New Product Manufacturer? What Do You Need to Know About Liability Before You Go to Market?

Finance & Money Blog

There are a number of different scenarios where a product manufacturer can be found liable under Australian law for loss or damage to a consumer. The legal system is set up to determine whether a manufacturer was at fault or not, and whether any compensation should be awarded to the plaintiff. As a new manufacturer, what do you need to know before you go to market, in order to protect yourself as much as possible?

General Entitlement

Several factors will be taken into account by any court when determining a case. Generally, products are deemed to have safety defects if the standard of safety is not what the public should be "generally entitled" to expect. A number of elements are considered, including fitness for purpose, packaging, trademarking, instructions given or warnings issued, reasonable expectations and time of supply. In order to avoid liability, it's a good idea to inspect similar products that your competitors may have placed in the marketplace. Determine both what they do and what they do not do in order to avoid any problems.

Determining Responsibility

If you are responsible for making or putting together your product, or if you are an importer where the manufacturer does not have a base in Australia, then you need to be concerned about safety defects. It doesn't matter if the actual promoter of the product is another person or entity. If you're ultimately the manufacturer, then the liability will rest with you. If you are in business with any other entity, be it an importer or otherwise, be sure to clarify any potential liability. You need to be completely happy with their standard of work as well before you proceed.

Who Can Claim?

Consumers can seek remuneration to help them with costs encountered through injuries, property damage or economic loss. It is up to the court to decide how much compensation is due, should the plaintiff win. Note that the protections in place for consumers do not apply to B2B relationships or do not cover damage to any commercial property. As is it always difficult to assess what type of claim could be brought by consumers in an open market, it's best to talk with insurers about liability insurance, to cover all eventualities.

Manufacturer Safeguards

There are certain safeguards to protect you against frivolous lawsuits. For example, if the claimed defect was not apparent at the time the product was supplied, the claim will be rejected. If your product is a component of a larger product and the safety defect only arises when that larger project is completed, then the "finished goods" manufacturer may be on the hook.  Once again, you must properly clarify your relationship with any other entity in the entire product supply chain in order to safeguard your individual position.

What Can You Do to Help?

It is important to have a good quality assurance system in place, as well as detailed design and production processes that make sound and responsible business practice. A manufacturer must always keep solid records and be up-to-date in developing customer information documents, with an eye to safety.

It's also important to have proper product liability insurance in place to cover any actions that could be brought under Australian Consumer Law. For more information, contact a business such as National Corporate Broking Pty Ltd.


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