A defect in a products liability suit may be based on the product's design. The Restatement (Third) provides that a design defect occurs "when the foreseeable risks of harm posed by the product could have been reduced or avoided by the adoption of a reasonable alternative design by the seller or other distributor, or a predecessor in the commercial chain of distribution, and the omission of the alternative design renders the product not reasonably safe."

Cases involving design defects generally focus on the manufacturer's decisions in making a product, especially with respect to decisions regarding a product's safety. Unlike manufacturing defect cases, which focus on errors that a manufacturer made while actually making the product, design defect cases focus on the manufacturer's plans in producing the product.

Modern courts employ a cost-benefit analysis in resolving design defect cases, as captured in the Restatement (Third). A plaintiff must identify an alternative design that could have made a product safer in order to prove a case based on a design defect. If a plaintiff can demonstrate that a practicable alternative to the design employed by the manufacturer could have prevented the plaintiff's harm, then the court will determine whether the alternative was cost-efficient.

For example, assume that a metal fan was covered by a guard, but the openings in the guard were three-quarters of an inch wide. In using the fan, the plaintiff's hand slips between the gaps in the guard, and the plaintiff is injured by the blades of the fan. The plaintiff may base a product liability suit on the design of the fan, arguing that if the guard's openings were a half-inch or less, the plaintiff's hand would not have been injured.