Liability of the Service Providers, Manufacturers and Traders under the Act- Product Liability

Legal provision

• Section 2(34): "product liability" means the responsibility of a product manufacturer or product seller, of any product or service, to compensate for any harm caused to a consumer by a defective product manufactured or sold, or by deficiency in services relating to it.
• Section 2(35): "product liability action" is a complaint filed before a District, State or National Commission to claim compensation for the harm.
• Sections 2(36), 2(37) and 2(38): definitions of product manufacturer, product seller and product service provider.
• Section 82: the Chapter applies to every claim for compensation under a product liability action for harm caused by a defective product.
• Section 83: the action lies against a manufacturer, a product service provider or a product seller.
• Section 84: liability of the product manufacturer.
• Section 85: liability of the product service provider.
• Section 86: liability of product sellers.
• Section 87: exceptions.
• Section 39(1)(e): the Commission may order compensation in a product liability action.

Meaning and definition

Product liability is the responsibility to compensate for harm caused by a defective product, or by faulty service in relation to it. It is a form of liability that rests on the defect and on the part the person played in producing, servicing or selling the product, and not only on carelessness.

Detailed explanation

Step 1: Who is a manufacturer, a service provider and a seller

• A product manufacturer makes a product or parts, assembles parts made by others, or puts his own mark on a product made by another. He may also make and sell or service a product, or design, produce or re-manufacture a product before sale. A seller who is also a manufacturer is included (section 2(36)).
• A product seller imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs or maintains a product in the course of business. It includes a manufacturer who is also a seller and a service provider. It excludes a seller of immovable property (unless he sells constructed houses or builds homes or flats), a provider of professional services where the product is only incidental, and a person acting only in a financial capacity (section 2(37)).
• A product service provider provides any service in respect of a product (section 2(38)).

Step 2: Liability of the product manufacturer (section 84)

A manufacturer is liable in a product liability action if:

1. the product contains a manufacturing defect;
2. the product is defective in design;
3. there is a deviation from manufacturing specifications;
4. the product does not conform to the express warranty; or
5. the product fails to contain adequate instructions of correct usage to prevent harm, or a warning about improper or incorrect usage.

Under section 84(2), a manufacturer is liable even if he proves that he was not negligent or fraudulent in making the express warranty. For the other grounds, the Act makes the defect the basis of liability, so the claimant need not prove negligence.

Step 3: Liability of the product service provider (section 85)

A product service provider is liable if:

1. the service was faulty, imperfect, deficient or inadequate in quality, nature or manner of performance required by law or by contract or otherwise;
2. there was an act of omission or commission, negligence or conscious withholding of information that caused harm;
3. he did not issue adequate instructions or warnings to prevent harm; or
4. the service did not conform to the express warranty or to the terms and conditions of the contract.

Step 4: Liability of the product seller (section 86)

A seller who is not a manufacturer is liable if:

1. he exercised substantial control over the designing, testing, manufacturing, packaging or labelling of the product;
2. he altered or modified the product, and the change was the substantial factor in causing the harm;
3. he made an express warranty independent of the manufacturer's, and the product failed to conform to it;
4. the identity of the manufacturer is not known, or notice or process cannot be served on him, or he is not subject to Indian law, or the order cannot be enforced against him; or
5. he failed to exercise reasonable care in assembling, inspecting or maintaining the product, or did not pass on the manufacturer's warnings or instructions, and the failure was the proximate cause of the harm.

Step 5: Exceptions (section 87)

• No action lies against a seller if the product was misused, altered or modified at the time of harm.
• A manufacturer is not liable for failure to warn if the product was bought by an employer for the workplace and the manufacturer gave the employer warnings.
• A manufacturer is not liable if the product was a component or material sold for use in another product, and it gave necessary warnings to the buyer, but the harm was caused by the end product.
• A manufacturer is not liable if the product was legally meant to be used only by or under the supervision of experts, and it gave reasonable warnings to them.
• A manufacturer is not liable if the complainant was under the influence of alcohol or of a prescription drug not prescribed by a medical practitioner.
• A manufacturer is not liable for failing to warn of a danger that is obvious or commonly known to the user.

Step 6: Procedure and remedies

• The action is a complaint before the District, State or National Commission, according to the value.
• The Commission can order compensation in a product liability action (section 39(1)(e)). It can also order the other reliefs, such as replacement or refund.
• Section 2(22) defines harm. It includes damage to property other than the product itself, personal injury, illness or death, mental agony or emotional distress attendant to personal injury, illness or damage to property, and loss of consortium or services.
• It does not include harm caused to the product itself, or any commercial or economic loss, including direct, incidental or consequential loss.

Step 7: Link with the common law

The manufacturer's duty goes back to Donoghue v. Stevenson, where the House of Lords held that a manufacturer owes a duty of care to the ultimate consumer, even without a contract. Chapter VI turns that idea into a statutory liability that rests on the defect.

Don't confuse: product liability and negligence

Common mistakes

• Saying that only the manufacturer can be sued. A service provider and a seller can also be sued.
• Thinking that negligence must always be proved. For the grounds in section 84, the defect is enough.
• Forgetting that a seller is liable when the manufacturer is unknown or unreachable.
• Forgetting the exceptions in section 87.
• Forgetting that the action is brought as a complaint before a Commission.

Apply it

Leading case laws

• Donoghue v. Stevenson (1932)

  Facts. A decomposed snail was found in a bottle of ginger beer bought for the claimant by a friend.

  Principle. A manufacturer owes a duty of care to the ultimate consumer, without a contract.

  Significance. The common law root of product liability.

• M.P. State Electricity Board v. Shail Kumari (2002)

  Facts. A cyclist died after touching a live wire lying on a road. The Board said that a stranger had stolen electricity from its line.

  Principle. The Board was liable under strict liability, and the act of a stranger was not a defence.

  Significance. Shows liability without proof of negligence for those who supply a dangerous product or service.

How to write this answer in the exam

Key points to remember

• Chapter VI, sections 82 to 87.
• Three defendants: manufacturer (section 84), service provider (section 85), seller (section 86).
• Manufacturer grounds: manufacturing defect, design defect, deviation, breach of express warranty, no adequate instructions or warnings.
• Manufacturer is liable for the express warranty even without negligence.
• Exceptions in section 87: misuse, alteration, obvious danger and others.

Quick self-test

Related topics

• Common Law and the Consumer-Duty to take care and liability for negligence
• Defects in goods and deficiency in services
• Remedies
• Rule of Strict Liability (Rylands v. Fletcher)