Your business risk in selling products to a consumer
The Consumer Protection Act 68 of 2008 (CPA) came into effect on 1 April 2011. A concise definition of consumers are persons to whom goods or services are marketed, who have entered into transactions with suppliers, users of particular goods or recipients/beneficiaries of services and if the consumer is a juristic person then it will be considered a consumer if it has a turnover or asset value of less than R2 million.
Section 55, states that a consumer has the right to receive goods that are reasonably suitable for the purposes for which they are intended, must be of good quality, in good working order and free of any defects.
The above section brings about the implied warranty in terms of section 56 wherein a consumer can within six months after the delivery of any goods return the goods to the supplier, without penalty and at the supplier’s risk and expense. If the goods fail to satisfy the requirements and standards contemplated in section 55, the supplier must, at the direction of the consumer, either repair or replace the failed, unsafe or defective goods or refund to the consumer the price paid by the consumer, for the goods.
It however is the latter part of section 55 regarding products being free of any defects that has made a substantial change to our common law in terms of product liability. In terms of the common law, a seller of goods is strictly liable to a purchaser for any latent defect in goods (ie. a defect which would not be apparent upon inspection by an ordinary person and which makes the goods unfit, or partially unfit, for the purpose for which they are intended to be used).
In terms of the common law, a seller of goods is strictly liable to a purchaser for any latent defect in goods (ie. a defect which would not be apparent upon inspection by an ordinary person and which makes the goods unfit, or partially unfit, for the purpose for which they are intended to be used).
Section 61 of the CPA has now changed the common law position. It provides that irrespective of negligence each producer, importer, distributor or retailer of a particular product is strictly liable for any harm caused wholly or partly as a consequence of:
supplying any unsafe goods;
had a product failure, defect or hazard in any goods; or
the consumer was provided with inadequate instructions or warnings in relation to any hazard arising from or associated with the use of the product.
Each producer, importer, distributor and retailer of the product is jointly and severally liable, meaning that a person who suffers harm from a defective product can bring a claim against any person in this supply chain.
Therefore a consumer will no longer be required to prove that the manufacturer or other person in the supply chain acted negligently in manufacturing or supplying the goods in question.
This is risky for any business, practising as a retailer to end consumers of a product. It is imperative that goods purchased are inspected prior to the resale to consumers. Furthermore, such businesses should ensure that they have well drafted indemnity clauses in their agreements with their suppliers in which their liability is limited by the supplier agreeing to make good any loss or consequential damages that it may incur.
Please do not hesitate to contact our Commercial Department at Kevind@dmkisch.com or Merciaf@dmkisch.com or 011 324 3025/33 with any queries, or for further information on the Consumer Protection Act, or if you require our assistance in drafting or amending your indemnity agreement.