The basics of product liability for injury and damage claims

January 25, 2024

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As adjusters and claims handlers, we frequently encounter claims relating to alleged defects or failures of products or services. In addition to common law duties and bespoke contracts entered into, there is legislation to consider, depending upon whether the claimant is a consumer or another business. In this blog, we highlight consumer rights and protections related to goods and services, as well as the nuances of business-to-business claims.

Claims from consumers

The Consumer Rights Act 2015 (CRA 2015) brings together the rights and remedies previously contained under a number of pieces of legislation relating to the sale of goods and supply of services, as well as unfair terms in a contract. Of note to the types of claims we typically encounter, the Act addresses when goods are deemed to be faulty in some manner or means. 

Goods 

CRA 2015 contains implied terms (s. 9 – 18), which include that goods sold must be:

  • Of satisfactory quality;
  • Fit for their particular purpose, being one for which goods of that kind are usually supplied, or which the parties knew the consumer intended it to be used for; and
  • As described.

In the event any of these terms are not met, CRA 2015 sets out the remedies available to the consumer (s. 19 – 24), which typically require the trader to refund, repair or replace the goods. 

Services 

The provision of services is also addressed by CRA 2015, containing implied terms (s. 49 – 53) that they must be:

  • Performed with reasonable care and skill;
  • Performed in accordance with any information, whether verbal or written, provided to the consumer regarding the service to be provided; and
  • Performed within a reasonable time.

What we are more typically concerned with is the consumer’s right to rely upon these breaches as in effect giving rise to a breach of contract, and so giving them a right to pursue other remedies available to them under contract law, e.g. damages (s.1(40 + 227) of the Explanatory Notes). 

Any attempts by a trader to insert terms that limit their liability for breaches of these terms, among others, is not binding upon the consumer, i.e. is in effect prohibited (s.31 + s.57) in all but very limited circumstances. This is further addressed by whether a term is deemed unfair (s.61 – 76) specifically if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

The Consumer Protection Act 1987 (CPA 1987) allows consumers to bring claims arising from a defect in a product without a contract existing between the parties. Its broad aim is to protect consumers from unsafe products and misleading advertising. It also gives them the right to claim compensation for injury or damage caused by defective products (s.2). In that regard, it conveys a strict liability upon producers as defined in s.1(2), those who hold themselves out as producers and UK importers.

Establishing whether the insured satisfies one of these categories is crucial to any investigation, both to determine if they owe a strict liability, or if another party does to whom the claim can be redirected. Whilst CPA 1987 does not require a consumer to demonstrate negligence, they must prove the existence of a defect and its effect. In practice, producers and importers may wish to be closely involved in any forensic investigation and initiate it, without delay, if there is any doubt about the presence of a causal defect.

CPA 1987 restricts damage giving rise to liability (s.5) to death or personal injury, or any loss or damage to property which is for private use, occupation or consumption. 

In many respects, CPA 1987 is a better tool for consumers when they wish to claim for injury or property damage which they believe arises from a defective product. Sometimes it enables them to circumvent a convoluted contractual/supply chain, albeit it does not prevent them from pursuing contractually derived remedies under CRA 2015 instead or as well.

Business-to-business (B2B) claims

Most of the Sale of Goods Act 1979 (SGA 1979) and the Supply of Goods and Services Act 1982 (SGSA 1982) still applies to B2B contracts, albeit note that only (s.11A – 11L) of the latter, relating to supply of goods, applies in Scotland.

SGA 1979 sets out implied terms (s.10 – 14), to include that goods must be of satisfactory quality, considering factors such as safety and durability, to name a few. 

SGSA 1982 contains similar requirements relative to the transfer or hire of goods, as well as addressing the supply of services (s.12 – 16). Implied terms include that the supplier will carry out the service with reasonable care and skill and carry out the service within a reasonable time.

Of course, what constitutes compliance with such terms is subjective, and it is important to carefully consider the bespoke contractual arrangements entered into between the parties in any given contract. There is greater scope in B2B relationships for the parties to contract as they see fit, and shape the allocation of risk and liability, subject to the terms of the Unfair Contract Terms Act 1977 (UCTA 1977). For example, it is not possible to exclude liability for negligence causing death or personal injury, however, it is possible for the parties to agree that one will indemnify the other for that liability. 

When assessing any onerous contractual obligations for the purposes of UCTA 1977, consider whether they pass the reasonableness test (s.24), which incorporates guidelines (Schedule 2) — considering the relative bargaining positions of the parties and whether an inducement was given to agree a certain term. Such considerations aside, the courts are generally reluctant to interfere with the manner in which parties of commensurate status choose to contract with one another, making interpretation of their intentions particularly important. 

Looking ahead

When dealing with any claim relating to the sale or supply of goods and services, carefully consider the nature and status of the contracting parties, the relevant legislation, and any bespoke contractual terms that feature. In particular, understanding the difference between contracts involving consumers and business-to-business relationships is critical. 

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