What is product liability in contract and in tort?

Product liability and safety 

Product liability and safety includes for instance contractual liability of vendors or suppliers of goods. On the other hand there can be a tortious liability of producers and others. Contractual liability arises if the product is faulty or defective. This constitutes a breach of contract as there are implied terms in the contract which state that the goods must be fit for purpose. The contractual relationship between the parties implies also other implied terms as in accordance with the Statute. Tortious liability may arise if there was damage caused by defective product and if there is no direct contractual relationship between the parties however there has to be an element of negligence.

Liability in contract

This area is primarily governed by the Statute however the common law still has its importance here. Persons who sell products or deal with those products in a way which is different to the one agreed in hire purchase agreement can face contractual liability. If there is a contract for the sale of goods or for hire purchase of goods, such contract contains certain implied terms which must be complied with in order for the contract to be lawfully executed. These implied terms may be for instance satisfactory quality, correspondence with description or fitness for purpose etc. Such terms will not be able to be excluded from the contract. If they were excluded such a provision would be contrary to the Unfair Contractual Terms Act. In order for a person to face contractual liability, there has to be some sort of contractual promise or contractual term which would have to be breached and there must be a clear intention to create these contractual relations. These contractual relations must intend to be binding. Description of the goods must comply with the one stated in the contract. If the description does not comply this could constitute fraudulent or negligent misrepresentation. In this case a person could be eligible for damages. Contractual liability will enable the party to recover compensation for damage which was caused by the use of defective products and it gives the party the option to reject such defective goods. There is a significant disadvantage to contractual liability as only the parties who are the parties to the contract will be able to have a claim under the same. This doctrine is called ‘privity of contract’. If the buyer buys the goods which are defective, he or she can only have a claim under contract of sale against the Seller e.g. retailer. If the retailer is insolvent there are no further claims possible. The Buyer will therefore be left without any remedy. No third parties will be able to claim against the retailer either.

Relation to Rights of Third Parties Act

In some circumstances and depending on the terms of the contract a third party will be able to enforce a contractual term unless specifically excluded by the contract.

If a party to the contract suffers pecuniary loss caused by the defective goods which injured a third party, compensation is recoverable for such loss. If a party can establish that there was negligence which was the cause of the damage, a party may have a claim in tort. Liability in tort is considered below.

Liability in tort

In 1932 there was a significant change in law when the House of Lords heard the case of Donoghue v Stevenson. It was held that the manufacturer can be liable in tort if it can be proven that he was negligent and if personal injury or damage to property was suffered by a consumer of the manufacturer’s product. This precedent establishes the fact that a third party may have a claim against the person in tort even if there is no contractual relationship between them. Some damage must be caused in order to have a claim in tort. However as in accordance with Consumer Protection Act 1987 negligence is no longer a requirement to be proven in relation to death, personal injury, consumer property. It is only necessary to prove that the Defendant produced defective product which caused damage to the Claimant. Similar liability is imposed by European convention on Products Liability in regard to Personal Injury and Death. Consumer Protection Act however does not cover all types of damage or loss which may be caused be defective products. Consumer Protection Act also sets out significant limitations and it does not have retrospective effect.

What are defective products?

Defective products may be considered products which do not meet sufficient safety requirements which a person is entitled to expect. Such defects may be caused by miscarriage in the production process; the products may also have defective design, composition or specifications. The product may also be considered defective if it does not contain sufficient warnings or directions for use. 

Statutes

There is a variety of statutes which protect and prevent any liability from taking place by making it an offence if a person does not follow specific rules and prescriptions in relations to product safety e.g. Health and Safety Act, Consumer Protection Act, Children and Young Persons (Protection from tobacco) Act, Tobacco Advertising and Promotion Act, Fireworks Act

Connection with foreign jurisdiction

If the buyer buys the product which however was manufactured in some other country, foreign jurisdiction may be involved. Or if a person who suffers injury or damage caused by the product bought in the UK resides in some other country.  The rules may not be governed by English law but may be governed differently. In such case it is essential to decide whether the English court has the jurisdiction to hear the case and the next question is what law will be applied in order to resolve the dispute.