A New Look at an Old Conundrum: The Determinative Test for the Hybrid Sales/Service Transaction Under Section 402A of the Restatement (Second) of Torts

Historically, the concept of strict tort liability was confined to two areas: injuries resulting from dangerous activities, and harm inflicted by wild and/or dangerous animals. However, in 1963, the California Supreme Court held in Greenman v. Yuba Power Products that the theory of strict liability in tort also included products. Then, in 1965, The Restatement (Second) of Torts adopted Section 402A and endorsed the theory of Greenman that strict liability was available as a distinct cause of action in litigation involving injuries caused by defective products. Though there was some initial confusion associated with the application of some of the provisions of Section 402A, much of that is now settled. Yet, there are a few questions that still require explanation or refinement, including one issue of particular importance concerning hybrid transactions, transactions which involve furnishing a product while also performing some kind of service. These transactions make it difficult to determine the true essence or thrust of a transaction regarding whether it is a sale or service, and make it difficult to determine the applicability of Section 402A to the transaction. Further complicating this matter is that there are two tests, one from the area of torts, the other from the sphere of contracts, which can each be applied to determine whether strict liability is applicable, and the two tests often produce different results. In order to resolve this issue and select the most appropriate test for determining strict liability, it is necessary to review the history and application of both standards. Armed with the information and insight revealed by such a review, it becomes clear that the “gravamen” test from the sphere of contracts is best suited to determine Section 402A applicability. This test is not only more direct and logical, but it also achieves more equitable results