Product Liability: What Manufacturers, Importers, and Vendors Need to Know

Product liability is an area of law with some unusual features.  In fact, there’s relatively little awareness of product liability and its reach among many manufacturers, importers, and vendors. There’s good reason for that, too: it’s quite complex!  So let’s start with its definition. Product liability essentially refers to the duty existing between the producer or seller of a product, and the purchaser or user of that product.  When you buy an item, you are entitled to use it under the expectation that it will fulfil its purpose effectively and safely.  If you buy something that fails to meet that basic standard of functionality and safety, you might face a risk of harm.

If you are harmed by something that falls below the threshold of functionality and safety, whose fault will it be?  According to the law, blame may rest with several parties.  Most often, product liability rests with the manufacturer.  However, the vendor might also shoulder some of the blame if things go wrong.  There are numerous factors that must be considered before liability may be apportioned appropriately.  A lot of the time, as well, that might be disputed.  As you can see, product liability is a field of law with many sides.  It’s designed to protect consumers, and it can be challenging for business owners to navigate.  So let’s take a look at some of the basics, to help your business reduce its liability exposure in relation to the products it sells.

You are ultimately responsible for your products – liability remains with you after sale

Whether you’re manufacturing, or selling, the law holds you ultimately responsible for your products after they are sold.  However, that doesn’t mean any injury involving your products will leave you liable to legal action.  An important consideration in cases of product liability is user error.  Take cars, for example.  If you manufacture a car that is later involved in an accident, there won’t be an automatic assumption that the car was faulty.  The accident is more likely to have been caused by the driver, or another road user.  However, if it is proven that the car was faulty, you may be liable for the accident as the product manufacturer.

Product liability exists in a chain between manufacturers and buyers

One of the more challenging elements of product liability is apportionment.  We mentioned it earlier, so let’s consider it in more depth.  Many legal disputes involving product liability involve three parties: the producer, the vendor, and the buyer.  If there is an incident involving a product, any of those three parties may be liable.  In some cases, all may be liable.  But how can that work?  Surprisingly, it’s more simple than it seems.

Consider this: each party has their own responsibilities in respect of the product in question.  The manufacturer has a responsibility to produce a product that is not defective or dangerous.  The vendor has a responsibility not to sell a product that is defective or dangerous.  And the buyer has a responsibility not to use a product in a dangerous way.

Fulfilling your duty of care: how to lessen your product liability exposure

Limiting your liability exposure in relation to products you make or sell is relatively straightforward.  At a basic level, it is a matter of fulfilling your duty of care.  Of course, what that involves specifically will depend on the nature of your business.  But there are a few tricks you can employ to improve your product liability position.  Start by asking yourself this: have I done everything I can to ensure that the product I sell is safe for use?  If you can answer yes to that, then you are in a good position.  However, the law adopts a high standard when it comes to product liability.  As a result, legal advice is vital to ensure that your business is implanting the right systems before your products hit the market.

Where do the laws surrounding product liability come from?

To understand the high standards of the law in relation to products, it’s important to know the source.  The historical – and indeed current – source of product liability laws is common law.  Specifically, the field of negligence is the one from which many standards of product liability have emerged.  The notion of ‘duties of care’ is a longstanding pillar of the laws of negligence.  Under that field of law, producers or vendors who don’t meet the requisite standard of care are considered negligent, and accordingly liable for defective or unsafe products.

More recently, though, Australian Consumer Law (ACL) has emerged as a source of product liability regulation.  The ACL provides a system for manufacturers’ liability.  That system is designed to compensate for loss or damage suffered as a consequence of goods with safety defects.  These provisions act a lot like consumer guarantees: they cannot be excluded or modified, which means that no contract can override them.

When you’re selling a product you need to consider your liability exposure – a commercial lawyer can help

All products, no matter how small they may seem, create some degree of liability exposure.  So, no matter what you’re making or selling, product liability is something you must turn your mind to.  However, even with a clear picture of what is generally expected of you, reducing your liability exposure is challenging.  Between common law and statutory standards, there is an abundance of legal principle at play.  If one of your products turns out to be defective or unsafe, there is a chance that your entire production/sales model will be scrutinised – from start to finish.  That’s why legal advice is invaluable.  An experienced commercial lawyer will be able to assess your approach to manufacturing or selling.  That assessment will help you identify aspects of your business that may increase your exposure to liability.  And once identified, that area can be appropriately addressed by you and your lawyer.  So don’t take the risk – contact an experienced business lawyer today.

Disclaimer

The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.

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