A change in Consumer Protection Act, 2019 has enhanced the parameters of product liability on part of companies. Now, the manufacturers or sellers are liable for any harm arising from a defect or deficiency in a product or service and the consumers would now be able to claim compensation against such liability.

Prior to 2019, the product liability framework was covered by many legislations resulting in lower compensation amount for consumers. However, that has been changed and now the companies will have to gear up for mitigation of possible product liability risk that may arise in the future.

According to experts, possible risk mitigation strategies should include the following while drafting a business contract:

• The manner in which and the extent to which a party will indemnify the other in case of any future product liability risk.
• Further, the payment clause must allow a party to set off product liability claims against amounts payable under the agreement.
• The insurance clause must also clearly mention the requirement of additional insurance cover to mitigate or counter the product liability risk.
• Also, the contract must allow for liability set-off due to contributory negligence by the supplier or the distributor. Under contributory negligence, a person cannot claim damages from another party if it is found out that an injury partly arose due to his own negligence.
• Further, an organization must carry out a due diligence of existing as well as prospective suppliers’ market standing, quality record, credentials and manufacturing practices to avoid or minimise product liability risk that may arise in the future.
• And finally, manufacturers, service providers and traders will have to ensure that their contracts with consumers don’t be ‘unfair’ in the form of imposing excessive security deposit, disproportionate penalty, unreasonable charges, unilateral termination without sufficient cause etc.

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