Product liability: managing the risks when launching a new product

It can take many years of experimentation and investment to develop a product which fulfils your original vision and design brief. As you start to plan how to take the product to market it is important to ensure that it is both safe and fit for purpose and that your marketing and product documentation highlight any safety issues.

The financial and reputational damage that can flow from marketing, manufacturing or selling a defective product can be huge, and the penalties, and any legal action that may arise from it, can be just as serious.

Such issues can affect businesses of all sizes, as indeed they have very recently, irrespective of the quality of your controls or research and development procedures. However, the risks can be dramatically reduced with the benefit of early legal advice as Selwan Yousif, commercial law expert with Thackray Williams explains.

When will a product be defective?

For instance, all consumers have the statutory right that “every contract to supply goods is to be treated as including a term that the quality of the goods is satisfactory”. A product will be defective when it does not allow or assist the person using it to do so in a safe manner. In addition, liability will usually arise where harm is caused as a result of the defective design or manufacture of a product or through a failure to provide appropriate warnings where there the product contains hazardous features.

Example:
A business launching a new line of cleaning products can reasonably expect a consumer to realise that if it contains bleach it will be dangerous. There will be no liability for supplying a dangerous product, but there will be liability if the business fails to label the product as being corrosive or potentially harmful and the consumer is injured because they were unaware of its potentially harmful nature.

It does not matter that you were not aware that a defect existed at the time the harm occurred.

What are the risks?

The risks to businesses in launching new products without proper planning and advice are illustrated by the experience of CoYo Yoghurt, a vegan food company who discovered that their range of vegan yoghurts contained milk.

The error resulted in a hasty product recall, an investigation by the Food Standards Agency and the need for a public apology on Twitter. Inevitably, the reputational effect on the business has been profound, with the financial cost yet to be publicised. The full story is available at http://www.bbc.co.uk/news/uk-43143993.

The bringing to market of defective products, from breast implants to cars with sub-standard emissions, can result in large scale group actions being brought by consumers who have suffered some loss or harm as a result of using or consuming such products. These actions can result in enormous financial liability for both compensation and legal costs.

In addition it is possible that regulators may become involved, many of whom can impose large penalties of their own.

How can we help?

By tailoring our advice to your business and the type of products you produce, we can assess the particular risks you face and your capacity to deal with potential claims and provide bespoke advice on the steps you can take to limit the extent of your exposure. Specifically, we can:

• assist in ensuring that products supplied are accompanied by sufficient information about safe use and properly drafted product warnings;
• review contractual warranties, draft contracts and any exclusion of liability clauses you currently rely on to ensure that they are effective and up to date;
• review your terms and conditions;
• advise on procedures for record keeping and reporting complaints to ensure that any issues arising can be dealt with quickly; and
• help devise appropriate plans and procedures for a product recall where necessary.