A Global Perspective on Product Liability

A Global Perspective on Product Liability

Author: Sharyu Rumde, School of Law, University of Mumbai.

Abstract

Product Liability is an emerging law which deals with protecting the rights of consumers. Many times, manufacturers or suppliers sell a defective product which ends up harming a consumer, this field of law makes sure that such harm caused doesn’t go unnoticed and a consumer is compensated for the loss caused to him. Under this law, the sellers are held liable for providing such faulty products/services. This article focuses on the global perspective of product liability by studying the laws enacted by different countries and their applicability to the affected parties.

We often hear the term ‘Consumer is King.’ While it is true that the products available in the market are as per the preference of consumers, but how often is a consumer treated like a king? At times, the products provided to a consumer are of subpar quality, some products have even ended up harming the consumer, but how often are the companies held liable for it? When a person is paying for a commodity, he deserves to get his money’s worth for it, but has that always been the case? The answer to all these questions can be derived in negative as time and again defective products have ended up causing grievous hurt to the consumers. For many years, consumers had no remedy to protect their interests, these sellers used to get away with their faulty services with ease. It was only after industrialization that the need for a law was recognized, a law which protected the consumers from such malicious sellers, a law which safeguarded their interests.

Product liability is the area of law which deals with such cases. A number of people work behind the supply chain, be it manufacturers, distributors, wholesalers, suppliers, retailers or others, under this law, anyone who is found responsible for providing the defective product will be held liable for it. The law simply states that a product should meet the desired expectations, if failed to do so, the customers will have the right to seek compensation.

This area of law has now been spread all over the globe. Many countries have recognized the need for formulating stricter policies. Though the momentum was started by the western countries, the urgency of the matter in today’s time has made everyone aware as to how important a product liability law is. The law may differ from country to country but the objective remains the same. The rights of consumers are being now addressed, not just in a particular country or continent but all over the globe.

LEGISLATION

Product Liability has become an important legal issue in the recent years. In this era of globalization and digitalization, people have become more aware about their rights as one can easily access information related to a product or its supplier. The governments are also implementing measures to minimize frauds caused by these sellers. Many countries have already developed laws related to product liability and it can be estimated that other countries will soon take the initiative as the awareness is spreading.

To better understand this concept, we can take a look at some countries who have adopted this law.

United States of America

The United States is considered by many as the pioneer of legislating Product Liability. The doctrine of strict product liability was first discussed and enacted in this country. In the past, plaintiff had the burden to prove negligence of the defendant, but as the years evolved and the petitions for injuries caused by defective products started coming out, the legislature felt the need to enact a stricter law.

In the year 1963, the landmark judgment of Greenman v. Yuba Power Products, Inc.[1] paved the way for the provision of product liability. The Supreme Court of California introduced the doctrine of strict liability in tort for defective products. The judgment stated that the plaintiff wasn’t responsible to prove anything, rather the whole burden of proof should be shifted on the defendant to show their innocence. While holding the manufacturer liable, the Hon’ble Court stated that, “A manufacturer is strictly liable in tort when an article he places on the market, knowing that it is to be used without inspection for defects, proves to have a defect that causes injury to a human being.” The judgment also made clear thatproductliability would no longer be governed by the law of contract, but by the law of torts.  

Later in the year 1964, the Supreme Court of California went on to extend strict liability to all parties involved in the process of manufacturing, distribution, and sale of defective products (including retailers)[2] and in the year 1969 it was made clear that these sellers were liable not only to the direct customers, but also to any innocent bystanders randomly injured by defective products.[3]

The historic judgment also ensured the introduction of a new amendment in the Restatements of Law as two years after the judgment, the American Law Institute introduced Section 402A for dealing with cases related to Product Liability.

S 402A. SPECIAL LIABILITY OF SELLER OF PRODUCT FOR PHYSICAL HARM TO USER OR CONSUMER

(1) One who sells any product in a defective condition unreasonably dangerous to the user or consumer or to his property is subject to liability for physical harm thereby caused to the ultimate user or consumer, or to his property, if

(a) The seller is engaged in the business of selling such a product, and

(b) It is expected to and does reach the user or consumer without substantial change in the condition in which it is sold.

(2) The rule stated in Subsection (1) applies although

(a) The seller has exercised all possible care in the preparation and sale of his product, and

(b) The user or consumer has not bought the product from or entered into any contractual relation with the seller.

Caveat:

The Institute expresses no opinion as to whether the rules stated in this Section may not apply

(1) To harm to persons other than users or consumers;

(2) To the seller of a product expected to be processed or otherwise substantially changed before it reaches the user or consumer; or

(3) To the seller of a component part of a product to be assembled.

The judiciary of the United States now uses this Section to handle the claims related to product liability. However, the efficiency of this section has been questioned by many. The need for a law was evident as the sellers were able to get away with their malpractices but the lack of defences available to the defendant is concerning. Under the provisions of this section, a mere claim of a buyer can initiate a legal action. Though the provision is meant to give easy access to an injured person, there is no certainty as to how many people can misuse it. The seller can be sued even if there has been no negligence on his part. On the other hand, there are no provisions related to product design. If the design of a product is the reason for its defect, the manufacturer is no position to do anything about it. In that case, if the order is favoured against the manufacturer, he will have to suffer for no fault of his own. Though the doctrine of strict product liability has ended up benefitting many consumers, the loopholes need to be addressed. The doctrine’s objective is being achieved as many consumers have now received compensation for the harm caused to them. But at the same time an innocent defendant should not be liable to pay compensation for the loopholes in law.

Europe

As the United States of America set an example by introducing Section 402A for cases relating to product liability, the issue was highlighted at a global level. In the year 1985, the European Union’s member nations collectively signed a Product Liability Directive.

The Directive clearly mentions that the producer shall be held liable for any damage caused due to a defect[4], it further defines the term producer in order to ensure a smooth legal process. Furthermore, the directive requires the consumer to prove the defect.[5] This is a welcoming change as compared to the US law as a definite proof before the commencement of a legal procedure will avoid any unnecessary hassles.

The Directive also describes a defective product for better understanding of the term and further provides a set of defences to be availed by the manufacturer/seller in case of legal action. 

Defective Product:

1. A product is defective when it does not provide the safety which a person is entitled to expect, taking all circumstances into account, including:

(a) the presentation of the product;

(b) the use to which it could reasonably be expected that the product would be put;

(c) the time when the product was put into circulation.

2. A product shall not be considered defective for the sole reason that a better product is subsequently put into circulation.[6]

Defences:

The producer shall not be liable as a result of this Directive if he proves:

(a) that he did not put the product into circulation; or

(b) that, having regard to the circumstances, it is probable that the defect which caused the damage did not exist at the time when the product was put into circulation by him or that this defect came into being afterwards; or

(c) that the product was neither manufactured by him for sale or any form of distribution for economic purpose nor manufactured or distributed by him in the course of his business; or

(d) that the defect is due to compliance of the product with mandatory regulations issued by the public authorities; or

(e) that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of the defect to be discovered; or

(f) in the case of a manufacturer of a component, that the defect is attributable to the design of the product in which the component has been fitted or to the instructions given by the manufacturer of the product.[7]

As compared to the law of the United States, the European Directive is more detailed. The Directive provides various definitions to better understand the concept and has even provided certain defences which can be availed by the defendant. The inclusion of remedy for both the parties is praiseworthy as unnecessary advantage of a situation can be avoided. Despite this, the Directive seems to be lacking in certain fields.

Though the Directive has been implemented years ago, its impact is yet to be seen. The claims are very few, at the same time not many products fall under the purview of the Directive which makes it unreasonable to file a suit as per its provisions. At times, a country’s own existing law has been proven a better alternative than the Directive as it has turned out to be more favourable to the consumers.[8]

Thus, in spite of being a detailed statute, its lack of use is not helping its purpose. This Directive of the European Union is a promising prospect in the area of Product Liability but its lack of use is concerning. The member nations have to understand that the gaps need to be filled. The areas where it is lacking have to be amended for its better use.

China

The Republic of China soon followed the lead of these western countries and introduced their own Product Quality Control Law. The law became effective on September 1993. The objective was to strengthen the supervision and control over product quality, to define the liability for product quality, to protect the legitimate rights and interests of consumers and to safeguard the socio-economic order.[9]

Under the Chinese law, producers are required to manufacture products that conform to the national and trade standards, they are not allowed to possess any dangerous property, the products should show the specifications, grade, ingredients, etc. along with the production date and date of expiry, with warnings in case the product is harmful to anyone.[10]

However, the law has also provided a set of defences for the producers which can be availed in a court of law. They are as follows:

  • The product has not been put in circulation;
  • The defect causing the damage did not exist at the time when the product was put in circulation;
  • The science and technology at the time the product was put in circulation was at a level incapable of detecting the defect.[11]

On the other hand, if the seller is not able to prove his innocence the law provides an exclusive clause of damages where the injured person shall be compensated for the medical expenses, the loss of earnings as well as the subsistence allowance in case the person becomes disabled. In case of death, the infringer has to pay the funeral expenses, the pension for the family of the deceased and the living expenses necessary for any other person(s) supported by the deceased before his death. Where damage is caused to the property, the infringer shall restore the damaged property to its original state, or pay compensation at the market price. Where serious losses are suffered, the infringer has to compensate for such losses.[12] The limitation period to pay the compensation is up to 2 years.[13]

The Chinese law has dealt with the provision of damages in a really effective manner as the clause is exclusive of compensation paid not just to the injured person but to his family as well. The strict provisions will help ensure better implementation of the law. Though the western countries have enacted the provision of product liability, the procedure laid down by China is more detail oriented and effective. The producers can’t get away with any defective product but at the same time the defences available has provided them a chance to prove their innocence and present their side.

India

In the newly enacted Consumer Protection Act, 2019, the Ministry of Consumer Affairs, Food and Public Distribution has added the feature of Product Liability. Earlier, there was no specific provision for product liability in the Indian law. The cases relating to it were governed under the Consumer Protection Act, 1986, the Sales of Goods Act, 1930, the Indian Penal Code, 1860 and certain other statutes. But this is the first time that a statute will specifically deal with cases relating to Product Liability.

The Act defines product liability as “the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by deficiency in services relating thereto”[14]

Under the Act, legal action can be taken against a product manufacturer, product service provider or a product seller. A manufacturer would be held liable if the product contains a manufacturing or design defect or in case the product is not specific to the instructions. Similarly, a seller will be held accountable if he alters the product, he is unable to prove the identity of the manufacturer or if he fails to exercise reasonable care, etc. As regards to the service provider, he will be liable in case of negligence or when he fails to adhere to the adequate instructions.

However, the Act has also provided certain defences, in case these conditions are proved, the defendant will not be held liable. If the product is misused or modified, if the injured person does not pay attention to the appropriate warnings provided to him, if the product is to be used under supervision and has been failed to do so, then the liability will not arise as the injury will be deemed to be caused by the user’s own negligence.[15]

The Indian Law is fairly new but the procedures laid down are certainly commendable. The Act has categorized various provisions while providing different remedies for it. Both the buyer and the seller will get an opportunity to present their case which shows a fair balance for both the sides. In theory, the Act has many distinct provisions which will prove beneficial in the near future but how it will be applied practically is yet to be seen.

Other Nations

Though the European Directive Model has not been of much use in its own continent, it has inspired many other nations. The countries of Israel, Brazil, Peru, Australia, Russia, Taiwan, Japan, etc. have referred the Directive and implemented certain provisions from it. Overall, globally, Product Liability is evolving with each passing year, many nations are taking this issue seriously and the governments are working to safeguard the interests of their citizens.

CONCLUSION

Product Liability was introduced with the intention of protecting the rights of consumers. The intent has been achieved over the years, as with each passing year a new country comes up with their own set of laws. From a time when an injured person had no remedies available to him to a time where he can easily access a court of law to fight for his right, we have come a long way.

The global reach of this law has benefitted more and more injured consumers. The law is far from being flawless but the defects in the legislation can be fixed as many suggestions are being provided by the experts. However, looking at the bigger picture, the output of Product Liability is worth appreciating. As the purpose of any law is to serve justice, product liability has helped achieved this purpose to a much wider extent.

Though the law has been efficient in many cases, one can’t claim that the objective is being fully achieved. There are still cases of consumers being fooled or sellers escaping his liabilities. At times, many consumers are not even aware of their rights and this spectrum is rarely discussed, so to claim that product liability has brought out maximum efficiency would be an overstatement. But credit should be given where it is due, though this area of law has a long way to go, the awareness on a global level, the rights recognized by the governments and the directives and enactments introduced in many countries are major steps towards protecting consumer rights. The steps which can help stop such fraudulent practices and create a safe buying environment for the consumers.


[1]Greenman v. Yuba Power Products, Inc. – 59 Cal.2d 57; 377 P.2d 897

[2]Vandermark v. Ford Motor Co. (1964) 61 C2d 256

[3]Elmore v. American Motors Corp., 70 Cal. 2d 578 (1969)

[4]Article 1 of the Product Liability Directive

[5]Article 4 of the Product Liability Directive

[6]Article 6 of the Product Liability Directive

[7]Article 7 of the Product Liability Directive

[8]International Product Liability Laws, Find Law, https://corporate.findlaw.com/litigation-disputes/international-product-liability-laws.html

[9]Article 1 of the Product Quality Law of The People’s Republic of China

[10]Article 15 of the Product Quality Law of The People’s Republic of China

[11]Article 29A of the Product Quality Law of The People’s Republic of China

[12]Article 32 of the Product Quality Law of The People’s Republic of China

[13]Article 33 of the Product Quality Law of The People’s Republic of China

[14]Section 2(35) of the Consumer Protection Act, 2019

[15]Product Liability under the Consumer Protection Act, 2019: Let the manufacturer/seller beware!, Bar and Bench, https://www.barandbench.com/columns/product-liability-under-the-consumer-protection-act-2019-let-the-manufacturer-seller-beware

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: