Product Liability Law In India: An Evolution – Dodd-Frank, Consumer Protection Act

PRODUCT LIABILITY LAW IN INDIA: AN EVOLUTION

Product liability law provides the consumers with legal recourse
for any injuries suffered from a defective product. It is estimated
that millions of people around the globe are negatively affected by
defective products, and that the manufacturers or sellers end up
paying large amounts for products-liability insurance as well as
damages. A product is required to meet the ordinary expectations of
a consumer, therefore, responsibility lies with the manufacturers
and the sellers to ensure safety and quality of the product as per
description. This, however, has not always been the case. The
theory of caveat emptor, meaning let the buyer beware,
governed the general consumer law from 18^th century up
until early 20^th century.¹ Where the
lifestyle was modest and all the products that were locally made,
and therefore any consumer who suffered any damages from a
defective product could directly confront the manufacturer and the
intervention of courts or legislature was not required. However,
with the changes in the means of production and consumption, such
as industrial revolution, technological developments, among others,
have led to the development of products-liability law due to the
rise in issues arising out of defective products.

The modern market for consumers for goods as well as services
have undergone drastic transformation with the emergence of global
supply chains, rise in international trade and the rapid
development of e-commerce have led to not only plethora of products
and services but also new delivery systems, options and
opportunities for consumers. It has also rendered the consumer
vulnerable to new forms of unethical and fraudulent practices and
sale of products based on misleading information. Therefore, a
robust legal framework is required to regulate the industries and
protect the interests of consumers.

Very recently, the Indian Ministry of Consumer Affairs, Food and
Public Distribution made the new Consumer Protection Act, 2019
(“CPA 2019“) effective which replaced
the erstwhile Consumer Protection Act, 1986 in entirety. One of the
key features of the CPA 2019 is the concept of product liability.
Prior to this there was no specific provision under any statutes in
India which governed product liability and also there was no
comprehensive legislation regarding this. Law related to product
liability in India was essentially governed by contracts and
generally under the Consumer Protection Act, 1986, the Sales of
Goods Act, 1930, the Indian Penal Code, 1860 and certain specific
statutes pertaining to specific goods and standardization.

The CPA 2019 now provides for detailed ambit on product
liability with specific responsibilities and liabilities of a
‘product manufacturer’², ‘product service
provider’³ or ‘product seller’⁴,
of any product or service, to compensate for any harm caused to a
consumer by such defective product manufactured or sold or by
deficiency in services relating thereto. To understand the genesis
of these specific provisions and the overall concepts of product
liability introduced in the CPA 2019, it is pertinent to be aware
of the principle and the historic evolution of the product
liability law.

PRINCIPLES OF PRODUCT LIABILITY LAW

Product liability law finds its origin in the common law concept
of caveat venditor, meaning “let the seller
beware”, placing the onus on the seller for any problem that
the buyer might encounter with a service or product. Product
liability implies the responsibility of a manufacturer or vendor of
goods to compensate for injury caused by defective merchandise that
it has provided for sale. Product-liability cases have consequently
led to development in general principles of contract law and tort
law; wherein in contract law, product liability is based on the
principle of ‘warranty’, and in tort law product liability
is based on the principles of ‘negligence’ and ‘strict
liability’.

Theories of Product Liability Law

The early days of product liability jurisprudence revolved
around the principles of contract law wherein remedies were awarded
by courts upon breach of any warranty made on the product. A
warranty is synonymous to a guarantee, it can either be implied or
express, and is essentially the manifestation of nature or quality
of goods that forms the basis of a purchase. Therefore, any
non-conformity with guaranteed nature or quality of goods may
result in a product liability action by a consumer. There is
however a blurry line between a warranty and trade-talk, for
instance, representations by a salesperson of a faulty car as
“in A-1 shape” and “mechanically perfect” can
be construed as an express warranty⁵ whereas the
representations made by a salesperson of a faulty bull that would
“put the buyer on the map” and that “his father was
the greatest living dairy bull” can just be just
trade-talk.⁶ Further, the principle of warranty is often
subjected to the doctrine of privity of contract, that states that
an effected person can only sue a negligent person if he or she was
a party to the transaction with the effected person. The inadequacy
of protection offered by contract law in product liability cases,
led the courts to move towards tort law principles of negligence
and strict liability to protect the interests of the consumers.

Negligence simply means the lack of due or reasonable care, and
is often effective in cases of defective designs, warnings, and
privity. Sellers that fail to exercise due caution, fall in the
trap of negligence. However, there are many possible defences to a
claim of negligence, that make holes in such claims, such as,
proximate cause, contributory negligence, subsequent alteration of
product, misuse of product, and assumption of risk by the
plaintiff.

As the pleas of warranty and negligence failed, courts developed
the strict liability principle, wherein products that were
unreasonably defective and dangerous that the seller would be made
liable for any proprietary loss or personal injury. However, to say
that this principle is absolute would not be correct, as there
maybe disclaimers on liability of the product, or a recovery limit,
or the economic loss may not recoverable. Basis this qualified
principle, we note that the CPA 2019 also envisages some specific
exceptions to a product liability action.⁷

CASE LAW DEVELOPMENT

The concept of negligence and strict liability in tort for
manufacturer evolved in response to the issue posed by famous
English case Winterbottom v. Wright (1842),upholding the
privity requirement.In that case, a coach company contracted with
the postmaster general to provide coaches for the mail service and
to take responsibility for the maintenance of the coaches.The
plaintiff, hired by the postmaster general to drive the coach and
deliver the mail, was subsequently injured when the coach collapsed
as a result of poor maintenance.The plaintiff sued the coach
company. The court held that the driver could not recover from the
coach company because the plaintiff was not a party to the contract
for maintenance between the coach company and the postmaster
general.

About a decade later, another famous case MacPherson v.
Buick Motor Co (1916) removed the requirement
ofprivity of contractfor negligence. Theplaintiff, Donald C.
MacPherson, was injured when one of the wooden wheels of his 1909
“Buick Runabout” collapsed. Thedefendant,Buick Motor
Company, had manufactured the vehicle, but not the wheel, which had
been manufactured by another party. However, the wheel was
installed by the defendant. Evidence suggested that the defect
could have been discovered through reasonable inspection, but no
inspection was carried out. The defendant denied liability because
the plaintiff had purchased the automobile from a dealer, not
directly from the defendant. Judge Cardozo of the New York Court of
Appeals held that if a company was negligent, then it was liable,
even if it had no privity of contract with the sufferer. For the
first time, the concept of ”privity of contract”
was discarded and according to legal commentators it was
”the conquest of tort over contract.”

To prove negligence on the part of the defendant the plaintiff
is required to prove that the defendant’s conduct fell below
the relevant standard of care. However, as a matter fact it is
quite difficult to prove the standard of care, breach, and
causation of negligence. Therefore, in the early 20^th
century, many courts found it was unfair to require seriously
injured consumer plaintiffs to prove negligence claims against
manufacturers or retailers and inclined to impose strict liability.
Justice Traynor in a concurring opinion inEscola v. Coca Cola
Bottling Co.(1944), expressed that “In my opinion it
should now be recognized that a manufacturer incurs an absolute
liability when an article that he has placed on the market, knowing
that it is to be used without inspection, proves to have a defect
that causes injury to human beings“. Further, courts
began to look for facts in the cases which they could characterize
as an express or implied warranty from the manufacturer to the
consumer. The doctrine of res ipsa loquitur“the thing
speaks for itself” was also stretched to reduce the
plaintiff’s burden of proof. The concept of strict liability on
manufacturer developed further with Greenman v. Yuba Power
Products, Inc. and the theory of implied warranty of safety
came with Henningsen v. Bloomfield Motors, Inc.

In Greenman v. Yuba Power Products, Inc (1963),
Greenman (the plaintiff) had bought a gadget called
”Shopsmith,” which was a combination power tool
that could be used as a saw, drill, and wood lathe. The plaintiff
watched a Shopsmith being demonstrated by the retailer and studied
a brochure prepared by the manufacturer. Later his wife bought and
gave him one such Shopsmith. He bought the necessary attachments to
use the Shopsmith as a lathe. After working with the lathe several
times without difficulty, it suddenly threw a piece of wood
striking him in the head inflicting serious injuries. He sued both
the retailer and the manufacturer. A unanimous court held affirming
the lower court decision that the consumer could sue the
manufacturer for breach of warranty. It was sufficient that the
consumer proved that he was injured while using the product in a
way it was intended and that his injury was as a result of a defect
in the design and manufacture, of which he was not aware and which
made the product unsafe for its intended use.

In the case Henningsen v. Bloomfield Motors, Inc
(1960), the plaintiff bought a car from the defendant’s
dealership. Just ten days after delivery, the steering
malfunctioned and the plaintiff’s wife was involved in an
accident. The plaintiff sued the dealer and the car manufacturer.
The dealer argued that there was a clause in the warranty signed by
the plaintiff that freed the defendant from any liability for
personal injuries. The warranty was only for replacement of
defective parts for the period of 90 days or 4000 miles. But the
court awarded damages to Henningsen. It was concluded that with the
sale of every object there was an implied warranty of safety.
Further defendant couldn’t argue that since it was
Henningsen’s wife who suffered damages, it was not responsible.
According to the court, the warranty extended ”to every
foreseeable user of the product.”

With the advancement of time, the jurisprudence of product
liability cases have progressed on the lines of holding the
manufacturer liable for negligence in the event of an injury
sustained by the ultimate consumer due to a manufacturing defect,
irrespective of the fact that no contract existed between such
effected consumer and the manufacturer.

Cases in India on issues of product liability have been dealt by
courts basis the principles of negligence and strict
liability,⁸ while statues have been historically silent
on the provisions for liability of seller or manufactures for
defective or faulty products and services.

The Apex Court in A.S. Mittal v. State of U.P. (1989),
considered a question of law involving product liability and held
that the same would depend on the facts and evidence presented. In
Airbus Industrie v. Laura Howell Linton (1994), where one
aircraft, a scheduled passenger flight from Bombay to Bangalore, in
the course of flight while attempting to land at Bangalore airport
contacted ground approximately 2,300 feet before the beginning of
the runway and immediately hit the boundary wall. As a result, the
fuselage, the wings and other parts of the aircraft disintegrated.
With the result, 92 passengers and four crew members perished and
the remaining 54 survivors sustained injuries of varying degrees of
severity. In action by the appellants to recover compensation from
the aircraft manufactures, airlines and airport authority of India,
a claim by the respondents were made that the Texas court was a
more appropriate forum as India had no law on strict product
liability. In this regard, the Karnataka High Court rejected the
claim of the respondents and considered the liability of the
appellants on the basis of common law concepts of causation and
principles of negligence rather than strict product liability and
concluded that “a mere fact that the Indian Courts does
not have the strict product liability law, it is not wise to say
that in such a situation and parties can go without any remedy. As
it was done in Charan Lal Sahu v. Union of India (Bhopal Gas
Disaster) that such antiquated acts can be drastically amended or
fresh legislation should be enacted to save the
situation.”

Consumer markets for goods and services have undergone profound
transformation since the enactment of the Consumer Protection Act
in 1986. Prior to the CPA 2019 and the rules made thereunder, there
was uncertainty and ambiguity in the Indian legal framework for
product liability. The amendment to the Consumer Protection Act,
1986 in 1993 and 2002, failed to contemplate provisions in relation
to product liability. The consumer protection bills of 2011, 2015
and 2018 also showed the pro-consumer approach of government and
urged for the updation of laws, to correct the legal uncertainty
and lack of precedents.

All the above instances have gradually led to the enactment of
the new CPA 2019, that has provided provisions in relation to
product liability, built on the strict liability principle of tort
law and the jurisprudence laid down by the courts. Further, the
e-commerce guidelines framed under the CPA 2019 mandate the
e-commerce entities to endorse product liability construct while
requiring them to disclose proper information to consumers, thereby
enabling transparency and more protection to the consumers.
Further, the provisions under the Indian Penal Code, 1860, the
Sales of Goods Act, 1930 and certain specific statutes pertaining
to specific goods and standardization (like the Drugs and Cosmetics
Act, 1945; Prevention of Food Adulteration Act, 1954, Food Safety
and Standards Act, 2006; Bureau of the Indian Standards Act, 1986;
Agricultural Produce (Grading and Marking) Act, 1937; among others)
continue as an additional measure for the protection of
consumers.

As the legal theories regarding product liability continue to
mature, we expect to see in future further interesting judgments
delivered by the courts and new statutes coming into force.
Further, with the advent of the product liability laws in India it
would be also interesting to see how the industry and judiciary
deal with the increasing unethical and fraudulent activities by
certain consumers and whether these provisions are misused by
certain consumers to indulge in fraudulent activities.

Footnotes

1 Don Mayer, Daniel M. Warner, George J. Siedel and
Jethro K. Lieberman, “Basics of Product Liability, Sales, and
Contracts”. Available at
https://2012books.lardbucket.org/pdfs/basics-of-product-liability-sales-and-contracts.pdf
>

2 Please see sections 2(36) and 84 of the CPA
2019.

3 Please see sections 2(38) and 85 of the CPA
2019.

4 Please see sections 2(37) and 86 of the CPA
2019.

5 Wat Henry Pontiac Co. v. Bradley, 210 P.2d 348 (Okla.
1949).

6 Frederickson v. Hackney, 198 N.W. 806 (Minn.
1924).

7 Please see section 87 of the CPA 2019.

8 See for example Manubhai Punamchand Upadhya v.
Indian Railways (1995), and Banyan Tree Holding (P)
Limited v. A. Murali Krishna Reddy (2009).

Originally published 07 August, 2020

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