With whom does liability sit? If there is more than one entity liable, is liability joint and several?
Generally in cases under the CPA, there is joint liability of the manufacturer (on account of the warranty provided) and the seller (being the wholesaler or retailer), although the warranty with respect to the product is typically provided by the manufacturer alone. In product liability cases that are also contractual breaches, apportionment of liability is ordinarily contractually driven and may be joint or several (or both) depending on the provisions of the contract and the facts and circumstances of the case.
Under Indian law, a decree passed in respect of payment of compensation or damages in a suit for breach of contract or tortious claims may be passed by a civil court only against persons named as defendants in a suit. In case of sale of defective products, consumers generally tend to proceed against both, the manufacturer and the seller, for joint and several liability.
Liability rests with the ‘manufacturer, etc.’ The ‘manufacturer, etc.’ means the following (Article 2 (3) of the PLA):
(i) any person who manufactured, processed, or imported the product in the course of trade;
(ii) any person who provides his/her name, trade name, trademark or other indication ( ‘representation of name, etc.’) on the product as the manufacturer of such product, or any person who provides the representation of name, etc. on the product which misleads the others into believing that he/she is the manufacturer (for example, an outsourcer of original equipment manufacturer products);
(iii) apart from any person mentioned in the preceding item, any person who provides any representation of name, etc. on the product which, in light of the manner concerning the manufacturing, processing, importation or sales of the product, and other circumstances, holds himself/herself out as its substantial manufacturer.
Hence, a party functioning as just a wholesaler or a lender will not correspond to the manufacturer, etc. In addition, because the term ‘product’ as used in the PLA means movable items that are manufactured or processed (Article 2 (1) of the PLA), product liability will not sit with a software provider as long as said software provider does not deliver such software with movable items, such as CD-Rs, etc.
If more than one entity is liable, such liability is joint and several.
Liability depends on the law and the damages claimed. A key distinction may be made between product liability and product safety law. Under the Law on the Preparation and Application of Technical Literature for Products (which governs product safety), the producers, authorized representatives, importers and distributors of a product are responsible for compliance with the regulations specified in that law. Under the same statute, assemblers, installers, users (eg, users of products kept in a workplace) and sellers which may be indirectly called producers are also responsible for the safety of products and their compliance with technical specifications.
By contrast, the Law on Consumers’ Protection defines product liability in a narrow sense, limiting it to the producers, importers and sellers of products, and the providers of services.
The Law on Consumers’ Protection also distinguishes between the producer’s liability and the seller’s liability. For example, refund of a defective product may not be claimed from the producer or importer, but may be claimed from the seller. However, the seller is not responsible for any damage arising from a defective or flawed product; instead, the producer or importer is liable.
(1) Primary liability: Manufacturer and Importer
The manufacturer of the finished product as well as manufacturers of raw materials or parts of the finished product
(iii) Manufacturer by label
Refers to a supplier who, although not the actual manufacturer or importer, indicates to the consumer that it is the manufacturer or importer using the name, trademark, trade name or other identifiable symbol of the supplier on the label attached to the product. This includes (i) not only the case where the supplier intends to label itself as a manufacturer or importer, (ii) but also the case where, regardless of the intent of the supplier, the label is misleading the consumer to believe that the supplier is the manufacturer or importer.
(2) Supplementary liability: Supplier
Where the manufacturer of a product cannot be identified, a person who supplies the product by means of sale, lease, or other form of transaction for profit is liable. Therefore, if an injured person who has not been informed of the manufacturer within a reasonable period of time at the request of a legal representative, claims compensation for damages against a supplier, that supplier is liable for product liability, irrespective of whether or not it is responsible for the failure to notify the injured person of the identity of the manufacturer. In order to avoid such liability, it is important for suppliers to keep information about the manufacturer and its own supplier.
(3) Joint liability
Where two people or more are liable for the same damage, they will be jointly liable for the damages (Product Liability Act, Article 5). Therefore, each responsible entity will bear the liability for the entire damages, regardless of each party’s respective liability ratio. Such jointly liable parties only have right to claim indemnification from the other party or parties, as applicable.
Under the ACL, affected persons have a number of remedies against suppliers and manufacturers if goods do not comply with consumer guarantees.
If an action is brought against a manufacturer, a consumer’s remedy is limited to damages. A consumer may seek to recover damages against the manufacturer of goods where there has been a failure to comply with certain of the consumer guarantees. The scope of those damages is limited, and importantly an affected person is only entitled to recover damages for any loss or damage suffered because of the failure to comply with the guarantee if it was reasonably foreseeable that the person would suffer such loss or damage as a result of such a failure.
A broader range of remedies are available against suppliers. The consumer’s remedy depends on whether there the failure to comply with the consumer guarantee is a “major failure” (or not a major failure but cannot be remedied) or a “non-major” failure.
Under the ACL, manufacturers will be held strictly liable directly to consumers for injury to persons or property damage suffered as a result of a defective product. Goods are considered to be defective if their safety is not such as persons generally are entitled to expect.
The ACL contains deeming provisions that assist claimants in circumstances where it is not clear who actually manufactured the defective product. Further, under the ACL, the definition of “manufacturer” is very broad and can potentially include anyone in the supply chain, particularly when the actual manufacturer is outside Australia.
In relation to the defective/unsafe product cause of action, a claimant is entitled to make a written request to the supplier for information about the manufacturer. If, after 30 days, neither the claimant nor the supplier knows the identity of the manufacturer, the supplier is deemed to be the manufacturer.
Proportionate liability and contribution
Whilst no generally established system of market-share liability exists in Australia, as a result of the Tort Reform Process, most jurisdictions have introduced proportionate liability for co-defendants in respect of non-personal injury claims for economic loss or property damage, or claims for misleading or deceptive conduct brought pursuant to state fair trading legislation. In such cases, each co-defendant will only be liable to the extent of its responsibility.
In personal injury claims, defendants may still rely on a statutory right to seek contribution from any or all other parties that would have been held liable for the same damage had they been a party to the proceedings
Under the strict product liability rules, liability sits with the producer of the defective product.
Producer is defined as a person acting in a professional capacity presenting himself as a producer by affixing his name, trademark or other distinctive sign to the product.
If the producer cannot be identified, the seller, the lessor or any other professional supplier of the defective product will be held liable.
Joint and several labiality is possible in the case of damage(s) caused by a defective product incorporated into another product.
As such, the producer of the component and the producer having incorporated the product are jointly and severally held liable.
According to the Consumer Protection Code, a product liability matter is not necessarily restricted to a single entity. It embraces all the members of the supply chain. If there is more than one company in the supply chain, all of them will be severally and jointly liable for the damages caused by the defective product.
Most product liability disputes involve both the producer and the seller of a product. The Tort Law and Product Quality Law allow an infringed party to bring action against either or both of them. As mentioned under Question 1, the principle of strict liability applies in either scenario, and the liability between the producer and the seller is joint and several.
Although the Tort Liability Law and the Product Quality Law both explicitly provide that a seller is liable only if at fault, the relevant provisions have been interpreted by the court as dealing with only the internal relationship between the producer and the seller, while the seller’s liability to the infringed party is regardless of whether it was at fault. That is, only after the infringed party is fully compensated can a non-faulty seller recover from the producer the compensation it paid to the infringed party.
If multiple producers or sellers collectively contribute to the product defect, then they shall bear joint and several liability for the damage or loss incurred by the infringed party.
In and of itself the concept of ‘contribution proceeding’ does not appear in PRC legislation. However, the Tort Liability Law and the Product Quality Law do provide for mechanisms of similar effects. In the event that the producer or seller assumes strict liability and has compensated the infringer, if the product defect was not the result of their own wrongdoing, the laws allow them to commence an action against the party that is ultimately responsible.
Primary liability lies jointly and severally on:
- the producer (effectively the manufacturer); and/or
- any “own brander” who, by placing its trademark/branding on the product holds itself out as the manufacturer; and/or
- an importer into the EU (note, upon Brexit, this will change to the importer into the UK).
This means the claimant can choose to bring an action against one or more of these entities.
Secondary liability can apply to the supplier/retailer if it does not identify the entities with primary liability within a reasonable period of being asked to do so by the claimant.
Liability sits with everyone who is defined to be the producer under the Product Liability Act. This is the person who has produced the final product, a raw material or a component part or who presents himself as being the producer by putting his name, trademark or other distinguishing feature on the product. A producer is also anyone who imports or takes into the area of application of the Agreement on the European Economic Area a product for sale, hire, leasing or any form of distribution. Also, where the producer of the product cannot be identified, each supplier of the product is deemed to be its producer unless it informs the injured person within a month of his receipt of a demand to this effect of the identity of the producer or of the person who supplied him with the product. If two or more producers are liable for the same damage, they shall be liable jointly and severally towards the injured person. Internally, liability in damages as well as the extent of compensation depend, unless otherwise specified by an internal agreement or by a special law, on the circumstances, in particular to what extent the damage is caused mainly by one or the other party.
The manufacturer and all subsequent links in the chain of distribution (the intermediaries) may incur liability for the defective product.
The Products Liability Act stipulates that a manufacturer must compensate for damages caused by a defect in a product manufactured, imported or supplied by him. The manufacturer is strictly liable if the injured party has established that the product is defective and that the injury was caused by the defect.
Before 2006, the Products Liability Act stipulated strict liability also for intermediaries. In 2006, the European Court of Justice overturned this rule. The Act was amended, and intermediaries are now subject to a presumption of negligence. This means liability with a reversed burden of proof. The intermediary is liable for damage or injury caused by a defective product unless he can prove that his conduct or the conduct of a party for which he is liable does not give rise to liability.
However, an intermediary will be directly liable to the claimant and subsequent intermediaries in the chain of distribution if and to the extent that the damage or injury was caused by defects or negligence on the part of the manufacturer or previous intermediaries in the chain of distribution.
The Product Liability Act stipulates joint and several liability if two or more entities liable for the same damage or injury.
If several manufacturers are liable, the liability will be distributed between them with due regard to defined criteria, such as the cause of the defect and the liability insurance taken out.
The entities liable may raise claims for contribution against each other.
Under Russian legislation on consumers’ rights protection, related claims may be brought against:
- authorised entities (an entity engaged in a certain type of business or established on the territory of the Russian Federation by the manufacturer (seller), including a foreign manufacturer (foreign seller) on a contractual basis to exercise certain functions and authorised to accept and satisfy consumer claims in respect of goods of improper quality); and
It should be mentioned that the grounds for claims as well as the content of the latter may vary depending on which of the aforementioned entities acts as a respondent.
Liability sits with the entrepreneur by whom a product was produced and put into circulation and with the entrepreneur by whom it was imported into and put into circulation in the European Economic Area (importer).
Where the producer or – in the event of imported products – the importer cannot be identified, any entrepreneur who has put the product into circulation can be held liable for damage caused by a defective product, unless he supplies the injured party with the name of the producer or – in the case of imported products – of the importer or the party who has supplied the product within a reasonable period of time.
A product is deemed to be put into circulation as soon as the entrepreneur has transferred it to another person into the latter’s power of disposition or for the latter’s use. Dispatching the product to the customer shall is deemed to be sufficient. If a producer or importer claims not to have put the object into circulation or not to have acted as an entrepreneur, the burden of proof shall rest with him.