Are You Part of a Product Supply Chain? Beware the CPA

A3The Consumer Protection Act (CPA) exposes you to some harsh remedies if, for example, a consumer suffers harm from a product supplied to him or her.

Affected businesses should take steps to reduce their exposure to such liabilities as they may be jointly and severally liable to compensate the consumer. These claims could be huge.

Brief summary

A producer or importer, distributor or retailer of any goods is liable for any injury or loss due to —

  1. Supplying any product that is not safe,
  2. A product failure, defect or hazard in any goods, or
  3. Insufficient or no instructions or warnings of any danger posed to the consumer by the product.

Significantly, there is no requirement for there to be negligence involved by anyone in the supply chain supplying the goods – you are “strictly liable” for any harm suffered by a consumer.

It is also worth bearing in mind that the supplier of products definition includes installers and anyone providing access to the goods – if that includes you, it is worth clarifying your position by taking expert advice.

The “harm” for which you face liability means:

  • Death, injury or illness to a person,
  • Economic losses, or
  • Loss or damage to physical property.

Your to-do list

In terms of 3 above, detailed instructions should be given to the consumer on the uses and potential dangers of the product, when the product is purchased.

If you are a distributor or retailer of the product consider getting an indemnity from the producer of the goods. Understandably, this may be difficult to get but if you cannot get it, seek written assurances that all standards of production are met as are all quality controls.

Another avenue is for the various parties in the supply chain to cross-indemnify each other. Thus, for example, a distributor may indemnify the other parties whilst he holds the product in stock, the retailer will do likewise in terms of supplying a pamphlet setting out all known product risks to consumers, and the manufacturer will indemnify the other parties on production processes.

You could also get the consumer to sign that he or she is aware of the risks of the product and is prepared to still purchase the product. The difficulty with this is there is no certainty that it will negate the “harm” clauses.

There is plenty to think about with this legislation. It is worth taking expert advice in protecting yourself.

One good thing though is that the quality and standard of goods should rise, which is to the benefit of us all. Already consumers are increasingly using the CPA to lodge claims for product defects.

This article is a general information sheet and should not be used or relied upon as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your financial adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

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