Sales Responsibility & Contracts-Legal Perspective: Exxon
Look at the general sales laws. Then try to find the company’s view on sales specifically towards customers. Then find any dirt that you can as far as sales goes? company is Exxon
This legal perspective of sales responsibility covers many areas of law, both in tort and contract law, with different rules and different remedies at both the state and federal level. The company selling products or services must exercise due diligence in its sales practices to avoid: (1) the tort of misrepresentation; (2) deceptive trade practices and advertising laws at the state level and rules of the Federal Trade Commission; (3) statutory caps and constitutional limits on punitive damages for fraudulent or deceptive trade practices; and (4) unenforceable contracts and compensatory damages for breach of contract. However, the amount of damages and the concept of the defense of “permissible puffing” of a product permeates all of these topics.
Product Liability Based Upon Misrepresentation
Fraudulent Misrepresentation:
When a fraudulent misrepresentation has been made to a user or consumer and that misrepresentation ultimately results in an injury, the basis of liability may be the tort of fraud. In this situation, the misrepresentation must have been made knowingly or with reckless disregard for the facts.
However, “puffing,” or mere exaggeration of qualities, opportunities, or value of an article, does not generally constitute fraudulent intent. Statements in advertising that go beyond “puffing,” however, can be indicative of an intent to defraud when the advertised product fails to do what was claimed. To determine whether a particular representation goes beyond puffery, courts rely on the presence or absence of good faith on the part of the “puffer.” See Brown, 79 F.3d at 1557 (holding puffing is not actionable under mail fraud statute). Puffing or “seller’s talk” concerns expressions of opinion, as opposed to the knowingly false statements of fact which the law proscribes.
The fraudulent representation can take the form of intentional concealment of a product’s defects. In contrast to actions based on negligence and strict liability, in a suit based on fraudulent misrepresentation, the plaintiff does not have to show that the product was defective or that it malfunctioned in any way.
Consider the following example from a court case. Cynthia Smith had a mechanical heart valve implanted in her heart to replace a diseased valve after having been told that she would die without the implant. Subsequently, she learned that the mechanical valve was being recalled because they were “falling apart and malfunctioning without notice resulting in death to the patients.” According to her surgeon, the risk of open-heart surgery to remove the valve was even greater than the risk of malfunction. In her suit against the valve’s manufacturer, the court held that even though Smith could not recover under other theories of product liability, including warranty theory, she had stated a cause of action for fraud. Evidence at the trial showed that the manufacturer was well aware of the risks attending the use of its heart valve and had failed to disclose those risks to Smith. (See Khan v. Shiley, Inc., 217 Cal.
Nonfraudulent Misreprentation:
Nonfraudulent misrepresentation, which occurs when a merchant innocently misrepresents the character or quality of goods, can also provide a basis of liability. In this situation, the plaintiff does not have to prove that the misrepresentation was made knowingly. For example, suppose that a pharmaceutical company innocently indicates to the medical profession that a certain drug that it markets is not physically addictive. The company’s statement is supported by fairly extensive studies of the medication, none of which revealed any evidence of addictive qualities. Based on the company’s information, a physician prescribes the medication to a patient, who develops an addiction that turns out to be fatal. Even though the addiction was a highly uncommon reaction resulting from the victim’s unusual susceptibility to this product, the drug company may still be held liable.
The Misrepresentation Must Be of a Material Fact.
Whether fraudulent or nonfraudulent, the misrepresentation must be of a material fact (a fact concerning the quality, nature, or appropriate use of the product on which a normal buyer may be expected to rely). There must also have been an intent to induce the buyer’s reliance on the misrepresentation. Misrepresentation on a label or advertisement is enough to show an intent to induce the reliance of anyone who may use the product. In addition, the buyer must have relied on the misrepresentation. If the buyer was not aware of the misrepresentation or if it did not influence the transaction, there is no liability.
What is the Measure of Damages?
If nonfraudulent, compensatory damages to make the injured party whole are granted. However, while Colorado has no limit on compensatory damages due to actual economic loss (lost wages, medical expenses, etc.), Colorado limits noneconomic damages (for example, pain and suffering) to $250,000 or $500,000 if there is “clear and convincing evidence” of the noneconomic damages. If the tort involved fraudulent misrepresentation or a reckless disregard of the facts, then Colorado limits exemplary damages (or punitive damages) to the amount of compensatory damages where the conduct involved “fraud, malice, or willful and wanton conduct.” Colorado’s punitive damages cap statute provides a special rule that if the defendant has a pattern for this kind of fraudulent conduct, then the injured party is entitled to punitive damages equal to three times the amount of compensatory damages.
This listing below describes the sixteen states that have adopted some sort of a cap on punitive damages”
CAPS ON PUNITIVE DAMAGES AWARDS
• Colorado—Colo. Rev. Stat. § § 13-21-102(1)(a) and (3) (1987) (as a main rule,

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