Product Liability Under Consumer Protection Act 2019
Author: LawSphereX
Category: Consumer Law
Published:
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PRODUCT LIABILITY UNDER CONSUMER PROTECTION
ACT 2019
Pranjal Choubey, ICFAI Law School, Hyderabad, IFHE University
ABSTRACT
Product Liability is defined under Sec 2(34) of Consumer Protection Act
2019 as “responsibility of product manufacturer or seller of any product or
service provided to compensate for loss /harm caused to any consumer due to any defect in product manufactured or sold or any deficiency in the service provided. It will be interesting to know how is this “liability” determined in the consumer forum and what challenges are faced by them in determining that liability. The project will also discuss how foreign countries decide the subject of product liability and how did the concept of product liability came into existence and how it became a crucial part of consumer protection law in India.
Objective Primary objective of this research project will be to understand the concept of product liability and to understand how it is determined by Consumer Forum in a practical sense. Scope Of Subject Product Liability is a concept that holds product manufacturer or seller or service provider accountable to his negligence w. r. t his defective product and thereby helps consumer to receive damages. It was been defined in section 2(34) of the Act and Chapter VI of the Act discuss how and in what scenario can product liability can be claimed, this is enumerated in Secs. 82-87 of the Act. Research Methodology In order to achieve a better understanding of the research topic, I propose to use The Doctrinal Methodology for the completion of the project. This project requires collection of information from case laws, bare acts, appropriate books, articles, documents etc.
and the compilation of the apposite matter thereafter. Chapter 1: Historical Development Of Product Liability The early development of the concept of product liability can be traced back to the United States of America wherein the claims usually consisted of breach of warranty as per contract’s provisions between the parties. However, there are 2 unavoidable issues under this method:
1. Absence of Warranty clause: Due to the fact that the warranty clause wasn’t a
mandatory clause in a contract an absence of the same would mean that an aggrieved consumer would not have any claim as there is no breach of contract. Furthermore, there are still circumstances in which the clause exists but warranty can be excluded or modified, which means that a product liability claim can be avoided completely.
2. Privity of Contract: It is a concept of contract law that states only the parties entered
into the contract can be liable to pay damages and no 3rd party can be involved in the same. This concept meant that a consumer can only claim damages from a product seller if any additions were made by him to the product and cannot claim anything from the
product manufacturer in case of manufacturing defect. These shortcomings were duly recognized by the Judiciary in various leading precedents that led to the conception of Product liability, some of the precedents as enumerated as under:
1. Mac Pherson V. Buick Motor Co.1
This case reflects the abandonment from principle of the privity of contract and at the same time highlights the shift from the liability due to contractual warranty towards liability due to negligence. “In this case,the plaintiff was injured in a car accident due to a car’s wheels’ defect. The defendant company, which had assembled the car, claimed they could not be held liable as the plaintiff had purchased the car from a dealer. Justice Cardozo removed the restriction of privity of contract as the defendant company had been negligent by breaching its duty to provide a safe vehicle to the plaintiff.”
2. Escola v Coca-Cola Bottling Co2
This case is seen as the next shift in the pursuit of the justice system to bestow a greater level of protection to consumers by utilizing a strict liability standard. This shift was based on the observation of the judiciary that it was tiresome and impractical for consumer to prove all elements of negligence by product manufacturer or seller. Thus, Justine Traynor opined that “A manufacturer incurs an absolute liability when an article that he has placed on the market, knowing that it is to be used without inspection, proves to have a defect that causes injury to human beings”.
3. Greenman v Yuba Power Products Inc3
This case further developed the rational of Escola case and further the Court held the
1 (1916) 111 NE 1050, 217 NY 382
2 24 Cal 2d 453, 150 P 2d 436 (1944).
3 59 Cal 2d 57, 377 P 2d 897
manufacturer liable while observing the cause of injury arising from a defect in the design.
4. Henningsen v Bloomfield Motors, Inc4
After the aforementioned court decisions, more progress occurred in the field of consumer protection. This included introducing the idea of the 'implied warranty of safety' in the present case wherein, the plaintiff's spouse got hurt due to a problem with their car. As a result, the plaintiff took legal action against both the manufacturer and the dealership. The dealership used two defensive strategies in response. “I. Plaintiff had signed the warranty consisting of a clause freeing the dealer from any liability for personal injury; and ii. the dealer was not responsible for an injury suffered by the plaintiff’s wife. The Court rejected these arguments and held that every sale of a product includes an implied warranty of safety and that this warranty extends to all foreseeable product users.
” Hence after all these cases the concept of product liability was developed with a primary objective to provide protection to consumers from defective products and services, the concept has changed over time to protect consumers more effectively and thereby ensuring that those harmed by defective items receive compensation. Chapter 2: What Is Product Liability? Product Liability is when the maker, seller, or service provider of a product has a legal duty to compensate the consumer if they sell something defective. The maker usually has to follow all the rules, guarantees, and conditions while meeting what consumers expect. Product liability in addition to consumer law falls under tort law and contract law as well. Under this concept of law, it could be due to negligence if the maker, seller, or service provider doesn't take care of consumers like they should.
At the same time, strict liability can also be in place as the maker is responsible for making sure the product is good when selling it. In contract law, there could
4 32 NJ 358, 161 A 2d 69 (1960).
be product liability for breaking the terms or guarantees set by the maker, seller, or service provider. In 2019 the Erstwhile Consumer Protection Act 1986 was replaced by the new 2019 Act after it was approved by the President and published in the Official Gazette of India on 09th August
2019. Although the law was passed in 2019 many of its sections including the product liability
section came into effect on 20th July 2020. The 2019 Act aimed to provide more robust and better protection to consumers by making significant changes to the existing law and introducing new provisions. The introduction of product liability in the 2019 Act meant a shift from the principle of “buyer beware” to “seller beware” which was also considered as the new guiding principle of the Consumer Protection law in India. Before the enumeration of Consumer Protection Act 2019 in India, product liability wasn't a clearly conceptualized. Courts relied on fairness, equity, and conscience for decisions. Technology advancements and e-commerce growth broadened consumer choices. Yet, issues like unsafe products arose, complicating regulation enforcement. Monitoring and enforcing rules became harder for national authorities with cross-border transactions.
Thus, in order to eradicate consumer problems and address the aforementioned Issues Chapter VI of the Consumer Protection Act 2019 introduced the concept of ‘product liability in Indian consumer law for the first time. Product liability is crucial as it holds manufacturers, sellers, & service providers responsible for any harm caused to consumers by defective products or inadequate services. To prove their case, consumers must show that their injuries stemmed from faulty products. Determining responsibility hinges on identifying the party at fault. For example, if a person gets hurt in an accident due to faulty vehicle brakes, the car manufacturer may be deemed accountable. If the brakes were compromised due to modifications by the seller, then the seller could face liability.
In cases where brake damage was a result of improper repairs, the responsibility may fall on the service provider. Sec. 2(34) of the Act defines Product liability as “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” Also Defect is defined under Sec. 2(10) of the Act as “any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to be maintained by or under any law for the time being in force or under any contract, express or implied or as is claimed by the trader in any manner whatsoever in relation to any goods or product and the expression "defective" shall be construed accordingly;” In order to understand product liability, it is also pertinent to know what constitutes a product? In essence a product may refer to a tangible object that is/becomes a personal property of a consumer when bought, furthermore that property must be moveable at the time of sale. In the Consumer Protection Act of 2019, a product is defined under Sec.
2(33) as: “product means any article or goods or substance or raw material or any extended cycle of such product, which may be in gaseous, liquid, or solid state possessing intrinsic value which is capable of delivery either as wholly assembled or as a component part and is produced for introduction to trade or commerce, but does not include human tissues, blood, blood products and organs” Thus, a product can be said to be a tangible object that is used for trade and commerce.
TYPES OF DEFECTS
2. Design Defects: These are error in the basic composition or configuration of a product
that poses unreasonable risk to the consumers of the product. Hence, due to the fact that design flaws are present before a product is even created this makes them even more dangerous even if the product in itself is working effectively.
3. Communication/Marketing Defects: These are defects that occur due to failure to
provide information w. r. t safe use of the product. These can occur due negligence of product manufacturer, if he fails to instruct the seller effectively, or due to neglect of product seller if he fails to instruct the consumer. Chapter-3: Concept Of Product Liability In Foreign Jurisdictions Concept product liability was not developed in India and was adopted from American and European countries therefore it is significant to know how is a product liability claim filed in different countries and what are the legislations that govern that. United Kingdom The United Kingdom in order to introduce Product Liability and to consolidate amendments to existing consumer law passed the Consumer Protection Act 1987. Section 2 the aforementioned Act discusses imposition od strict liability on the manufacturer or seller or the product as the case may be.
It is pertinent to note that this law is also consistent with the Product Liability Directive 85/374/EEC which a legislation introduced by the European Union in 1985 to impose strict liability on manufacturers of defective products. According to Sec 2 of the UK CPA 1986 Act a claimant must prove the proximity between damage suffered by him and the defect present in the product the same has been held by the court in various precedents- Baker v KTM Sportmotorcycle UK Ltd 5 “The Court stated that it is not required for the plaintiff to prove the defect causes. In the present case, the product was regularly used, and the plaintiff carried out proper maintenance and servicing.
5 Baker v KTM Sportmotorcycle UK Ltd 2017 EWCA Civ 378
Therefore, the galvanic corrosion must be a defect in the design or manufacture. Thus, the defendant was liable. ” Al-Iqra v DSG Retail Ltd6 “The Court observed that the contention of a product never previously causing harm did not mean that the product could not be defective. As such, the facts of each case have to be determined independently. ” Claire Busby v Berkshire Bed Co Ltd7 “The plaintiff purchased a bed from the respondent, which led to an injury by falling off the end of the bed. She claimed that a defect caused the accident, the alleged defect was that there was a onedegree slope in the bed which had caused the plaintiff to lose their balance and get injured. The Court while dismissing the claim of breach of contract and negligence made the following observations.
The Court held that the product’s level of safety would be based on the test of ‘what a person would generally be entitled to expect. Although the respondent had not manufactured the bed, they had branded the beds as their own and therefore were liable” United States of America The USA lacks any formal uniform law that governs all product liability claims in all some ,while some states have specific legislations, claims are mostly dealt in either (i)contract law, or tort law by negligence or Strict Liability. The USA has construed 2 tests to determine Product Liability: I.
Risk-Utility Test- “courts balance the cost of making a product safer against the risk of injuries present if the safety measures are not implemented.”
6 Al-Iqra v DSG Retail Ltd 2019 EWHC 429 (QB)
7 Claire Busby v Berkshire Bed Co Ltd 2018 EWHC 2976 (QB)
II.
Consumer Expectations Test- “a product is determined to be defective if it is “dangerous to the extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics. ” European Union In the countries governed by European union product liability claims are decided by the Aforementioned Directive 85/374/EEC, the directive was adopted in 1985 and under Art. 6 of the directive clearly states that in order to claim damages under product liability the claimant has to establish a direct causal relationship b/w defect product and legal injury. While the standard of defences varies from country to country the basic definition of a defective product is “A product is defective if it does not provide the safety that a person is entitled to expect” the same is stated in Art. 6 of the directive.
Chapter- 4: Development Of Product Liability In India Before the conception of Consumer Protection Act 2019 CPA 1986 was the only legislation discussing consumer protection, even though the act did not use the words product liability an aggrieved consumer could still file a claim under Sec 2(1)(f) and 2(1)(g) of the Act which defined defect and deficiency respectively. The 2 sections basically implicated that any violation from standards prescribed under this or any other consumer welfare legislation would lead to the specific product or service being held as defective. Additionally, a remedy can be sought under other special consumer welfare legislations as the Act clearly defined it jurisdiction as additional i. e “the Act is in addition to and not in derogation with any other law for the time being in force”.
DEVELOPMENT OF CONSUMER LIABILITY BY THE JUDICIARY
“The Consumer Commission relied on Black’s Law Dictionary to define the term “ ‘manufacturing defect’as a deviation from design specifications during production resulting in a product’s defect, frailty or shortcoming.”
2. Gopal Aggarwal v. Metro Motors9
“The Consumer Commission observed that if the manufacturing defects were claimed, the car must have been sent to an accredited laboratory per procedure. This procedure cannot be circumvented by saying it is a mere technicality.”
3. C.N. Anantharam v. Fiat India Ltd. and Ors.10
“A complaint was filed regarding noise from the engine and the gearbox wherein the Supreme Court directed that if the independent technical expert is of the opinion that there are inherent manufacturing defects in the vehicle, the petitioner will be entitled to a refund of the price of the vehicle and the lifetime tax and EMI along with interest @ 12% per annum and costs.”
4. Hindustan Motors Limited v. Ashok Narayan Pawar and Another11
“The case was regarding a defect in car in lieu of which the Court ordered that in case they had stopped manufacturing this car, in that eventuality, they would pay the current price of the car, along with 9% interest from the date of the incident, till its realization. If they choose to give him a new car, they are also liable to pay compensation in the shape of interest @ 9% p.a., from the date of the incident, till its realization.”
9 SCC OnLine NCDRC 754 : (2020) 1 CPJ 85 (NC)
10 (2011) 1 SCC 460 : AIR 2011 SC 523
11 2015 SCC OnLine NCDRC 3
Chapter- 5: Product liability After Enactment of Consumer Protection Act 2019 As discussed before the concept of “product liability” was established to hold a product manufacturer or seller accountable for the defective product sold to consumer in case of legal injury. The principle aim of product liability was to compensate a consumer harmed by a defective product or deficient service. Chapter VI of the CPA 2019 deals with all product liability actions and also lays down conditions in which product liability claim will be accepted and the exceptions under which a product seller, manufacturer or service provider will not be liable. It would be also pertinent to note that this chapter does not provide any claim for the defective product itself i. e. only legal injury caused to the plaintiff will be compensated and not the cost of product.
However, a claim for defective product can be sought under Sec. 2(10) of the Act An action can be made before District or State Consumer Commission against a manufacturer/seller or service provider under Sec. 83 of the CPA 2019 if any harm is caused on account of the defective product. There are 3 major components of an action of product liability: a. “There must be harm/legal injury caused to the consumer/claimant b. Injury must be caused by a defective product c. The defect should be caused by either by a product manufacturer/seller or by a product service provider. ”
LIABILITY OF PRODUCT MANUFACTURER
iv. Product does not conform to express warranty v. Product does not contain any precautions or instructions on correct use to avoid harm or injury Additionally, a product manufacturer shall also be liable even if he proves that he was not negligent or fraudulent in making the express warranty of a product.” During the determination of defectiveness of product standards set by Sec. 16 of Sales of Goods Act 1930 are referred by the consumer commission, it states 4 factors that determines whether a product is of merchantable quality those are: • “Genuine as per name • Kind and description of the product • Saleable in the market under designation fit for ordinary use • purpose of such goods or product are free from defect”
LIABILITY OF SERVICE PROVIDER
The term “product service provider” means a person whoc provides any services in respect of any product.W.r.t product liability service as per CPA provisions refer to service(s) carried out to a product. Persons engaged in the business of constructing houses also come under product service providers According to Sec 85 of the Act12 liability of a product service provider only arises if any deficient servicers are provided by him.
LIABILITY OF PRODUCT SELLER
According to Sec.
86 of the Act13 this liability can arise in the following scenarios: “a) he has exercised substantial control over the designing, testing, manufacturing, packaging or labelling of a product that caused harm; or (b) he has altered or modified the product and such alteration or modification was the substantial factor in causing the harm; or (c) he has made an express warranty of a product independent of any express warranty made by a manufacturer and such product failed to conform to the express warranty made by the product seller which caused the harm; or (d) the product has been sold by him and the identity of product manufacturer of such product is not known, or if known, the service of notice or process or warrant cannot be effected on him or he is not subject to the law which is in force in India or the order, if any, passed or to be passed cannot be enforced against him; or (e) he failed to exercise reasonable care in assembling, inspecting or maintaining such product or he did not pass on the warnings or instructions of the product manufacturer regarding the dangers involved or proper usage of the product while selling such product and such failure was the proximate cause of the harm” Thus, if any of the above condition are satisfied and proved by the claimant then the product seller would be liable.
HOW IS PRODUCT LIABILITY DETERMINED
1. Wilkes v Depuy International Ltd14
“The Court made the following observations: (i) The level of safety is an objective standard based on a person’s general expectation rather than a legitimate expectation of the public. (ii) The emphasis should be to determine if there was a defect or not and not on identifying the harmful characteristic which caused the injury. (iii) Relevant factors for determining defect include – cost and the risk-benefit balance of a product, ease of and extent of mitigating risk, the product’s compliance with applicable standards and producer’s specification.”
2. Colin Gee v Depuy International Ltd15
“The Court made the following observations: (i) The concept of ‘defect’ is strictly objective and subjective to examination. (ii) As per Section 3, the burden falls on the claimant to prove a defect to show that the product was below the safety standards. (iii) If an injury can arise even if the product meets the safety standard under Section 3, then there is greater specificity about how the product is unsafe. It needs to be established that the product is unsafe due to an abnormal feature.” In the USA 2 tests by the name of Consumer Expectation test and the Risk-Utility test are used to determine defectiveness of the product
14 2016 EWHC 3096 (QB).
15 Colin Gee v Depuy International Ltd 2018 EWHC 1208 (QB).
I.
The Consumer Expectations Test – It is the historical standard used to determine whether a product is defective. Under the consumer expectation test, a product is determined to be defective if it is “dangerous to the extent beyond that which would be contemplated by the ordinary consumer who purchases it, with the ordinary knowledge common to the community as to its characteristics.” The test sets an objective standard for determining defect (e.g., it is based on the expectations of the “ordinary consumer” who has the “ordinary knowledge of the community”). II.
Under the risk-utility test – “courts balance the cost of making a product safer against the risk of injuries present if the safety measures are not implemented. If the cost of safety is determined to be less than the cost of injury, then the benefit of making the product safer outweighs the risk and the product is determined to be defective. Conversely, if the risk is minimal compared to the cost of changing the product, then the product is deemed not to be defective. ” Apart from these 2 other tests can also be used to determine proximity between defect of the product and injury to the consumer these are Sine Qua Non test/but for test - “To apply this test, the trier of fact will assess whether the injury would not have occurred “but for” the conduct of the defendant.
” The Substantial Factor Test- “the trier of fact will evaluate whether negligent act was a substantial factor in bringing about the harm. ”
CASE ANALYSIS
The following cases relating to product liability were reviewed by me during the course of my internship
1. X vs. BMW Motors Co.
In this case the Plaintiff (Our client) bought a car from the manufacturer BMW from their authorized dealership this car got into a serious accident and the airbags didn’t open at the point of impact and thereby our client was more severely injured thus a claim under section 84 was filed for product liability before District Consumer Forum.
The relief claimed was 2,00,000 rupees for injuries and a further Rs.50,000 for mental trauma.
2. Y vs. Scopus Tours and Planning
Our client planned a tour package from the defendant 6 months prior wherein he had booked a direct flight to Paris he hence secured a visa for the same. 2 months before the trip the defendant informed our client that he due to unavailability of flights reasons had to layover in Vancouver for 2 hours the problem was that due to the laws in place a visa is needed even for layover purposes and time to procure the same is 4 months and thus this meant that our client had to cancel the trip altogether thus a claim was filed under Sec. 85 for deficient and faulty services provided by him and a relief amounting to Rs. 2,25,00,000 was prayed before the State Consumer Forum.
3. A vs. Tilakram Builders and Developer
The plaintiff has paid all installments w.r.t a project by defendant who is a Project developer the defendant was supposed to deliver possession by July 2020 but due to covid the same was delayed but the defendant still failed to deliver possession even after 4 years of extension the possession was not delivered and the project site was abandoned. The plaintiff thus filed a suit under Sec 85 for deficient services and sec. 2(10) which defines service provider, and relief of 20,00,000 was claimed along with Rs. 5,00,000 for mental trauma faced by the plaintiff.
CONCLUSION AND RECOMMENDATIONS
It is certain that introduction of Product Liability was a powerful and significant step for consumer protection. A product liability a claim can arise from contract law under breach of contract or from tort law under negligence but the basis of the claim remains same i.e. that a consumer must be compensated for his legal injury that is caused due to the defective product. Beginning of product liability can be traced to the USA the further development of the concept can be observed in 3 stages First stage wherein product liability was based in contract law, second stage where claims arose under tort of negligence and Third stage wherein strict liability was imposed on manufacturer for producing defective products. Finally, a specific law dealing with product liability was codified in various nations.
Though product liability has developed immensely in the past few years many more developments are needed to make it 100% absolute weapon for consumer for instance product liability claim shall also include cost of defective product, additionally better ADR mechanisms must be developed for speedy disposal of small claims and lastly more benches of Consumer forum shall be opened to overcome the large number of pending cases.