Background of the Product Liability Act
 
          The proposal of the Product Liability Act (“the Act”) was under the observation of all entrepreneurs, consumers, and other relevant organizations for almost ten years since the Office of the Consumer Protection Board proposed it to the cabinet in 2000. In spite of political turmoil and instability during the reading period in the parliament, the Act was eventually announced in the Royal Gazette on February 20th, 2008. As a consequence, entrepreneurs will now be liable for damage caused by any unsafe product sold by them after February 20th, 2009.
 
          The fundamental rationale behind the Act is that products bought and sold in the market nowadays are being produced using more sophisticated methods than in the past. Meanwhile, significant competition in the market is directly affecting the quality of the products. A producer trying to survive in the industry may reduce their cost of production in many ways, including compromising on product quality and safety. It is obvious that the government agency responsible for quality and safety control is not capable of performing a complete examination for every single product. What the government can do is merely an occasional random examination which is not sufficient to protect general consumers from unfortunate outcomes caused by unsafe products. Also, general consumers are not able to do a thorough check on every product they intend to buy as they do not possess the requisite knowledge and skills to do so. Moreover, when damage from an unsafe product is incurred by a consumer, the procedure for claiming damages available at the present time is too complicated and burdensome for general consumers to sufficiently protect their rights. Therefore, the Act was proposed in the hope of eliminating or at least minimizing, these kinds of problems.

Objectives of the law
 
          Typically, a consumer suffering from damage caused by an unsafe product is entitled to file a tort lawsuit against the product producer. However, in a tort lawsuit, a plaintiff is required to prove that the defendant (in this case, a producer) has willfully or negligently caused damage to the plaintiff. The ensuing problem is that, technical information and knowledge regarding the actual manufacturing of the product is not available or accessible to general consumers. Nevertheless such information is necessary for the plaintiff to prove the producer’s intention or negligence as required by law. Without such information, consumers are unlikely to achieve their legitimate compensation.

          In order to improve consumer protection and eliminate the aforesaid obstacle in the tort law mechanism, the Act was proposed on the basis of the strict liability principle, in which the suffering consumer is only required to prove that the damage was caused by the alleged unsafe product. For the remainder of the proceedings, the burden shifts to the producer or importer to prove why it should not be held liable.

          Besides the objective of reducing the burden of legal proceedings for suffering consumers, another objective of the Act is to deter entrepreneurs from producing or importing unsafe products. The exposure of entrepreneurs to product liability lawsuits means that they will be motivated to produce or import products with care.

Who may be liable and who may be exempted under the law?

          Pursuant to the Act, all entrepreneurs shall be jointly liable for damage incurred from an unsafe product (which is movable property of all kinds) which has been sold to a consumer. The term “entrepreneur” has a broad definition including:
          (1) a producer or a person hiring another to produce,
          (2) an importer, 
          (3) a seller who cannot specify a person in (1) or (2), and
          (4) a person using a trade name, trademark, sign, or wording of, or by any other means, convincing other persons that he or she is a person in (1) or (2).

          Meanwhile, the term “produce” also has a broad definition. “Produce” means make, mix, blend, decorate, assemble, invent, modify, transform, adapt, select, pack, froze, or radiate, including any other act with similar characteristics. Therefore, effectively, according to the Act, an entrepreneur is any person involving in a process of production or importation of all movable properties.

          A person who will not be regarded as an “entrepreneur” under the Act is a product seller who can specify a producer, a person hiring another to produce, or an importer of the product; and a seller of primitive agricultural products which have not been “produced” yet. In addition, provision of services and selling of immovable property are not subject to the Act. 

Specific criteria for liability

          An entrepreneur will be held liable under the Act to any person who has suffered damage from the unsafe product sold by the entrepreneur when all of the following criteria are met: 
          (1)  Damage exists. Whether it is damage to life, body, physical or mental health, or           property. Nevertheless, damage to the unsafe product itself is excluded. 
          (2) Such damage was caused by the unsafe product whether by:
                    (a) error in the production process, or
                    (b) error in design, or
                    (c) lack of use or maintenance instructions, warnings, or product information, or
                    (d) the above mentioned information was provided but it is incorrect or insufficient.
          (3) That unsafe product was “sold”  to a consumer.

          Upon satisfying the criteria above, the complainant is not further required by law to prove the entrepreneur’s intention, which otherwise would have been required under normal tort law.

          There is one important factor that needs further consideration. Whilst the Act prescribes that an entrepreneur will be liable to a complainant when “the product has been sold to a consumer”, the term “consumer” has not been defined in the Act. Even though the Act does not require a person eligible for compensation to be a consumer, “selling to a consumer” is a condition precedent to the liability of an entrepreneur. The question posed then, is who qualifies as a consumer? For example, one company manufactured and sold an unsafe machine to another company. The machine then exploded and caused the entire factory of the buyer to be burnt to the ground. The buyer has clearly suffered damage. But has the machine ever been sold to “a consumer”? Does the latter company qualify as a consumer within the scope of the Act and enjoy all protection provided therein? This kind of situation may lead to problems of interpretation.

          The term “consumer” as defined in the Consumer Protection Act B.E.2522 (1979), as amended in 1998, is as follows:

          “Consumer” mean a person who buy or obtains services from a business man or a person who has been offered or invited by a businessman to purchase goods or obtain services and includes a person who duly uses good or a person who duly obtains services from a businessman even he/she is not a person who pays the remuneration.

          In other words, “consumer” under the Consumer Protection Act means anyone who purchases a product from a businessman for any purpose. If this definition is used, as the closest legal definition available, for the interpretation of the term “consumer” under the Act, all selling by a businessman will become “selling to a consumer”, and thus all manufacturers and importers may be liable under the Act regardless of the fact that products sold by them are non-consumer products.

          However, if the term “consumer” under the Act is to be interpreted by its general meaning used in common sense, then a person using a product for non-commercial purposes, an entrepreneur selling non-consumer products (such as the problematic scenario involving two companies above) will never become liable under the Act since the product in question will never be sold to a consumer.

          As discussed earlier, the objective of the Act is to protect consumers who are not capable of thoroughly inspecting a product they are going to buy. Therefore, it would be unjust to thrust the burden of proof upon the product manufacturer or importer when the buyer is also a business entity. Thus, the term “consumer” should be interpreted using common sense, and not by the closest legal definition. Unfortunately, there is no precedent judgment by the Supreme Court on which of these two interpretations the court would favor. 

Who can bring a case to the competent court?
 
          When all the legal criteria are met, a complainant can exercise its rights under the Act by bringing the case to a competent court. Moreover, the Act also allows other persons (e.g. the Office of the Consumer Protection Board or an association or foundation certified by the Office) to bring a case to the court on behalf of a complainant.

          During the parliament reading, the principle of class action was also proposed for incorporation in the Act. Pursuant to this principle, the defendant will be bound by one judgment to compensate everyone suffering from its actions even though they were not parties to the lawsuit. However, the class action principle was not incorporated into the Act at the final stage because the principle had been proposed as an amendment to the Civil and Commercial Procedure Code. When the Code is successfully amended, the class action principle will be applicable not only in product liability cases, but in other kinds of commercial case as well.

Standard of proof 
 
          Contrary to the procedure in a tort lawsuit, a complainant (or other persons bringing the case to the court on behalf of a complainant) in a product liability lawsuit is not required to prove whether the damage was a result of a willful or negligent act. Moreover, a complainant is not even required to prove whose action the damage has resulted from (if more than one entrepreneur is being sued in the same case).

           A complainant is only required to prove that:
           (1) the damage was caused by the unsafe product, and
           (2) the unsafe product was used and maintained in an ordinary course.

Defenses

            An entrepreneur cannot defend itself by claiming that it did not willfully or negligently cause damage to the sufferer since the Act imposes strict liability on all entrepreneurs. Entrepreneurs will become liable for damage incurred from products produced or imported by them unless they can prove the following:

           (1) the entrepreneur’s product is not an unsafe product i.e. it does not have error in design or production process, and an entrepreneur has correctly and clearly specified use and maintenance instructions, warnings, and product information; or
           (2) the sufferer had previous knowledge before use that the product was unsafe but he or she still purchased it; or
           (3) the damage was caused by improper use or maintenance by the complainant despite the fact that instructions, warnings, and product information were given correctly and clearly by the entrepreneur.
    
           Other than these three defenses, an entrepreneur who produced the unsafe products by order of an employer, or produced only some components of the unsafe products for a third party manufacturer, will not become liable for damage to a complainant if he or she can prove that the product’s unsafe qualities resulted from designs or instructions of the employer which the entrepreneur could not foresee; or resulted from the assembling process or provision of inappropriate use and maintenance instructions, warnings, or product information by the manufacturer, as the case may be.

Liabilities

          Other than damages or compensation prescribed in the Civil and Commercial Code or other special laws to which a complainant may be entitled, the Act has also prescribed clearly that the court has the authority to impose damages to an entrepreneur for mental damage  caused to a complainant. This clear prescribing of damages for mental damage eliminates the potential for controversies related to whether the court has the authority to grant such damages, which exist in the realm of tort law. Nevertheless, proving of mental damage may not be easy in practice.

          In cases where an entrepreneur produced, imported or sold the unsafe products with knowledge that they are unsafe, or did not know that fact by gross negligence, or were aware of the unsafe qualities after the products had been produced, imported, or sold, but did not take any appropriate action to prevent the damage, the court has the authority to impose punitive damages of not more than two times the amount of the actual damages caused to the complainant. The court will consider all relevant and surrounding facts in determining and imposing punitive damages.

          The Act does not impose criminal liability, even though it was once proposed during the parliament reading.

How to minimize potential legal risks?
 
          Things that an entrepreneur can do in order to minimize their legal risk from liabilities under the Act are as follows:

• Producers and importers should control the quality of products they are producing or importing to achieve compliance with relevant standard for that kind of product. It should be noted, however, that product manufacturing standard certification from any government agency will not shield any producer from liabilities under the Act.
• When the Act comes into full force, the insurance industry will, as has occurred in foreign countries, provide insurance coverage for the risk of product liabilities. Entrepreneurs should obtain insurance as appropriate to their industry.
• Appropriate documents e.g. use and maintenance instructions, warnings, or product information should be correctly and clearly prepared and attached to all products sold.
• It should be noted that a ‘non-liable clause’ or disclaimer in a sale contract between an entrepreneur and their customer is not legally binding and will be declared null and void.
• Products sold to consumers within one year from the date that the Act is publicly announced in the Royal Gazette will not be subject to the Act, as the drafters wanted to give entrepreneurs time to adapt. Unsafe products that have already been produced or imported which are not commercially correctable should be recalled for elimination or sold to consumers within such period.
• When an entrepreneur is aware of the product’s unsafe qualities or when damage to a consumer has occurred, the entrepreneur should use their best efforts to correct or mitigate the damage in order to avoid punitive damages which may be imposed by the court.
• Negotiations with all complainants are another way to avoid punitive damages. If the complainants have settled their case out of the court, the court will not have any case opportunity to impose punitive damages.
• Statute of limitations for a product liability case is three years starting from the date that a complainant identifies both the damage suffered and a person to be held liable, but not exceeding ten years from the date the product was sold. Therefore, an entrepreneur should clearly specify the name of the product producer or importer in order to enable the three-year period to be triggered immediately when a complainant is aware of the damage. The statute of limitations will be suspended during the period of negotiations.