Warning!

• The lecture introduces you to legal

aspects of engineering practice
but is not intended as legal advice.
 Typical ‘Legal’ Situations

• Preparing a contract to secure the services of a

specialized software company
• Reviewing a contract to determine if a contractor who
built the clean room should be paid
• Managing a design project against potential product
liability suits
• Testing equipment for compliance with FCC regulations
• Implementing an ISO 9000 quality control standard
 Law vs. Ethics
• Both reflect the values of a society, are
interrelated, but are still distinct.

• Example 1: A defective product despite all

due diligent care

• Example 2: Hiring engineers away from a

competing firm
 The Origin of Laws-I
1758 B.C.: Hammurabi’s Building Code
“If a builder has built a house for a man and
has not made his work sound, and the
house which he has built has fallen down,
and so caused the death of the
householder, that builder shall be put to
death.”
(quoted from Martin and Schinzinger, 1989)
 The Origin of Laws-II
A.D. 1852: The U.S. Steamship Code
During 1816-1848, 233 boiler explosions
contributed to a total of 2563 persons
killed and 2097 injured. One explosion
alone, on the Moselle in 1838, claimed
151 lives.

(data from Martin and Schinzinger, 1989)

 Liability

Liability = Obligation to pay damages

How does one incur a liability?

1. Breach of contract
2. Committing a tort, e.g., fraud,
negligence
 Contracts
Contract = offer + acceptance + consideration

Example: If Supersoft and Dilbert enter

into a contract in which Supersoft
promises to pay Dilbert $5000 for
modifying a CAD software package, both
the money and the service are
considerations.
 Contracts: Typical Situations
• Sale or purchase of property and services

• Employment contract (intellectual property

rights)

• Confidentiality agreements
 Breach of contract

 A breach of contract occurs when one

party fails to perform his/her part of the
contract.
 Extreme difficulty/greater cost in
executing the contract does not relieve a
party of the responsibility to deliver as
promised.
 (Legally) injured party can sue for
damages.
 Contracts: A Case Study
ABC electric agreed by fax on Monday to
buy 100 fractional-horsepower motors for
$3000 from XYZ electric. On Wednesday
the purchasing agent from ABC calls and
says he is canceling the order. XYZ says
the motors have already been shipped
and they want their money.
 Tort = Civil Wrong
• Fraud (ex.: Double billing, false certification)

• Professional Negligence:
 Good intentions are not enough.
 Even corporate employees can be sued.

• Product liability
 Negligence: A Case Study
Tom Swift, P. E., was hired by MicroCom Corp. to
recommend the equipment needed to convert a
certain product line (PDA) from metal to plastic
parts without affecting the production rate. After
$10M of new equipment was installed, it was
found that the new production line would operate
at only 70% of the old production rate because
Mr. Swift did not take into account the longer
cycle time for plastic curing in his design.
 Product Liability
• From 1995 to 1996, personal injury
product liability civil lawsuits in federal
courts increased 116%. (quoted from Dieter,
2000)
• Strict Product Liability: A manufacturing or
design defect is sufficient to create a
liability even though no professional
negligence was involved or even when the
injured party acted carelessly.
Design Aspects of Product Liability
Strict adherence to standards
Thorough testing
Quality control measures
Process documentation
Warning labels and instruction manuals
Formal design review before production
Liability insurance
 Laws > Regulations > Standards

• Lawmakers cannot be expected to keep up with

each new technological innovation.
• What is needed are regulatory agencies (such
as FDA and EPA) and commissions, e.g., FCC,
which employ experts to set up precise
regulations (= administrative law).
• Govt. agencies may develop or adopt
(mandatory) standards as parts of their
regulations.
 Laws > Regulations > Standards:
example
The Clean Air Act is the comprehensive
Federal law that regulates air emissions
from various sources. This law authorizes
the U.S. Environmental Protection Agency
to establish National Ambient Air Quality
Standards (NAAQS) to protect public
health and the environment.
 Why a LSE Curriculum?
• Engineers constantly encounter legal issues in their
careers
– Daily encounters with contracts, regulations, employment issues
– Less frequent, but more critical, encounters with depositions and
court proceedings
• “Sending an engineer into the workforce with no legal
training is like sending him or her out without learning
calculus” – OSU CEAT Associate
• Engineers make excellent attorneys and our society
desperately needs more technically astute lawyers.
 LSE Program Goals
• Our goals IS NOT to morph good engineers into bad want-a-be
lawyers
• Incorporate instructional materials that prepare students for the ever
expanding role of legal issues into science and engineering practice;
• Aid the learning of science, technology, engineering and
mathematics by placing those disciplines in the context of the legal
responsibilities imposed by society;
• Address directly the important opportunity and need of educating
future technical professionals on the role of the law in technology
endeavors; and,
• Produce materials that students and practicing professionals find
useful in practice.
Products Liability Law for Technical
Professionals
• Overview of federal and state court systems
• Overview of products liability liability
– Negligence
– Tortuous Misrepresentation
– Warranties
– Strict Liability
• Defects
– Manufacturing Defects
– Design Defects
– Warning Defects
– What Technical Professionals can do to identify defects
• Causation
– Cause in fact
– Proximate cause
• Defenses
 Example Case: Hollister v. Dayton Hudson
Corp. 201 F.3d 731 (6th Cir. 2000)
• Facts
– A woman was severely burned when her shirt ignited upon contact with electric burner
– Experts A opined that fabric was unreasonably flammable (fabric was 100 % rayon,
loosely woven with 1.5 denier threads)
– Expert A tested exemplar fabrics and showed that fabric ignited instantly and shirt
consumed completely within six seconds.
– Expert B offered no opinion to use of different fabric
– Fabric passed Consumer Products Safety commission minimum tests for flammability
• Legal Issue
– Was the shirt unreasonably dangerous, or
– did the shirt fail to carry a warning as to its extreme flammability?
• Legal Rule
– Plaintiff must establish that 1) the product was sold in a defective condition, and 2)
defect caused her injury
• Conclusion
– Product not itself defective
– Prima facie case established that lack of adequate warnings made the product defective
– Case should have gone to jury on defective warning cause of action
 What do Technical Professionals
learn from this exercise?
• How their decisions are scrutinized in our
legal system
• The role they play in
– preventing damages and resulting litigation
– expert opinions in litigation and litigation
support, and
– developing legal doctrine and social policies.
Contract and Tort Law
 Systems of Law
• There are two systems of law that operate in
most countries – Common Law and Civil Law

• Common Law – operates in all Canadian

Provinces and territories other than Quebec and
is based on the British approach to law

• Civil Law – operates in Quebec and is based on

the European continental approach to law
 The Common Law System

• “Judge made” law – legal principles develop

incrementally through successive cases

• In modern society many areas of the law are codified

into statute, rather than just being left to develop purely
through case law, but even the interpretation of those
statutes develops incrementally based on the case law

• Statutes are also used to alter the common law where it

is found not to meet current social norms
 The Civil Law System

• The Quebec Civil Law system is based on

the French legal tradition

• The main source of the law is the Quebec

Civil Code and takes precedence over
interpretations arising out of individual
cases
 Civil Law as a Type of Law

The term “civil law” is also used to

distinguish all areas of the law other than
criminal law
 Areas of Law of Potential
Professional Liability for Computer
Scientists

• Contract Law

• Tort Law
 What is a Contract?
• A contract is an exchange of promises
between two or more parties to do, or
refrain from doing, an act which is
enforceable in a court of law

• A contract is a binding legal agreement

• The law provides remedies for breaches of

contracts
 Elements of a Contract
• Offer and acceptance

• Consideration

• An intention to create legal relations

• Legal capacity

• Legality

• Formalities
 Offer and acceptance
• One party must make an offer and the other
party must accept that exact offer for a contract
to be formed

• The evidence on which contract formation is

assessed is objective (i.e., would a reasonable
person conclude that an offer and matching
acceptance had occurred?)

• Some contracts can be oral and others can not

 Consideration
• The price of the promise – both parties to a contract
must bring something to the bargain

• Can be either conferring an advantage on another party

or incurring some kind of inconvenience or detriment
towards oneself

• A common law requirement

• Consideration must be real, but need not be adequate

• Consideration must not be from the past

 Intention to be Legally Bound
• There is a presumption for commercial
agreements that parties intend to be legally
bound (unless the agreement says otherwise)

• Some types of agreements are unenforceable

as a matter of public policy

• Privity of contract – typically it is only the parties

to a contract who can enforce it
 Legal Capacity

Persons contracting must not be under a

legal disability, such as being minors or
being adults who are mentally incapacitated
 Legality

In order to be enforceable, the purpose of a

contract cannot be illegal or against public
policy
 Formalities and writing
• Most contracts can be formed orally, but some could not

• For example:

 Contracts in consideration of marriage

 Contracts which cannot be performed within one year
 Contracts for the transfer of an interest in land
 Contracts by the executor of a will to pay a debt of the estate with their
own money
 Contracts for the sale of goods above a certain value
 Contracts in which one party becomes a surety (acts as guarantor) for
another party's debt or other obligation

• Various jurisdictions have changed some of these rules

 Elements of a Compensable
Breach of Contract
• Existence of a contract

• Breach of the contract

• Damages to the plaintiff caused by the breach

• Damages resulting from the breach were

foreseeable at the time that the contract was
made
 Defences to Claim of
Breach of Contract
• No contract

• No breach – either no actual breach occurred or a

breach occurred but liability is limited by a disclaimer
clause

• Limitation period has expired

• Breach did not result in damages

• Damages not foreseeable at time contract was made

 Objective of Damages for
Breach of Contract

To restore the plaintiff to the position he or

she would have been in if the contract had
been performed
 Damage Awards for
Breach of Contract
• General damages – compensation for actual losses suffered that flow from
the breach and were in the contemplation of the parties when the contract
was formed

• Consequential damages – compensation for damages that although not

naturally flowing from a breach, were within the contemplation of the parties
when the contract is formed (e.g., economic harm)

• Aggravated damages – awarded for the manner in which the contract was
breached causing additional harm (e.g., contract breach occurs in manner
that causes mental distress)

• Punitive damages – awarded to punish certain types of behaviour (e.g.,

fraud or bad faith)

• Plaintiffs have a duty to mitigate their damages

 Contractual Determination of
Damages
• Liquidated damages are a pre-estimate of loss
agreed in a contract should the contract be
breached

• A penalty clause that seeks to deter breaches by

requiring the payment of a steep penalty in the
event of a breach where the amount of the
penalty does not constitute a genuine pre-
estimate of damages will not be enforced, even
if it is called a liquidated damages clause
Definition and Purpose of Tort Law

• A tort is a civil wrong other than a breach

of contract

• Tort law defines what constitutes a legal

injury and establishes the circumstances
under which one person may be held
responsible (i.e., liable) for another’s injury
 Categories of Torts
• Intentional torts – torts against the person (assault,
battery, false imprisonment, intentional infliction of
mental suffering, malicious prosecution, libel and
slander, and fraud) and property torts (trespass to
property, trespass to chattels and conversion)

• Negligence – covers the full scope of human activity

(e.g., product liability, “slip and fall”, negligent
misrepresentation, professional negligence, etc.)

• Strict liability torts – nuisance

 The Evolution of Tort Law
• Tort law has evolved over time based on case
law

• Additional torts have also been created by

statutes (e.g., occupiers liability, competition
law)

• Perceived failures of the common law to address

the needs of society through tort law have led to
additional statutory reforms (e.g., workers’
compensation and negligence legislation)
Elements of a Negligence Claim
• Duty of care owed by defendant to the plaintiff according
to the proximity (i.e., “neighbour”) principle

• Breach of the duty of care by a failure to meet the

required standard of care, which is that of the reasonable
person in the circumstances

• Causal link between the defendant’s act or omission and

the plaintiff’s loss (i.e., damages)

• Damages were reasonably foreseeable at the time of the

breach
 The Duty and Standard of Care
Owed by Professionals

Professionals have a duty to exercise the

skill, care and diligence that may
reasonably be expected of a person (i.e., a
professional person in a particular
discipline) of ordinary competence,
measured by the professional standards of
the time
Negligence and Economic Harm

• Negligence can involve compensable

harm that is purely economic in nature

• This is often, though not exclusively, the

situation in cases involving negligent
misrepresentation
Defences to Negligence Claims
• No duty of care owed – the duty of care can only arise in
circumstances involving reasonably foreseeable harm
and proximity sufficient to establish a duty of care and
where there are no policy reasons that would negate the
establishment of the duty of care

• No breach of the standard of care

• No damages were caused by a breach of the standard of

care

• Damages were not reasonably foreseeable

• Limitation period has expired

 Elements of Negligent
Misrepresentation
• Duty of care exists based on a special relationship (e.g.,
professional person and lay person who may reasonably rely on the
professional person’s professional expertise)

• Professional person makes representation that is untrue, inaccurate

or misleading

• The representation is made negligently

• Person receiving the representation relies on it in a reasonable

manner

• The reliance is detrimental and damages result

 Defences to Claims for Negligent
Misrepresentation

• No duty of care is owed – (e.g., plaintiff is not a member of the

class of individuals that professional knew would rely on the
misrepresentation)

• Plaintiff’s reliance is not reasonable (e.g., the representation

was part of a discussion and not a formal opinion or the
professional limited liability through a disclaimer clause)

• Professional’s negligent misrepresentation did not cause

damages

• Limitation period has expired

 Objective of Damages for
Commission of Tort

To restore the plaintiff to the position he or

she would have been in if the tort had not
been committed
 Damage Awards for
Commission of Tort
• General damages – compensation for non-monetary loss or harm
suffered as a result of the commission of the tort that was
foreseeable when the tort was committed (e.g., pain and suffering,
mental distress or damage to reputation)

• Special damages – compensation for the quantifiable monetary

losses suffered by the plaintiff that include direct losses (such as
amounts the plaintiff had to spend to try to mitigate problems),
consequential or economic losses (such as lost profits in a
business), and punitive damages, where applicable

• Punitive damages – awarded to punish certain types of behaviour

(e.g., fraud or bad faith)

• Plaintiffs have a duty to mitigate their damages

 Vicarious Liability

• In certain cases, one person can be liable

for the harm cause by another

• One example relevant to professional

liability is an employer’s liability for the
actions or omissions of its employees
Limitation Period – Prior to 2004

• For claims arising before January 1, 2004,

various limitation periods applied
 Limitation Period – After 2003
• Subject to certain exceptions set out in the Limitations
Act, 2002 (Ontario), a proceeding shall not be
commenced after the second anniversary of the day on
which a claim was discovered

• Generally speaking a claim is discovered when the

claimant knew there was damage, or when a reasonable
person ought to have known there was damage

• There is also an absolute limitation period that applies

after the 15th anniversary of the day on which the act or
omission on which the claim is based takes place
 The Role of Insurance
• Professional liability insurance policies are available for
professionals

• Occurrence policies cover incidents that take place

during the policy term, whereas claims made policies
cover claims made during the policy term

• The scope of indemnification by the insurer is described

in the policy and it may or may not include legal fees

• Such policies are subject to specified deductibles and

exclusions
The Role of Insurance (continued)
Some typical exclusions include:

 Errors and omissions outside the insured

party’s area of professional practice

 Taking on an unreasonable risk relative to

the responsibility that the common law
normally imposes on a contract
 The Role of Insurance (continued)
An insured party owes the following duties to its
insurer:

 To complete the insurer’s insurance application

fully and honestly

 To notify the insurer immediately when a claim is

made against the insured party

 To co-operate fully with the insurer in the

investigation and resolution of the claim
THANK YOU!