Introduction to Contracts, Sales, Product Liability, and Bankruptcy
Contract Law
Consumer Protection Laws
Consumerism reflects the struggle for power between buyers and sellers. Specifically, it is a social movement seeking to increase the rights and powers of buyers vis-à-vis sellers. Sellers' rights and powers include the following:
- To introduce into the marketplace any product, in any size and style, that is not hazardous to personal health or safety, or if it is hazardous, to introduce it with the proper warnings and controls
- To price the product at any level they wish, provided they do not discriminate among similar classes of buyers
- To spend any amount of money they wish to promote the product, so long as the promotion does not constitute unfair competition
- To formulate any message they wish about the product, provided that it is not misleading or dishonest in content or execution
- To introduce any buying incentives they wish
Meanwhile, buyers have the following rights and powers:
- To refuse to buy any product that is offered to them
- To expect products to be safe
- To expect a product to be essentially as the seller represents it
- To receive adequate information about the product
Many laws have been passed to protect consumer rights. Table 2 lists the major consumer protection laws.
| Key Consumer Protection Laws | |
|---|---|
| Mail Fraud Act (1872) | Makes it a federal crime to defraud consumers through use of the mail. |
| Pure Food and Drug Act (1906) | Created the Food and Drug Administration (FDA); protects consumers against the interstate sale of unsafe and adulterated foods and drugs. |
| Food, Drug, and Cosmetic Act (1938) | Expanded the power of the FDA to cover cosmetics and therapeutic devices and to establish standards for food products. |
| Flammable Fabrics Act (1953) | Prohibits sale or manufacture of clothing made of dangerously flammable fabric. |
| Child Protection Act (1966) | Prohibits sale of harmful toys and gives the FDA the right to remove dangerous products from the marketplace. |
| Cigarette Labeling Act (1965) | Requires cigarette manufacturers to put labels warning consumers about health hazards on cigarette packages. |
| Fair Packaging and Labeling Act (1966) | Regulates labeling and packaging of consumer products. |
| Consumer Credit Protection Act (Truth-in-Lending Act) (1968) | Requires lenders to fully disclose to borrowers the loan terms and the costs of borrowing (interest rate, application fees, etc.). |
| Fair Credit Reporting Act (1971) | Requires consumers denied credit on the basis of reports from credit agencies to be given access to their reports and to be allowed to correct inaccurate information. |
| Consumer Product Safety Act (1972) | Created the Consumer Product Safety Commission, an independent federal agency, to establish and enforce consumer product safety standards. |
| Equal Credit Opportunity Act (1975) | Prohibits denial of credit on the basis of gender, marital status, race, religion, age, or national origin. |
| Magnuson-Moss Warranty Act (1975) | Requires that warranties be written in clear language and that terms be fully disclosed. |
| Fair Debt Collection Practice Act (1978) | Makes it illegal to harass or abuse any person, to make false statements, or to use unfair methods when collecting a debt. |
| Alcohol Labeling Legislation (1988) | Provides for warning labels on liquor saying that women shouldn't drink when pregnant and that alcohol impairs our abilities. |
| Nutrition Labeling and Education Act (1990) | Requires truthful and uniform nutritional labeling on every food the FDA regulates. |
| Children's Television Act (1990) | Limits the amount of advertising to be shown during children's television programs to not more than 10.5 minutes per hour on weekends and not more than 12.0 minutes per hour on weekdays. |
| Americans with Disabilities Act (ADA) (1990) | Protects the rights of people with disabilities; makes discrimination against the disabled illegal in public accommodations, transportation, and telecommunications. |
| Brady Law (1998) | Imposes a 5-day waiting period and a background check before a gun purchaser can take possession of the gun. |
| Children's Online Privacy Protection Act (2002) | Regulates the collection of personally identifiable information (name, address, e-mail address, phone number, hobbies, interests, or other information collected through cookies) online from children under age 13. |
| Can-Spam Anti-Spam Law (2004) | Requires marketers to remove customers from their lists when requested, and provide automated opt-out methods as well as complete contact information (address and phone) with alternate means of removal. It also bans common practices such as false headers and e-mail harvesting (the use of software that spies on Web sites to collect e-mail addresses). Subject lines must be truthful and contain a notice that the message is an ad. |
| Credit Card Accountability and Disclosure Act (2009) | Amends the Truth in Lending Act to prescribe open-end credit lending procedures and enhanced disclosures to consumers, limit related fees and charges to consumers, increase related penalties, and establish constraints and protections for issuance of credit cards to minors and students. |
| Dodd Frank Wall Street Reform and Consumer Protection Act (2010) | The act established after the financial crisis of 2008 created a number of new government agencies tasked with overseeing various components of the act and by extension various aspects of the banking system. In May, 2018, Congress and President Trump passed a law to roll back significant pieces of Dodd-Frank. |
Table 2