Businesses that manufacture products for onward supply have legal responsibilities to the end users of those products and to other entities in the supply chain.
Understanding those responsibilities allows a manufacturing business to mitigate its exposure to civil (and potentially criminal) liability, as well as minimising the risks of reputationally-damaging product recalls or high-profile claims.
This article summarises some key aspects of the product liability regime before considering how appropriate provisions in contracts between manufacturers and their supply chain partners can help to manage the risks associated with product liability claims.
Statutory liability for defective products: The Consumer Protection Act 1987 (the CPA) is the principal UK legislation governing liability for defective products.
The CPA, and the case law that has developed around it, determine key issues such as:
Other bases for a claim in respect of defective products: Alongside the statutory regime governed by the CPA in respect of defective products, manufacturers could also incur liability in respect of products they have manufactured as a result of a common law claim in negligence – which would be based on the argument that the manufacturer had failed to satisfy a duty of care to the user of the product – or a claim for breach of contract brought by the buyer of the product.
The statutory liability for breaches of product safety requirements: A separate statutory regime in respect of product safety, governed by the General Products Safety Regulations 2005 (the GPSR) in the UK, runs alongside the CPA regime in respect of defective and unsafe products.
The GPSR creates a range of criminal offences for supplying consumer products which fail to meet the statutory definition of being 'safe' and for a range of other breaches in respect of consumer safety.
Many categories of products (drugs and medical devices, food, electrical equipment, toys etc.) are subject to their own specific regulatory safety regimes, which apply in place for the GPSR, save to the extent that the requirements of the GPSR go beyond the requirements of the product-specific regime.
Since product liability risks are a consideration for all of the entities involved in the product supply chain, it is important for any business entering into a commercial contract relating to the manufacture or supply of products to ensure that the contract provisions on this issue provide for an acceptable allocation of risk and exposure.
Key issues to bear in mind from the outset when considering such arrangements include:
The contractual measures discussed above can be used to mitigate product liability risks (and allocate those risks between the parties), complementing other measures used by manufacturers to control exposure, such as the use of insurance and, of course, the implementation of operational quality assurance measures to ensure that defects do not occur in the manufacturing process, and are swiftly identified and managed if they do.