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5-20 Law, Business & Government [CH 5

Illustration 5.5 Reducing the Risk of Tort Liability by Designing Safe Products

strict product liability
Legal concept that covers In certain instances, product liability laws have been expanded to include cases in which
injuries caused by products the manufacturer and/or marketer of the product need not be proven negligent. Under this
regardless of whether the legal concept of strict product liability, the business is responsible for any damages that
manufacturer is proven may result regardless of the care they observe to guard against injury. The injured party
negligent.
need only show “(1) that the product was defective, (2) that the defect was the proximate
proximate: close. In this cause of injury, and (3) that the defect caused the product to be unreasonably dangerous.”
instance used as “probable
cause of injury.” Bankruptcy Protection Law

bankruptcy Bankruptcy law is a protective law that allows debtors to legally not pay the financial
Legal nonpayment of obligations that they have incurred. A declared state of bankruptcy can be requested or
financial obligations. initiated by the bankrupt individual or firm, or it can be requested by creditors in an effort to
recoup a portion of what they are owed. By declaring bankruptcy, the individual or business

asks to be declared legally insolvent and unable to pay and therefore are to be released from
financial obligations.
The primary purpose of bankruptcy laws are: (1) to give an honest debtor a "fresh start"
in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner
property: Cash, land, to the extent that the debtor has property available for payment. Additionally, the
equipment, tangible and
intangible, real with declaration of bankruptcy allows debtors to be discharged of most of the financial
improvements. obligations, after their assets are distributed, even if their debts have not been paid in full.
The term bankruptcy is derived from the Latin bancsus ruptus. Bancsus is a bench or
table and ruptus means broken. Bank originally signified a bench that the first bankers had
in the public places such as markets and fairs on which they sold their money, wrote their

bills of exchange and thus conducted their business. When a banker failed, they broke his
bank (table/bench), to advertise to the public that the person who conducted his business
was unable to continue. This was the common practice in Italy and is said that the term
bankrupt was thus derived from the Italian banco rotto (broken bench).
In times past, the bankrupt individual was sent to debtors’ prison. Fortunately, debtor
prisons are gone. Federal legislation passed provides for an orderly handling of
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