For any new business owner who plans to produce or sell goods, it’s important to understand the extent to which you are liable for the safety and quality of the goods. The Australian Consumer Law (ACL) allows for consumer protection if recipients of your goods experience loss or damage as a result of the poor quality of the products. Below we set out what safety defects refer to as well as how you can protect your business from any consumer claims.

What is a Safety Defect?

A safety defect is a legal term determined by the court. The court considers many factors before it decides that a safety defect has occurred. It is not only limited to the good’s quality but also how the business or individual represented the good. For example, the good’s description needs to match the use of the good.

Further, the court will also look at instructions or warnings relating to the assembly of the product and details about what a consumer would reasonably expect to do with the product.

Are you Liable for Safety Defects?

Manufacturers may be liable for a safety defect. A traditional understanding of a manufacturer includes a business that creates or assembles a product. The ACL, however, expands this definition to cover retailers and businesses who import the product if the manufacturer has no office in Australia. Other businesses that may be held liable include those who use their own brand name in relation to the sale of the product. For example, if another business manufactures jewellery in Indonesia and you sell it in Australia under your own brand, you may still be considered a manufacturer.

What Does Compensation Mean?

An affected consumer needs to have experienced a loss or damage from the use of the goods. This can include: 

  • Physical injuries;
  • Financial losses that arise as a result; or 
  • Damage to private property. 

If you were to, for example, use a defective lawn mower that subsequently caused damage to your property, you could assess the financial loss and claim this back to the manufacturer. There are, however, certain losses that consumers cannot claim including losses arising out of damage to commercial property.

What if You’re Not Liable?

There are statutory defences in place that relate to the defect not being present at the time of supply. Also, if you are a business only providing a part of a final good, it is most likely that the business assembling all the parts would be considered liable. A safety defect may not be yet known due to the current scientific or technical knowledge.

There are certain ways your business can ensure your products remain safe including a detailed compliance and monitoring system to ensure that all products meet quality standards. 

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If you are a business involved in the supply of goods, whether you are a retailer, importer or manufacturer, get in touch with LegalVision’s consumer lawyers to ensure that you are complying with Australia’s Consumer Law.

Kristine Biason

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