Final answer:
A manufacturer may be liable for product liability even if there is consumer misuse or substantial product alteration, provided such actions were foreseeable and inadequately warned against. Generally, manufacturers must be engaged in manufacturing the product to be liable, and modern laws extend liability beyond direct purchasers under privity of contract.
Step-by-step explanation:
Answering the questions regarding manufacturer liability:
- True. A manufacturer may be liable even if the consumer misused the product. Misuse does not always absolve a manufacturer of liability, especially if the misuse was foreseeable and the manufacturer failed to provide adequate warnings or instructions.
- True. A manufacturer may be liable for product liability even if the consumer substantially changed the product. If the change was foreseeable or if the manufacturer did not properly warn against such changes, liability can still be assigned.
- True. A manufacturer must normally be engaged in manufacturing the product to be liable in a product liability claim about that product. Liability generally attaches to parties who are in the chain of distribution of the faulty product.
- False. Under the theory of privity of contract, a manufacturer was historically liable only to a person who purchased the product directly from them. However, modern laws often allow for liability that extends beyond this narrow scope, and consumers need not have direct contractual relationships with the manufacturer to make a claim.
The Counter Example Situation emphasizes the manufacturer's liability when knowing of defects prior to sale, influenced by regulatory oversight, such as that of the Federal Trade Commission (FTC), and considerations such as caveat emptor, highlighting the complexities of product liability law.