Product liability: managing the risks when launching a new product
The financial and reputational damage that can flow from marketing, manufacturing or selling a defective product can be huge, and penalties may be just as serious in cases where you knew nothing of the fault before it arose.
Such issues can affect businesses of all sizes, irrespective of the quality of your controls or research and development procedures. However, the risks can be dramatically reduced with the benefit of early legal advice as Dermot Callinan, commercial law expert with Myers & Co Solicitors in Stoke on Trent explains.
When will a product be defective?
A product will be defective when it does not allow or assist the person using it to do so in a safe manner. Liability will usually arise where harm is caused as a result of the defective design or manufacture of a product or through a failure to provide appropriate warnings in relation to hazardous features.
A business launching a new line of cleaning products can reasonably expect a consumer to realise that if it contains bleach it will be dangerous. There will be no liability for supplying a dangerous product, but there will be liability if the business fails to label the product as being corrosive or potentially harmful and the consumer is injured because they were unaware of its harmful nature.
It does not matter that you were not aware that a defect existed at the time the harm occurred.
What are the risks?
The risks to businesses in launching new products without proper planning and advice are illustrated by the experience of CoYo Yoghurt, a vegan food company who discovered that their range of vegan yoghurts contained milk.
The error resulted in a hasty product recall, an investigation by the Food Standards Agency and the need for a public apology on Twitter. Inevitably, the reputational effect on the business has been profound, with the financial cost yet to be publicised. The full story is available here.
The bringing to market of defective products, from breast implants to cars with sub-standard emissions, can result in large scale group actions being brought by consumers who have suffered some loss or harm as a result of using or consuming such products. These actions can result in an enormous financial liability for both compensation and legal costs.
In addition, it is possible that regulators may become involved, many of whom can impose large penalties of their own.
How can we help?
By tailoring our advice to your business and the type of products you produce, we can assess the particular risks you face and your capacity to deal with potential claims and provide bespoke advice on the steps you can take to limit the extent of your exposure. Specifically, we can:
- assist in ensuring that products supplied are accompanied by sufficient information about safe use and properly drafted product warnings;
- review contractual warranties, draft contracts and any exclusion of liability clauses you currently rely on to ensure that they are effective and up to date;
- review your terms and conditions;
- advise on procedures for record keeping and reporting complaints to ensure that any issues arising can be dealt with quickly; and
- help devise appropriate plans and procedures for a product recall where necessary.
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.