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TOPIC: CPA - Liability for Damage Caused by Goods

CPA - Liability for Damage Caused by Goods 11 years 11 months ago #2513

  • Bandit
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Imagine the following supply chain:
A = Producer
B = Distributor
C = Retailer
D = End-user

The goods in question cause harm to D(as contemplated in section 61(5) of the Consumer Protection Act).

Assume D is a protected consumer and A, B and C are exempted consumers by virtue of their asset value or annual turnover exceeding the threshold (R 2 000 000).

Question 1
Can D claim damages from A, even though A and D do not have any direct relationship with each other, or is A limited to claiming from C? This question pertains to the interpretation of the joint and several basis on which producers, distributors or retailers are held strictly liable.

Question 2
If D succefully claims against B, can B pursue compensation from A for the damages it suffered as a result of D's claim? Presuming an indemnity for such damage existed in the contractual relationship between A and B, could A rely on this indemnity or would B be able to negate the effects of the indmnity by relying on s61 itself.

I look forward to your comments.
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Re: CPA - Liability for Damage Caused by Goods 11 years 11 months ago #2517

Hi

I suppose your guess is as good as mine at this stage in the absence of any president.

Below is an extract from an article by WWB:

"Section 61 of the Consumer Protection Act prescribes liability for damage caused as a result of unsafe, defective or hazardous goods. This section has invoked apprehension for various suppliers of goods in the supply chain, based on the perceived notion that it imposes strict liability as well as the fact that the net of liability is cast wider than at common law.

At common law only the manufacturer or a distributor who professed to have the expertise and knowledge about the goods he was supplying, could be held liable for the defective goods in delict. Section 61 casts the net of liability wider than at common law, and provides that the producer, importer, distributor and retailer are all jointly and severally liable for defective goods, irrespective of whether or not negligence could be ascribed to the particular supplier. At first blush it appears that in terms of section 61 of the Consumer Protection Act, strict liability is imposed on all the contributors in the supply chain. However, the following claw back clause in terms of section 61(4) allows the following defences to the supplier where:

(a) the unsafe product, defect or failure is wholly attributable to compliance with any regulation;
(b) the unsafe product, characteristic, defect or hazard did not exist at the time that it was supplied by that person to another person; or was wholly attributable to the compliance of instructions provided by that person who supplied the goods;
(c) it is unreasonable to have expected the distributor or retailer to have discovered the unsafe product or characteristic or defect having regard to the supplier’s role in the market.

The intention of the Department of Trade and Industry ("DTI") in proposing strict liability, was to ensure that the consumer would be compensated from any one of the suppliers in the supply chain. A further purpose was to promote accountability and responsibility to consumers even in the cases where there is no contractual nexus between the consumer and the supplier, such as the importer or distributor.

However, the reprieve provided in section 61(4)(c) may have unintended consequences and may actually have provided suppliers with an escape from liability which could conceivably be applied in most circumstances.

The effect of section 61 is that the Consumer Protection Act is weaker than the DTI anticipated. The Consumer Protection Act no longer requires negligence to be proved by the consumer. The supplier, in order to escape liability, will have to prove that it was unreasonable to expect him to have discovered the defect based on his role in the market. This will invariably result in the following enquiry:

1) Would the reasonable supplier have foreseen that the defect would have caused harm or damage?
2) Would a reasonable supplier in the position of the supplier in the supply chain, have taken steps to inspect or discover the defect?
3) Did the supplier take those steps?

The test is a negligence enquiry and therein lies the defect in section 61. The section does not impose strict liability, in the true sense, as the DTI had intended. All that the section accomplishes is to shift the onus onto the supplier to prove that the supplier was not negligent in the circumstances.

Consequently, although suppliers, higher up in the supply chain, should be concerned about the fact that their conduct will now be under greater scrutiny, the suppliers such as importers and distributors should take some measure of comfort in that the unintended defect in the section provides them with an escape route. Suppliers will only be held liable if they were negligent in not discovering the defect or hazard in the goods."

In direct answer to your questions, my personal views are:

Q 1

My personal view is that D can go directly after A. Most consumers would however choose to knock at the door nearest to them, i.e. C.

Q 2

If B can show that A and/or C contributed to the harm caused to D, then B should be able to recover or partially recover from A or C. In the absence of an indemnity from A to B, I see no reason why B should not be able to hold A liable other than A being able to invoke a defence based on S 61(4).

My informal advice to distributors and retailers lower down in the supply chain has been to obtain some form of indemnity from their suppliers (directly above them in the supply chain).

Obviously, any form of negligence on the part of the distributor or retailer will to a large extent negate the benefit of having taken such an indemnity.

And if the importer, manufacturer, etc. do not want to provide such an indemnity, then find another who has greater belief in the quality of their product.

Also see www.edutrain.co.za/wp-content/uploads/20...-caused-by-goods.pdf

Your views please.
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Re: CPA - Liability for Damage Caused by Goods 11 years 11 months ago #2521

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Thank you for your response.

Q1
I understand that the general view regarding this question is that a consumer can claim against either the producer or importer, distributor or retailer and that these parties may be held liable jointly and severally.

An alternative view is that on a strict interpretation of s61(1) the word "or" excludes the idea of all the parties being jointly liable, and thus the consumer can only proceed against one of these parties. If, for example, the importer and distributor are liable, then the consumer would be able to proceed against them collectively by virtue of s61(3), thereby leaving the retailer unscathed.

Q2
You state that, "In the absence of an indemnity from A to B, I see no reason why B should not be able to hold A liable other than A being able to invoke a defence based on S 61(4)."

In this scenario we assume no indemnity in operation between A and B, and that B attempts to rely on the provisions of section 61 to claim against A, for the loss it incurred by compensating D, who similarly claimed loss in terms of s61.

I am of the view that in such circumstances B will not be able to rely on the provisions of s61 to claim compensation against A. My reasoning is that the "harm" suffered by B when it had to compensate D falls beyond the ambit of "harm" as contemplated in s61(5). Accordingly, the harm suffered by B is too far removed from the initial harm relied upon by D.

Nothwithstanding the above, it does not mean B is without recourse. B will have to rely on the ordinary principles of delict to claim compensation from A.

I think it is sound advice for anyone in the supply chain to obtain indemnities specifically catering for s61, in addition to the more general exclusionary clauses. It goes without saying that the inclusion of such indemnity clauses in parties' contracts comes down to the bargaining power of the respective parties.
Last Edit: 11 years 11 months ago by Bandit.
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