Beware of product liability under the new Consumer Protection Act

Section 61 of the Consumer Protection Act, 2008 (the Act) introduces drastic remedies for consumers who suffer death, injury or illness, or the loss of, or physical damage to, movable or immovable property as a result of having been supplied unsafe or defective goods, or if they are given inadequate warnings or instructions regarding hazards which may arise from using the goods supplied.

Although the Act is only expected to come into full operation on 24 October 2010, once it comes into effect, a consumer will be entitled to claim compensation for harm suffered in respect of any defective goods supplied to that consumer since 24 April 2010.

The inadequate protection offered by current consumer protection legislation will be repealed and replaced by the Act, which contains a plethora of consumer rights aimed at protecting consumers from having to agree to unfair contract terms when purchasing goods or services. This article deals only with the product liability provisions contained in section 61 of the Act.

In terms of section 61, all manufacturers and suppliers of the goods which have caused harm to consumers in the manner specified in the section, are jointly and severally liable for that harm, as well as for any economic loss which a consumer may suffer indirectly as a result of that harm. Section 61 applies to all goods which are supplied to a consumer, even if the supplier is exempt from complying with the provisions of the Act.

Therefore, to claim compensation in terms of section 61 of the Act, a consumer need only prove that the supplier supplied the goods to the consumer and the consumer suffered harm as a result of using the goods. This is commonly referred to as “”no fault liability”” because the consumer does not have to prove negligence on the part of the supplier. Any party in the supply chain is open to a product liability claim by the consumer due to liability being joint and several.

Amongst other things, if the supplier can prove that the defect did not exist in the goods at the time they were supplied by that supplier to another supplier, or that it would be unreasonable to expect the supplier to have discovered the defect considering the suppliers role in supplying the goods, the supplier may escape, or minimise, its liability under section 61.

A consumers claim under section 61 prescribes within three years after the harm is suffered or discovered, or three years after the latest date on which the consumer suffers economic loss as a result of such harm. It seems that if a consumer suffers a loss of income which continues for an indefinite period, the consumers claim may never prescribe.

Since liability will effectively arise from 24 April 2010, we strongly recommend that suppliers of goods take immediate action to assess their risk and implement preventative measures to minimise their liability under the Act with effect from 24 April 2010. In particular, suppliers should ensure that their insurance cover provides sufficient cover for product liability claims. Since product liability cover is required for consequential and foreseeable loss, it is anticipated that such cover will come at a substantial cost to the supplier. It is quite likely that such costs will be passed on to the consumer in the form of higher prices.

When the Act is fully operational, suppliers of goods and services will not be permitted to contract with consumers on terms which have the purpose, or effect, of depriving consumers of any of the consumer rights contained in the Act. This means that suppliers will no longer be able to contract out of, or contractually limit their product liability as they have done in the past.

TAXtalk: www.taxtalk.co.za.

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