An Introduction to Product Liabilty: Terminology

For decades, the German Producer Liability Act has recognized the obligations of (industrial) producers in the field of design, production, instruction and after-sales product monitoring. In 1990, this was joined by the German Product Liability Act, which stems from a Product Liability Directive from Brussels. Today, both systems apply in parallel.

From industry’s perspective, German law essentially distinguishes between contractual and statutory liability: Contractual liability is basically only considered between contractual partners, i. e. in genuine supply relationships. This issue is not dealt with any further here, although there are many pitfalls that await in contracts in cross border business, which would make an early, judicial contractual review seem a recommended course
of action.

We generally talk of the risk from product or producer liability not when it concerns contracts and disputes between suppliers but when it concerns people who assert a claim for damages: Action is brought against a product’s producer due to personal injury or material damage that his product is supposed to have caused (whether or not this is the case is generally decided after a complex process, usually involving a variety of
specialists). The injured party makes a claim against the producer for financial compensation; compensation for non-pecuniary damages may also be involved if there has been damage to health.

Two areas of statutory liability

Statutory liability is again subdivided into two categories: Liability resulting from unlawful acts, known as liability in tort, which is based on an accusation or, in legal terms, on fault. In law, fault is re-described either as “accountability” or with the expressions of guilt: “intent” and “negligence”. If the law allows the mere presence of a certain risk to be enough to justify the producer’s liability (with no interest in the question as to whether at least negligence was involved), we talk of strict liability. This comes into effect much earlier and is
therefore particularly critical for producers.

The above-mentioned liability in tort of the producer is regulated in § 823 of the German Civil Code (BGB); strict liability for defective products comes from the Product Liability Law (ProdHaftG). Its content can only be applied if the accident or damage occurred in Germany. This is also called the “scene of crime principle”. If the accident or damage occurs in a different country, the local liability law will apply in most cases. This
may be more flexible in a particular case, but may also be stricter than German law. In any case it is an unfamiliar law; in incidents abroad such as these, legal advice must be obtained quickly so that mistakes are not made out of pure ignorance.

The section that follows will look first at strict liability from the Product Liability Act and then outline liability in tort. Although in practice both liability principles can usually be applied in parallel, there may be some important differences, particularly with regard to the scope of liability. These will be dealt with separately.