Expanded Protection against Defective Products
Product liability is one of the most important parts of the Tort Law. The Tort Law expands consumer/buyer protection against defective products. Manufacturers are subject to strict or "no-fault" liability for the quality of their products. However, a manufacturer is entitled to seek contribution from the seller or a third party if the damages are due to the fault of such seller or third party.
Unlike previous laws that restricted compensation to amounts equal to specified multiples of the products' values, manufacturers and sellers may now be held liable for "punitive damages", without a specific limit, if they have knowingly produced or sold defective products which have caused human injury or death. However, the Tort Law does not set out any criteria as to how the punitive damages are to be calculated.
The Tort Law also gives an additional protection to consumers with a right to request manufacturers and sellers to eliminate and remove the danger of unsafe products. If defects are found in products already sold in the market, manufacturers and sellers are obliged to issue product warnings or recall such products. Failure to take timely action may subject the manufacturers or the sellers to liability in damages.
The Tort Law is a significant step forward for China's product liability legal framework in that it clearly expands the scope of individual rights protected under PRC law.
With the passage of the Tort Law, an injured party in China may now seek punitive damages from either manufacturers or sellers. This will likely benefit consumers, while subject the manufacturers or sellers to an increased risk of product liability. However, the effectiveness of the Tort Law remains to be seen as this will still be subject to the realities of an individual's ability to access the PRC courts and his procedural rights, and thereafter the enforcement of remedies through the PRC legal system.
Given that foreign owned enterprises normally tend to be scrutinized more closely when a defective product is identified, they should put in place proper pre-emptive measures, such as implementing effective quality control systems, develop product recall plans, review their current contracts and relationships with business partners and revisit their insurance policies and other risk management measures to avoid being exposed to potential liability under the Tort Law.
This is precisely where OLN's China Practice Group and its experienced team members can offer invaluable assistance.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.