Application of Product Liability in the UK- the Company Outback - Case Study Example

Application of Product Liability in the UK- the Company Outback INTRODUCTION European Economic Community directive 85/374 and the UK Consumer Protection Act 1987 are stringent with regard to the product liability in cases involving safety of products causing death or damages to the customer. The object of this paper to analyze the given commercial liability case and conclude on the advice to be given to the defendant. (Product Liability. 2007). The company ‘Outback’ run by the partners Maggie and Ken and inherited from Ken’s father has been in business since 1940’s and has a fast moving product in trailer tents. The company has a good reputation for its products that are exclusively sold through its own factory outlet (there are no intermediaries in the sale). Recently, that is, in the past few months, the company has had some complaints pertaining to malfunctions of the wheels and tow bar, which are actually outsourced products and not the company’s own. While the base, wheels and axles are produced within the UK, the tow bar and couplings are imported from Russia through a UK company. After the customer complaints began to be known, ‘Outback’ brought out a note and attached it to the packing of the tent trailers disclaiming any liability for foreign products not meeting British standards. The company also installed testing machines to scan each product sold by the company. Although some parts are purchased from outside and not made in-house, the company outlet is displayed prominently on the outside with advertising placards that read that the components, make and standards of the trailer tents are 100% British. An accident occurred to Jerry Summer and family while using the trailer tent that had been purchased from ‘Outback’ along with the liability disclaimer, but before the test equipment had been set up. The accident occurred on account of defects in exactly the outsourced parts of wheel that became loose, and the tow bar coupling that failed, resulting in the trailer crashing into the car and the car veering out to hit an embankment. Jerry and family suffered severe, but not fatal, injuries. The question now is whether Jerry Summers’ tort liability suit under Consumer Protection Act will stand and, if it will, with what extent of loss to the company. The partners fear that the court’s award of damages may totally cripple the company, leading even to the closure of business. The paper looks at the relevant sections of the Consumer Protection Act and EEC directives in regard to tort liabilities and some court judgments to suggest that the company is in a position to successfully defend the case and escape crippling financial penalties. LEGAL ISSUES RELEVANT TO THE SCENARIO Article 1 of the EEC directive 2001/95 states that ‘the purpose of the directive is to insure hat products placed on the market are safe’ (Ashgate, Geraint Howells, et.al., Consumer Protection Law, 2005, p466). In this case serious bodily injuries have occurred from the product and prima facie there exists a case for tort liability and possible injunctions. Consumer Protection Act 1987 and the EEC directive 85/374 & 2001/95 According to section 19 of the CPA, ‘safe’ means that “there is no risk, or no risk apart form the one reduce to a minimum, that the goods cause the death or personal injury to any person whatsoever” (Ashgate, Geraint Howells, et.al., Consumer Protection Law, 2005, p472). The product liability and safety provisions of the ‘Consumer Protection Act 1987’ make it possible to charge the manufacturer of the finished product as well as the component manufacturer. Both the UK producer and the UK-based importer of foreign goods are liable for penalties. The European Community directive 85/374/EEC makes the first importer into an EC country liable and not the subsequent importer into the UK. (Guide to the Consumer Protection Act 1987. Product Liability and Safety Provisions). In this case, therefore, there are hidden two defenses for the company ‘Outbak’, namely that the component manufacturer ‘Manchester Steel’ that supplied the base, wheels and axle, is liable, and that the importer of the Russian tow bars and connectors, ‘Connect Imports’ is also liable. Since these are the components that have failed and led to the accident, this represents a possible shifting of responsibility away from ‘Outbak’ onto the suppliers. The ‘Consumer Protection Act 1987’ allows compensation for three types of damages, namely, death, personal injury and private property exceeding 275 pounds sterling. Jerry Summers can sue under the for the personal injury category. He cannot claim damages to the trailer itself (Council Directive. 1985). Allowed defenses under the Consumer Protection Act, 1987 There are six defenses available under the above act for an alleged tortfeasor. These are: the product was counterfeit or stolen, the technical knowledge at the time of manufacture did not reveal the problem, a willful compliance with a law caused the defect, defect was caused subsequent to the sale from the company, the product was not sold for economic gain, and the component manufacturer having just complied with a supplied defective product design (Longman, Barbara Harvey, et.al., Cases and Commentary on Tort, p293) In the case under study, none of these usual defenses apply. Let us examine the legal position with respect to the plea of ‘lack of technical knowledge’ or called ‘state of the art’ defense. Developmental risks or lack of technical knowledge or ‘state of the art’ defense One possible thought is to apply this defense if design changes had been implemented or sources of supply changed in the last few months. It is seen that defenses under this are basically risky on different reasons. (Floudas, Demetrius. Andreas). There is no evidence that the sources of supplies or the designs have changed ever in the course of the forty years of the company’s existence. The only changes that the company ‘Outbak’ made on being alerted about the market complaints of its outsourced products was to issue a warning to the customers in the form of a disclaimer and the installation of a testing device. Qualitative evaluation of design or possible changes in sources of supply had not been attempted or taken recourse to. Hence the defense that the products were under development and escaped the detection of some design flaws does not hold water. But there is a point which is either a serious problem or a strong defense. The problem is this: “Manufacturers also owe a continuing duty to warn of any faults identified after the product has been supplied and, where a warning is not sufficient, to modify or withdraw the product.” ( International Comparatives Legal Guide Series). International Comparative Legal guide page –page -117). ‘Outbak’ has installed test equipment in response to the market trend of poor quality. It has not recalled any previously sold products for testing or for modifications. This action of the company could be construed as negligence. If indeed there was justifiable doubts of safety of earlier batches, and the company did not take action, then this point becomes a very serious one that would help the claimant win his case. On the contrary, if the test results which are not available to the writer now, are generally negative and no rectifications were really carried out, it expressly doesn’t warrant recalling previous batches. If that is the case, it only aids the defendant’s argument that user negligence led to the accident. Negligence of the plaintiff Negligence of the plaintiff in use of the equipment is a mitigating circumstance that can reduce the liability. In this case negligence of the user is not hinted in the case description. Since the incident has occurred within the last few months when the product is actually new, and since there are no regular cases of product complaints in the company’s forty-year history, it is reasonable to assume that a certain negligence on the part of the user was involved with one exception as noted below. (Guide to the Consumer Protection Act 1987). The only point to be carefully considered here is the time gap between the date of accident and the date of sale – if it is less than six months, there is a stronger case in favour of a breach or product warranty implying a defective product. In case more than six months have passed, it is safe to argue that the plaintiff has been negligent. Validity of the published declaration along with the product It is seen from the Consumer Protection Act that a part designer or a programmer cannot be held responsible for the defects in the product. (Guide to the Consumer Protection Act 1987). The manufacturer or producer carries the full responsibility for the safety of the product. Hence if there is an inherent design problem in the tow bar or couples supplied by ‘Connect Imports’; or the base, wheels and axles supplied by ‘Manchester Steel’, the company ‘Outbak’ itself will be responsible notwithstanding the disclaimer note supplied along with the packing. The only case of responsibility resting with the suppliers is when the parts were defective due to their manufacturing problems. “Under the Unfair Contract Terms Act 1977 the implied terms of satisfactory quality and fitness for purpose cannot be excluded in consumer contracts (and they may only be excluded in business contracts if the exclusion is reasonable)” (International Comparative Legal guide page –115). So it is clear that the declaration disclaiming responsibility for the outsourced parts does not absolve the company of its responsibility in the product as a whole. Therefore, the published declaration is legally null and void. Argument of long history and reputation of company In the case Abuzaid Vs Mothercare, 2001, Iman Abuzaid was allowed damages from Mothercare for a defective perambulator elastic attachment with metal hook that hit him in the left eye causing loss of central vision in it. The defect was a technical one which could have been avoided by better application of design thought. Although Mothercare pleaded on the ground of lack of previous injuries, the case was decided in favour of the plaintiff, although with a delay of ten years, on the ground that the product was inherently unsafe and that the injury history did not indicate the product’s safe design. (Jenkins, David. 2001). (A and Others v National Blood Authority and Another [2001] 3 all ER 289) is another case of claims under Consumer Protection Act 1987 which implemented the EEC director 85/374. The claimants had been infected with Hepatitis C virus through blood transfusions and sued the blood producing authority for damages. Although the defense was hinged on the unavoidability of the occasional bad blood sample being accepted, the plaintiff’s case was held, ruling thereby that the safety of the final product is the ultimate prerogative of the producer, no matter what causative nitty-gritty went wrong, or whether detection methods were available or not. Going by the above judgment, it is seen that it will be futile to argue on the basis of reputation of the company or the lack of previous history of injuries and tort liability claims. (Floudas, Demetrius. Andreas). But if the long-time good reputation of the company is also buttressed by a zero accident history, and the particular accident in question has occurred six months after the sale, then there is sufficient strength in the argument that it occurred due to the plaintiff’s negligence. This point must be decided taking into consideration the accident history of the company over and above the other facts already available. Effect of qualitatively wrong advertisement The advertisements on the placards outside the factory outlet claim 100% British made with all-British parts answering British specifications. But, in fact, there are some parts that are imported from Russia. Will this material fact be construed as a fraud and will it form part of the plaintiff’s arguments for an increased liability? “Public statements made by manufacturers, importers, distributors and retailers of the product, for example in labelling and advertising, must also be factually correct and form part of the retailer’s contract with the consumer” (International Comparative Legal guide page –115). When analyzing the above point, it can be seen that the prominent advertisements on the placards testifying the product to be 100% of indigenous origin and complying with the British specifications while simultaneously issuing a disclaimer on the product’s non-compliance is a breach of consumer contract. This point will be the subject of a non-defendable objection of the plaintiff. But this is not serious enough to warrant huge punishments since the subject matter is an advertisement and some overstatements are always found or allowed in advertisements. That the company also issued a disclaimer along with the product shows that the wordings on the placard were really only intended as advertisement hype. The worst that can be expected from the breach of consumer contract in this regard is a court injunction to discontinue the claims of British system compliance. The question of recent origin of problems It is clear from the case description that the company has a reputable history of over forty years, but the complaints of wheel, base, axle, tow bar and coupling have started cropping up only in the last few months. In response the company ‘Outbak’ has installed additional testing devices to screen the final products for safety before releasing to the market and additionally supplies a liability disclaimer along with the packing. The response the company has taken shows that it is a responsible company sensitive to the safety of the consumers. The product liability disclaimer on account of imported parts is, however, legally not standing, but it serves the useful purpose of informing the buyer that actually the company sources some components from abroad. The disclaimer only acts as a bulwark against the qualitatively wrong claim in the advertisement stating the product to be of 100% British origins. If the testing has really not yielded any defective products (this is a piece of information not immediately available and to be collected), then the company ‘Outbak’ has a very strong argument in support of just one stray case of a manufacturing defect. Supposing there were more frequent defects and rectifications, then the case is weak for ‘Outbak’ since there is no evidence of recalling the old batches, even as it is accepted that 100% safe products are only released to the market after the screening tests. It is not clear if the company has taken any actions to reduce the defects of its outsourced products. If some evidence can be shown in this direction, it will lend further credence to the argument that the company took all available steps to ensure the product safety. ADVICE TO THE CLIENT The client is advised to prepare the defense on the basis of the following points. 1. State of the art defense: As soon as there were doubts about the quality of the outsourced components, the company installed 100% screen tests to ensure the safety of the final products. Since there were no final product safety problems (this is a piece of information that has been assumed and added to the given facts) even after sending the products through the new tests, the safety was not found to have been compromised. 2. Negligence of the plaintiff: Since the accident occurred six months after the sale (this information has been assumed), the product warranty has not been breached; the malfunction must have occurred on account of the negligence of the plaintiff. 3. Since the critical components that have failed have been outsourced from British suppliers, they are responsible for the liability claims for the manufacturing defects. It is seen that the two facts assumed above – that there were no defective products even after installing the testing machine and that six months had elapsed between the sale and the accident – help the defendant considerably. In case these assumptions are not true, then the defendant has a weak case. In any case, the onus of liability can be shared or entirely shifted to the component manufacturers. In sum, the prognosis of the case is quite positive and there is scope for a studied and competent defense. It will be wise on the part of the company to change the advertisement voluntarily to reflect the foreign hardware input to the predominantly British composition, albeit not compromising on safety. Works Cited Product Liability. (2007). Dti. Retrieved 11 May, 2007, from http://www.dti.gov.uk/consumers/Safety/liability/index.html Guide to the Consumer Protection Act 1987. Product Liability and Safety Provisions. Consumer Affairs Directorate. Retrieved 11 May, 2007, from http://www.dti.gov.uk/files/file22866.pdf Council Directive. (1985). Retrieved 11 May, 2007, from http://www.dehp-facts.com/upload/documents/document42.pdf Floudas, Demetrius. Andreas. Some Aspects of Liability for Defective Products in England, France and Greece after Directive 85/374/EEC. Retrieved 11 May, 2007, from http://www.intersticeconsulting.com/documents/Product_Liability_EU.pdf International Comparatives Legal Guide Series. ICLG. Retrieved 11 May, 2007, from www.iclg.co.uk Jenkins, David. (2001). Justice for Iman after a 10 – Year Delay. Rospa. Retrieved 11 May, 2007, from http://www.rospa.com/productsafety/articles/iman.htm A and Others v National Blood Authority and Another [2001] 3 all ER 289. http://www.lexisnexis.co.uk/lawcampus/dataitem.asp?ID=11672&tid=7 Read More