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Let the Seller be Aware: Product Liability under Consumer Protection Act, 2019

The famous traditional rule Caveat Emptor wherein buyer has to take the responsibility of the products and services that he’s been purchasing and availing, has been reversed now and the burden has been shifted on seller. Recently the Consumer Protection Bill, 2019 was passed by the Parliament where the Consumer Protection Act, 2019 (CPA, 2019) repealed the Consumer Protection Act, 1986 (CPA, 1986). The CPA, 2019, provides for protection of interests of consumers, establishment of a central consumer protection authority, mechanism to settle consumer disputes and specifically regulates product liability and misleading advertisements.

While dealing with the Product Liability either in day to day transaction or at the time of entering into any commercial relationship, one should always acknowledge the responsibility and accountability of not only buyers but also sellers towards the products or services that are being marketed in t.

Product Liability

Product Liability, a new provision proposed by CPA, 2019 under which a manufacturer or a service provider has to compensate if the goods or services cause injury or harm to consumer in event of goods or services turn to be defective or shoddy. The term Product Liability has not been yet defined in any Indian statute. However, in according with the jurisprudence and judicial decisions that have been evolved over the period of time, the overall meaning of product liability is the liability of any or all parties involved in process of manufacturing and supply of product or service which arises from any defect in such product or service and subsequent loss caused by such defective good or service to the consumer.

Before the CPA, 2019, product liability was relatively governed by principles of tort law, Sale of Goods Act, 1930, the Consumer Protection Act, 1986, Indian Contract Act, 1872 and the principle outlined in Donoghue v Stevenson. Along with these acts, Courts were influenced by the principles of justice, equity and good conscience. Liability with respect to defective products is mostly linked with damage caused to the consumer wherein there always a contractual relationship between the parties. The apportionment of such liability may be joint or several or both depending upon case to case and contract executed between the parties.

In addition to above laws, the CPA, 2019 has precisely gone into the roots of the concept of Product Liability by specifically inserting a separate chapter VI as “Product Liability”.

Definitions Under CPA, 2019:

Section 2(34):

Product Liability means 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;

Section 2(35):

Product Liability Action means a complaint filed by a person before a District Commission or State Commission or National Commission, as the case may be, for claiming compensation for the harm caused to him;

Section 2(36):

Product Manufacturer means a person who—
makes any product or parts thereof; or
assembles parts thereof made by others; or
puts or causes to be put his own mark on any products made by any other person; or
makes a product and sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains such product or is otherwise involved in placing such product for commercial purpose; or
designs, produces, fabricates, constructs or re-manufactures any product before its sale; or
being a product seller of a product, is also a manufacturer of such product;

Section 2(37):

Product Seller , in relation to a product, means a person who, in the course of business, imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains, or otherwise is involved in placing such product for commercial purpose and includes—

a manufacturer who is also a product seller; or
a service provider, but does not include—

a seller of immovable property, unless such person is engaged in the sale of constructed house or in the construction of homes or flats;
a provider of professional services in any transaction in which, the sale or use of a product is only incidental thereto, but furnishing of opinion, skill or services being the essence of such transaction;
a person who-
(I) acts only in a financial capacity with respect to the sale of the product;
(II) is not a manufacturer, wholesaler, distributor, retailer, direct seller or an electronic service provider;
(III) leases a product, without having a reasonable opportunity to inspect and discover defects in the product, under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor;

Section 2(38):
Product Service Provider , in relation to a product, means a person who provides any service in respect of such product;

Steps To Be Taken By The Companies Involved In Goods And Services Sector:

If company is acting as a Product Manufacturer:
The product shall not contain any manufacturing defect or should not be defective in design;
There should not be a deviation from the manufacturing specifications;
The product should conform to an express warranty. Express warranty is a material statement, description, sample of a product conforming that the product corresponds to such statement, description, sample (as the case may be); or
The product should contain adequate instructions as to how to correctly use it to avoid any harm or the product does not contain appropriate warnings regarding improper usage.

2. If company is acting as a Product Service Provider:
Services provided by him should be perfect and adequate in respect of quality, nature or manner of performance mandated under any law or in pursuance of any contract;
There should not be any act or omission or negligence which might cause injury to the consumer;
He should not withhold any information which might cause harm to consumer;
He should not issue adequate instructions or warnings to prevent any harm;
The services should confirm the express warranties and terms and conditions of the contract.
Further, a product manufacturer shall be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of a product.

3. If company is acting as a Product Seller:
He should alter or modify the product only to that extent up till which no harm can be caused to a consumer;
He should not exercise any substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm;
Any express warranty made independent to that made by manufacturer must be complied with;
He should ensure that the product or services assembled and inspected properly;
He should provide adequate instructions to the consumer as passed onto him by the manufacturer.

Exceptions To Product Manufacturer Liability:

In a product liability claim arising on account of failure to provide adequate warnings / instructions, the product manufacturers will be exempt from liability in scenarios where: –

The product was purchased by an employer for use at workplace and the product manufacturer had provided warnings or instructions to such employer;
The product which was sold was to be used as a component in another product, provided the following conditions are met – appropriate warnings or instructions were given by the product manufacturer in relation to such product; and the harm was caused by use of the main product (i.e. of which the product of the product manufacturer was only a component);
The product was legally meant to be used under the supervision of an expert and the product manufacturer had deployed reasonable means to give warnings or instructions regarding such condition;
The product was used under the influence of alcohol or a prescription drug without such prescription; and
The dangers with respect to a product are obvious or commonly known or consumers ought to have known, in view of the characteristics of the product.

Liability For Default:

Whenever any contractual relationship has been entered into between the parties, warranty is typically provided by manufacturers with respect to product or services, which is later on passed on by seller or retailer to the consumer. This thus creates privity of contract between manufacturer and consumer.

In event of contractual breaches including without limitation to defects in products or services, liability cab be apportioned contractually or by considering joint and several principle which may differ as per the provisions of contract and facts of the case. Thus, if any consumer files complaint under CPA, liability can be apportioned joint and severally wherein manufacturer on account of warranty provided and seller or retailer or dealer on account of involving in selling and distributing the products or services, are jointly and severally liable for sale of defective products.

Who Can File Complaint?

An action for product liability claims can be brought against a product manufacturer by multiple persons including a consumer (i.e. a purchaser or user of the manufactured goods but does not include a reseller or a person who uses such goods for commercial purposes), a registered voluntary consumer association, Central or State Government, and one or more consumer(s) where a number of consumers have the same interest.

Apart from imprisonment and fine, the CPA, 2019 entitles aggravated persons to claim compensation for any harm caused on account of a defective product. Further, CPA, 2019 contemplates suspension of any license (up to 2 years) issued for the first offence and cancellation of such license in case of a subsequent offence. Separately, the authority formulated under CPA, 2019 may require that goods which are dangerous, hazardous or unsafe be recalled or that purchasers of such goods be reimbursed etc.

The CPA, 2019 is the major step taken by the Government of India to prevent the exploitation of the interest of consumers from misleading tactics played by not only manufacturers but also product service providers and product sellers. The new legislation thus alerts everyone involved in trade except consumer with the bundle of responsibilities and accountabilities to protect the interest of consumers.

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