Product Liability

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See also Unconscionability

 

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Legislation to impose a duty of care on manufacturers.

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Whereas common law and occupational health and safety legislation addresses product-related injury in the workplace, Part VA of the Trade Practices Act 1974 covers injury related to the use of the product by the consumer. The Act primarily addresses defective (unsafe) products that are not as safe as persons in the community are generally entitled to expect and.deficiencies in supporting information.

The Act supplements existing laws for negligence for defective consumer products under;
bulletCommon law
bulletbreach of contract; and
bulletof negligence
bullet Product liability under state and federal sale of goods statutes Part VA applies to all consumer products that have come onto the market since 9 July 1992 including raw materials and finished goods that are personal, domestic or for household purposes.

The legislation is directed at goods which are not as safe as the community (more important than the claimant) is entitled to expect.

 

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Defects Recognised

Three types of defects are recognised;
bullet Manufacturing defects that are inadvertent and unplanned (as a result of production, transport or storage). These are normally one-off in a product or production-run.
bullet Design or formulation defects that occur at the beginning of design or formulation. These are repeated defects and inherent in the product.
bullet Informational defects from information conveyed or not conveyed (ie. information that should have been conveyed, whether deliberate or inadvertently). Labelling, literature, guarantees, advertising and promotion and information media. Included is a failure to identify a risk whether known or should have been known.

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Objective of Legislation

The legislation is aimed at;
bulletManufacturers;
bulletImporters, where the manufacture is overseas;
bulletPersons, who apply their own names or marks;
bulletManufacturers of components of the finished goods; and
bulletProducers of raw materials.
In other words distributors, own-branders, service providers and repairers may be defendants under product liability laws.

Directors and officers of corporations may become personally liable under certain circumstances.

The legislation does not affect rights to sue foreign parties.

 

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Claimants

Claimants may be product purchasers, consumers, bystanders, workplace employees, consumer groups etc., if suffered;
bulletPersonal injury,
bulletLoss through injury to another person, or
bulletDamage to;
bulletother goods that are for personal, domestic or household use, or
bulletland, buildings or fixtures that are ordinarily acquired for personal use.

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Claims

Claimants must prove;
bulletProduct was defective or unsafe, and
bulletLoss or damage was caused by the defect.
The legislation recognises all relevant circumstances. These include;
bulletManner of marketing;
bulletThe presentation, including markings;
bulletWarnings and instructions on harmful products;
Failure to warn at time of supply of known and discoverable risks (including known or should have been known including for regulations and foreseeable misuse of the product);
bulletReasonably expected uses, including misuses; and
bulletThe times at which the goods were supplied.
The manufacturer may be liable to claims for injury as a result of contamination or tampering of their package by another party if the packaging is susceptible to contamination or tampering.

Raw material suppliers may be held liable indirectly if the finished product has contributed to injury that is linked to the raw material (or component).

Since March 1992, class action may be used when there are more than seven persons with common claims.

Part VA provides for joint and several liability (ie. two or more parties may be held collectively and individually liable).

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Damages

Damage may be for;
bulletPersonal injury;
bulletDamage to real property; and, under certain circumstances
bulletEconomic loss.

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Supplier's Defence

Some defences to claims include;
bulletA statute of repose that places a limit of ten years after supply for which a claim must be commenced;
bulletA limit of three years from the date of becoming aware of the defect or injury;
bulletThe product was delivered at a state of art knowledge about the ability to detect the defect or the injury (ie. not able to detect the defect). Therefore one must be able to claim the product was tested to detect all defects according to current state of knowledge of technology and awareness of all risks of injury.
bulletThe defect arose after supply (and not reasonably anticipated etc);
bulletDefective due to compliance with legislation;
bulletAs components of goods are included, a defence claim could include that the;
bulletdefect is attributable to the design of the finished goods; or
bullet- relates to the markings instructions or warnings of the finished goods.
Misuse of the product or even assuming the risk may not necessarily provide basis for defence.

Apportionment on fair and equitable grounds may be applied by the court if there is contributory negligence by the plaintiff.

 

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Minimisation Measures

Measures to minimise claims and costs include;
bulletRegular process and product testing (quality control including of containers),
bulletLegal review of;
bulletwarnings and instructions on products,
bulletpromotional material and advertising,
bulletguarantees and warranties,
bulletcontracts for the;
bullet purchase of raw materials/components (including packaging), bullet supply of goods,
bulletMeasures to review;
bulletliterature and research to maintain awareness of risks,
bulletlegislation related to occupational health and safety,
bullet Effective liability insurance, bullet Review of defect response procedures including;
bulletproduct recall from market, and
bulletinformation release.

 

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Deceptive Conduct

Section 52 of the Trade Practices Act 1974 prohibits misleading or deceptive conduct or which is likely to mislead or deceive. It is intended to promote a duty of care regardless of intent.

A plaintiff must prove;
bulletThe defendant is a corporation;
bulletEngaged in trade or commerce; and
bulletThe conduct was, or likely to mislead or deceive.
It is not necessary to prove that the action to mislead or deceive was intentional.

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Unconscionability

From 1 July 1998, section 51AC of the Trade Practices Act prohibits unconscionable conduct by a business that is in a dominating position in supplying or buying goods or services. The goods or services must cost less than $1 million and must be for business purposes (not private use). The section will apply to a vast range of common business contracts, including standard from contracts for supply of goods and services.

The changes are aimed to make it more difficult for a large supplier, purchaser, landlord or franchisor to use its strength to drive a bargain with a smaller company.

Unconscionable is not defined though a list of considerations are provided;
bulletThe relative strength of the bargaining positions of the parties.
bulletWhether the parties acted in good faith.
bulletWhether the big business was willing to negotiate the terms and conditions of the contract.
bulletWhether the small business understood the documents.
bulletWhether the big business exerted any undue influence or pressure or used unfair tactics.
bulletThe amount for which, and the circumstances under which, the small business could have acquired identical or equivalent goods or services elsewhere.
bulletWhether the big business imposed conditions that were not reasonably necessary to protect its legitimate interests.
bulletWhether the conduct of the big business was similar to its conduct in similar transactions with similar businesses.
bulletWhether the big business unreasonably failed to disclose to the small business: any intended conduct of the big business that might affect the interests of the small business; and any risks to the small business arising from the intended conduct of the big business (that would not be apparent to the small business).
bulletThe requirements of any applicable industry codes.
bulletThe requirements of any other industry code, if the small business acted on the reasonable belief that the big business would comply with that code.
Big businesses could fall foul of the law if, for example, they tell a small business to "take or leave" standard terms and conditions, they pressure the small business to purchase by saying someone else is interested, they grossly overcharge for goods or services, they treat some buyers or sellers more favorably than others, or they conceal that they are about to be sold.

 

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 A.C.T.E.D. Pty Ltd ABN 71 007 034 022. Publications 1997. All contents Copyright © 1997. All rights reserved. Information in this document is subject to change without notice. Products and companies referred to are trademarks or registered trademarks of their respective companies or mark holders. URL: www.chemlink.com.au/