § 402A
The Restatement (Second) of Torts § 402A adopted the "unreasonably dangerous" standard for strict products liability. It provides that a seller is subject to liability for harm caused by a product that is in a defective condition unreasonably dangerous to the user or consumer.
The rule applies even if the seller has exercised all possible care in the preparation and sale of his product and even if the user or consumer has not bought the product from or entered into any contractual relation with the seller. The product must be dangerous to an extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.
8.2 Restatement (Third) of Torts: Product Liability
The Restatement (Third) of Torts: Product Liability modernizes the approach and recognizes the distinction between manufacturing, design, and warning defects. Section 1 provides that one engaged in the business of selling or otherwise distributing products who sells or distributes a defective product is subject to liability for harm to persons or property caused by the defect.
The Third Restatement also emphasizes that fairness requires the consumer to bear appropriate responsibility for proper product use in order to prevent careless users and consumers from being subsidized by more careful users. This represents a shift from the Second Restatement's focus on the consumer's reasonable expectations.
FAQ
What is the "neighbour principle" established in Donoghue v Stevenson?
The neighbour principle is the foundation of the modern law of negligence. In Donoghue v Stevenson [1932] AC 562, Lord Atkin stated that a person owes a duty of care to those who are so closely and directly affected by the act that the defendant ought reasonably to have them in contemplation as being so affected. In the context of product liability, this means a manufacturer owes a duty to the ultimate consumer of their products.
References:
From beer to bones - Law Society of Scotland
From beer to bones - Law Society of Scotland
What is the difference between the Restatement (Second) and (Third) of Torts on product liability?
The Restatement (Second) § 402A focuses on whether a product is "unreasonably dangerous" from the perspective of an ordinary consumer. The Restatement (Third) distinguishes between manufacturing, design, and warning defects and emphasizes that consumers bear appropriate responsibility for proper product use. The Third Restatement also adopts a more balanced approach, recognizing that fairness requires careful users not to be subsidized by careless users.
What is an "abnormally dangerous activity" under common law?
An abnormally dangerous activity is defined by the Restatement of Torts as an activity that (1) is not of common usage, and (2) creates a foreseeable and highly significant risk of physical harm even when reasonable care is exercised by all actors. A person who engages in such an activity is subject to strict liability for any physical harm resulting from it. The doctrine originated from the rule in Rylands v. Fletcher (1868).
References
Buchan v. Ortho Pharmaceutical (Canada) Ltd., 1984 CanLII 1938 (ON SC) - CanLII
The Restatement Approach to Products Liability - Open Casebooks
Manufacturer Liability Doctrines - Law Gratis
Abnormally Dangerous Activity - Cornell University Legal Information Institute
Product Liability & Safety 2026 - Chambers and Partners
The Restatement (Third) and Product Liability - The Florida Bar
Commercial Law: Negligence and Product Liability - Cambridge University Press
Strict Liability and Abnormally Dangerous Activities - UN International Law Commission
From beer to bones: Product Liability - Law Society of Scotland