- •Commercial Law
- •Contents
- •Preface
- •Abbreviations
- •Table of Statutory Provisions
- •Table of Cases
- •1 Introduction
- •1 Introduction
- •2 What is agency?
- •3 Nature and characteristics of agency
- •4 The different types of agency
- •5 Conclusion
- •6 Recommended reading
- •1 Introduction
- •2 The authority of an agent
- •3 Agency by ratification
- •4 Agency of necessity
- •5 Conclusion
- •6 Recommended reading
- •1 Introduction
- •2 Duties of an agent
- •3 Rights of an agent
- •4 Commercial agents and principals
- •5 Disclosed agency
- •6 Undisclosed agency
- •7 Termination of agency
- •8 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Development of the sale of goods
- •4 Equality of bargaining power: non-consumers and consumers
- •5 Impact of the European Union
- •6 Contract of sale
- •7 Contracts for non-monetary consideration
- •8 Contracts for the transfer of property or possession
- •9 Recommended reading
- •1 Introduction
- •2 Background
- •3 Sale of Goods Act 1979, section 12: the right to sell
- •4 Sale of Goods Act 1979, section 13: compliance with description
- •5 Sale of Goods Act 1979, section 14(2): satisfactory quality
- •6 Sale of Goods Act 1979, section 14(3): fitness for purpose
- •7 Sale of Goods Act 1979, section 15: sale by sample
- •8 Exclusion and limitation of liability
- •9 Acceptance
- •10 Remedies
- •11 Recommended reading
- •1 Introduction
- •2 Background to the passage of property and risk
- •3 Rules governing the passage of property
- •4 Passage of risk
- •5 The nemo dat exceptions
- •6 Delivery and payment
- •7 Remedies
- •8 Recommended reading
- •1 Introduction
- •2 Background
- •3 Provision of Services Regulations 2009
- •4 Supply of Goods and Services Act 1982
- •5 Recommended reading
- •1 Introduction
- •2 Background
- •3 Electronic Commerce (EC Directive) Regulations 2002
- •4 Distance selling
- •5 Recommended reading
- •Introduction
- •1 Introduction
- •2 CIF contracts
- •3 FOB contracts
- •4 Ex Works
- •5 FAS contracts
- •6 Conclusion
- •7 Recommended reading
- •1 Introduction and background
- •2 Structure and scope
- •3 UNIDROIT Principles of International Commercial Contracts
- •4 Conclusion
- •5 Recommended reading
- •1 Introduction and background
- •2 Open account
- •3 Bills of exchange
- •4 Documentary collections
- •5 Introduction to letters of credit
- •6 Factoring
- •7 Forfaiting
- •8 Conclusion
- •9 Recommended reading
- •1 Introduction
- •2 Hague and Hague-Visby Rules
- •3 Charterparties
- •4 Time charterparty
- •5 Common law obligations of the shipper
- •6 Common law obligations of the carrier
- •7 Bills of lading
- •8 Electronic bills of lading
- •9 Conclusion
- •10 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Development of negligence
- •4 The move to strict liability
- •5 Types of defect
- •6 Developments in strict liability
- •7 Recommended reading
- •1 Introduction
- •2 Personnel
- •3 Meaning of ‘product’
- •4 Defectiveness
- •5 Defences
- •6 Contributory negligence
- •7 Recoverable damage
- •8 Limitations on liability
- •9 Recommended reading
- •Introduction
- •1 Introduction
- •2 Background
- •3 Enforcement strategy
- •4 Criminal law controls
- •5 Civil law enforcement
- •6 Recommended reading
- •1 Introduction
- •2 Scope of the 2008 Regulations
- •3 Prohibition against unfair commercial practices
- •4 Codes of practice
- •5 Misleading actions
- •6 Misleading omissions
- •7 Aggressive commercial practices
- •8 Commercial practices which are automatically unfair
- •9 Offences
- •10 Recommended reading
- •1 Introduction
- •2 Background
- •3 Controls over misleading advertising
- •4 Comparative advertising
- •5 Promotion of misleading or comparative advertising
- •6 Recommended reading
- •1 Introduction
- •1 Introduction
- •2 History of banking regulation: early policy initiatives
- •3 New Labour and a new policy
- •4 The Financial Services Authority
- •5 The Coalition government
- •6 Conclusion
- •7 Recommended reading
- •1 Introduction
- •2 What is a bank?
- •3 What is a customer?
- •4 Bank accounts
- •5 Cheques
- •6 Payment cards
- •7 Banker’s duty of confidentiality
- •8 Banking Conduct Regime
- •9 Payment Services Regulations 2009
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •2 European banking regulation
- •3 The Financial Services Authority
- •4 Financial Services Compensation Scheme
- •5 Financial Ombudsman Scheme
- •6 Financial Services and Markets Tribunal
- •7 The Bank of England
- •8 Bank insolvency
- •9 Illicit finance
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •1 Introduction
- •2 Evolution of the consumer credit market
- •3 Consumer debt, financial exclusion and over-indebtedness
- •4 Irresponsible lending
- •5 Regulation of irresponsible lending
- •6 Irresponsible borrowing
- •7 Ineffective legislative protection for consumers
- •8 A change of policy
- •9 Lessons from the United States
- •10 Conclusion
- •11 Recommended reading
- •1 Introduction
- •2 Crowther Committee on Consumer Credit
- •3 Consumer Credit Act 1974
- •4 Formalities
- •5 Cancellation of agreements
- •7 Documentation of credit and hire agreements
- •8 Matters arising during the currency of credit or hire agreements
- •9 Credit advertising
- •10 Credit licensing
- •11 Unfairness test
- •12 Other powers of the court
- •13 Financial Ombudsman Service
- •14 Enforcement
- •15 Consumer Credit Directive
- •16 Conclusion
- •17 Recommended reading
- •Bibliography
- •Index
275 |
3â Development of negligence |
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quality and fitness for purpose, which would include a claim for the value of |
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the product itself.6 |
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Finally, defective products may give rise to criminal liability for unsafe goods |
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under the General Product Safety Regulations 2005, SI 2005/1803, although |
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such liability lies beyond the remit of this text. However, the link is import- |
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ant since, if the criminal law framework succeeds in preventing unsafe goods |
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from reaching the market, the incidence of product-related injuries and claims |
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should be minimised. Unfortunately, this is not always the case as, on the one |
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hand, unscrupulous traders will always seek to make money irrespective of any |
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danger that the products might pose to product users and, on the other, users |
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may be prepared to use a less safe product because it is cheaper. |
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Q1 Consider the relationship between negligence, product liability and |
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contract |
as forms of remedy for product-related injuries. |
3â Development of negligence
(a)â Duty of care
Many product-related injuries are caused by faults that were introduced into the product while it was still under the control of the manufacturer and it is reasonable to expect that the manufacturer will be liable in tort in respect of injuries caused by such faults. Since the days of Donoghue v. Stevenson, itself a product liability case, a remedy has lain in tort through an action in negligence. Lord Atkin, in his oft-quoted judgment, defined the parameters of a manufacturer’s tortious liability thus:
a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer’s life or property, owes a duty to the consumer to take reasonable care.7
Of course, the decision in Donoghue v. Stevenson impacted well beyond product liability cases and underpins the whole of the modern law of negligence, with its requirement for the existence of a duty of care, a breach of that duty and a proven causal link between that breach and the damage which ensued. Only by showing the existence of all three and proof that the damage was within the bounds of foreseeability, will the claimant be able to successfully claim compensation. In the current context, however, it is the impact of Donoghue v. Stevenson on product-related injuries that is of interest. To recap the facts, the
6Damages for the defective item itself cannot be claimed in strict liability, see Consumer Protection Act 1987, s.5(2).
7[1932] AC 562, 599.
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Negligence and the rise of product liability |
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claimant claimed damages for having suffered severe gastro-enteritis after con- |
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suming some ginger beer, which had been bought by a friend and was packaged |
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in a sealed dark opaque bottle. The allegation was that, after the claimant had |
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consumed part of the drink, the remainder was poured out and found to con- |
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tain the decomposed remains of a snail. As the friend had purchased the item, |
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the claimant lacked contractual privity and so could not pursue a claim against |
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the café from which the drink had been purchased. Instead, she chose to pursue |
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a claim against the manufacturer. The Court of Session in Scotland (the events |
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having occurred in Paisley) decided that there was no cause of action. The case |
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was then sent to the House of Lords, which held that the manufacturer of goods |
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does owe a duty of care to the ultimate user of those goods. Ironically, given |
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the pre-eminence of this decision, the existence of the snail itself was never |
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proven– when the case left the House of Lords, it was remitted to the Court of |
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Session to apply the judgment to the facts of the case but the manufacturer died |
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before this could happen and the claim was settled by an out-of-court payment |
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of £100. |
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While Lord Atkin referred specifically to the manufacturer of a product, |
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there is no doubt that the principle includes wholesalers, distributors, assem- |
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blers, retailers, and anyone else handling the product, to the extent that their |
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negligent activities contribute to a fault in the product and a consequent injury. |
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Clearly, there is a duty on everyone in the distributive chain to ensure that the |
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goods are handled correctly and stored properly. Thus, for example, chilled food |
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that is meant to be stored in a chill cabinet but is allowed to remain at room |
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temperature will deteriorate faster and may cause actionable food poisoning |
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even if eaten by the specified ‘use by’ date. In this situation, it will be the person |
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incorrectly storing the food who will be liable and not the original producer |
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who packed it. |
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Q2 Consider the scope of the duty of care in product liability both in terms |
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of the people who owe the duty and the breadth of situations in which it will |
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arise. |
(b)â To whom is the duty of care owed?
Donoghue established that the duty of care is owed to those persons who would be classed as your ‘neighbours’. In answer to the question ‘Who then, in law, is my neighbour?’ Lord Atkin opined that it is:
persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called into question.8
8 [1932] AC 562, 580.
277 3â Development of negligence
In the context of a manufacturer of goods, there is no doubt that this necessarily includes the ultimate user of the product and anyone else who is sufficiently near to the product to be affected by the fault. Thus, for example, if an indoor firework has been made negligently and explodes when lit, it may injure not merely the person lighting it but also anyone standing close by. The damage might be physical, such as a burn, or property damage if, for example, a fire ensues. But it may go wider than that. If the tyre on a car has been negligently manufactured and an accident results, potential claimants would include the driver of the car together with any passengers but would also include any pedestrians or occupants of other cars that may become embroiled in the accident, as long as this was foreseeable. In respect of claims for nervous shock, it also includes those who come upon the aftermath of the accident and who have a special relationship with an injured party, e.g., the parent of an injured child.9
While the examples quoted above all relate to personal injury of foreseeable victims, the duty of care extends well beyond that. Foreseeable ‘neighbours’ to whom a duty of care would be owed would include businesses and other organisations which might suffer some property damage as a result of the negligent action of the manufacturer of the product or someone else in the distributive chain.
Q3 Does the neighbour principle adequately identify those who should have a valid tortious claim?
(c)â Standard of care
Negligence revolves around the concept of holding liable the person who is to blame for the incident and the consequent damage. As such, it is thought to be a moral approach to liability as it requires the defendant to face the consequences of his blameworthy actions. This thus demands identification of the standard of behaviour to be required of the defendant, for only by establishing the requisite level can a failure to meet it be proven. The standard of care in negligence is the standard of the reasonable man, the so-called ‘man on the Clapham omnibus’. However, the standard of care to be expected will rise in relation to the professional skills of the defendant, so that, in the words of McNair J:
The test is the standard of the ordinary skilled man exercising and professing to have that special skill. A man need not possess the highest expert skill … it is sufficient if he exercises the ordinary skill of a competent man exercising that particular art.10
â 9
10
White and others v. Chief Constable of South Yorkshire [1998] 3 WLR 1510.
Bolam v. Friern Hospital Management Committee [1957] 2 All ER 118, 121. For further discussion of the standard of care in the provision of services see Part 2 Chapter 4.
278 |
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Negligence and the rise of product liability |
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Translating this into a product-related situation, it follows that manufac- |
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turers must exercise the skills appropriate to the manufacture of that product |
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range. This requires them to use relevant knowledge and skills to avoid negli- |
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gent manufacture and thereby ensure that a product will not cause injury.11 As |
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will be seen later in the chapter, a similar approach underpins strict liability, |
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with its emphasis on the safety of the product. The standard of care applicable |
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in negligence is decided by reference to what it was reasonable to expect of the |
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manufacturer at the time that he manufactured the item, as it would be totally |
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unreasonable to require him to exercise knowledge and skills not available at |
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the time of manufacture. Negligence must be assessed in context– you cannot |
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‘look at [a] 1947 accident with 1954 spectacles’.12 |
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(d)â Intermediate inspections |
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Thus far, we have presumed that the product will be transferred from the manu- |
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facturer to the ultimate injured user without any intermediate inspection. |
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Indeed, Lord Atkin delineated the duty of the manufacturer on the basis that |
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he intends the goods ‘to reach the ultimate consumer in the form in which they |
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left him with no reasonable possibility of intermediate examination’.13 Where |
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the product is sealed in a tin, bottle or jar, as occurred in Donoghue v. Stevenson |
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itself, it is clearly the intention of the manufacturer that the product will reach |
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the ultimate user in the form in which it left him and hence liability will fol- |
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low. It would, in those circumstances, be unreasonable for the manufacturer to |
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assume that any intermediate examination will occur. Consequently, the manu- |
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facturer must ensure that the goods have been produced properly and, further, |
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that they do not contain any extraneous substance that might adulterate them |
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or pose a risk to the ultimate user. Where an intermediate examination does |
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occur, the manufacturer will remain liable in respect of latent inherent defects |
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that the examination would not reveal as long as it was his negligence that intro- |
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duced the fault. If an item is clearly defective and a retailer, knowing that fact, |
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proceeds to supply it and an ultimate user is subsequently injured, the retailer |
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will also be responsible for his negligence in allowing the supply to take place.14 |
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11 |
Failure to manufacture a safe product might also give rise to criminal liability under the General |
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Product Safety Regulations 2005, SI 2005/1803. |
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12 |
Roe v. Minster of Health [1954] 2 All ER 131, 137, per Denning LJ. The case concerned the |
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adulteration of an anaesthetic in 1947. Denning LJ was at pains to point out in his judgment |
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that negligence must be considered in the context of the knowledge available at the time of the |
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alleged negligence and cannot be judged against knowledge that became available later, even if |
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the new knowledge would affect the defendant’s actions if the same situation were to arise again. |
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13 |
[1932] AC 562, 599. |
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14 |
He would also be criminally liable under the General Product Safety Regulations 2005, reg. |
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8(1)(a), which makes it an offence to ‘expose or possess for supply, or offer or agree to supply, |
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or supply a product to any person which he knows or should have presumed, on the basis of |
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the information in his possession and as a professional, is a dangerous product’. The offence is |
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committed by a ‘distributor’ who is defined in reg. 2 as being ‘a professional in the supply chain |
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whose activity does not affect the safety properties of a product’. |
279 |
3â Development of negligence |
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(e)â Breach of duty and causation
Having established that the defendant owes a duty of care to the claimant, the latter must show that there has been a breach of that duty and that he has suffered recoverable damage as a consequence. In practice, this will involve the claimant proving that the defendant’s actions have fallen below the standard of care to be expected of him and that, as a direct consequence of that failure, the claimant has suffered injury either to his person or his property. It is insufficient merely to establish that the defendant has breached the requisite duty of care. It is crucial that the causal link between that breach and the injury suffered by the claimant is proven.
When assessing whether a breach of care has occurred, the essential question is whether the manufacturer has fallen below the standard of care to be expected of him. This will include not merely considering the physical properties of the item but also any instructions for use and warnings that the manufacturer has chosen to provide to prospective users. He has a right to expect that users of products will exercise appropriate care for their own safety and wellbeing and, hence, there is no need to warn of obvious dangers.15 However, he is required to take into account vulnerable groups who foreseeably may use his product. The most obvious group is children and thus the standard of care to be expected of a manufacturer would include the provision of warnings stipulating a lower age limit for users of the product where appropriate, e.g., ‘not suitable for children under 3 years of age’. Equally, foreseeable use or abuse of a product by children might require the use of extra safety devices such as childproof lids on pharmaceutical containers. Of course, children are not the only potentially vulnerable group and manufacturers may need to make extra or alternative provision for the elderly or the disabled and provide them with appropriate warnings. The provision of warnings to a professional person who is going to use the product in a service offered to the ultimate user will often suffice.16 Thus, warning a doctor of the side-effects of a prescription-only drug would satisfy the requisite standard of care, the duty then moving to the doctor and pharmacist to pass on appropriate warnings to the patient. By contrast, warnings in respect of over-the-counter drugs must be included with the product either on the outer packaging or on a user leaflet in the box. There is no requirement that full details of a warning about a product be included in both places.17 In that situation, the manufacturer has a right to assume that the user will read the leaflet and not discard it.
15Farr v. Butters Brothers & Co. [1931] 2 KB 606.
16Holmes v. Ashford [1950] 2 All ER 76, in which a hairdresser ignored the warning on a bottle of hair dye to do a patch test prior to use. The customer suffered dermatitis from the use of the
product but the court held that the warning given to the hairdresser was sufficient to absolve the manufacturer from liability for negligence. The court held that it would be ‘unreasonable and impossible’ to expect the manufacturer to give a warning in a form that would definitely come to the attention of every customer.
17See Worsley v. Tambrands Ltd (unreported, 3 December 1999), a product liability case involving the use of tampons. A warning of the risk of toxic shock syndrome when using the product was