Chapter 23: Product Liability - Thomson Reuters

153Ch 23: Product Liabilityabnormally dangerous things and activities, but the marketing of ordinaryproducts does not fit that description. Its rationale is different. 165Both fairness for the consumer and accident deterrence combine in placingresponsibility for defective products squarely on the manufacturer. Throughmarketing techniques manufacturers seek to create implicit consumer relianceon product safety. Consumers are ill equipped to make their own assessment ofa product’s safety, while the manufacturer is in a strategic position to controlquality of production and design. The cost of accidents should be “internalised”to the enterprise that is the best cost-avoider; and in so far as that cost is passedon by the producer to the customer, it may not only reflect itself in competitivepricing but the cost will be spread among all consumers of the product. Theprice of the product will in effect include the cost of insurance 166 for injury fromdefective products.The negligence regime only imperfectly achieves these objectives. The injuredconsumer is in a singularly disadvantageous position in carrying the burden ofproof. Strict liability already controls the relation between buyer and sellerbecause of the warranties in the contract of sale; to extend it betweenmanufacturer and ultimate consumer merely permits a direct action whereformerly the same result could mostly be achieved by successive claims up theladder of vertical privity.The warranties implied by statute into a contract for the sale of goods 167served as a bridge to strict liability in tort. American courts simply discarded theprivity requirement and extended the contractual warranties to consumers notin privity with the seller. 168 Australian courts were not so bold but the bridgewas made for them by legislation. Enacted in 1978, theTradePracticesAct1974(Cth) Part V, Division 2A originally extended warranties, more modestly, only tothe ultimate purchaser, thereby replacing contractual by vertical privity(warranties run “with the goods”) and leaving only non-buyers (bystanders)beyond the pale. 169 The last step was to complete the transformation byextending protection to any person injured by the defective product. That wasdone in 1992, with the enactment of Part VA of the Trade Practices Act 1974(Cth). Part V, Division 2A applied only to consumer goods; Part VA applied toall goods. 170 With effect from 1 January 2011, Part VA became Part 3-5 of theAustralianConsumerLaw and theTradePracticesAct1974 (Cth) was renamedthe Competition and Consumer Act 2010 (Cth). 171 The implied warrantiescreated by Part V, Division 2A were replaced by a set of statutory guarantees inSubdivision 1A of Part 3-2 of the Australian Consumer Law.Although the Competition and Consumer Act 2010 (Cth), s 131C clearlyprovides that nothing in theAustralianConsumerLaw is intended to exclude orlimit the concurrent operation of any State or Territory law “whether written orunwritten”, questions have been raised on several occasions, including once inDRAFT165 See the extended discussion by Stapleton, Product Liability (1994), Part 2 (Theory); alsoRichardson, “Towards a Test for Strict Liability in Tort: A Modified Proposal for AustralianProduct Liability” (1996) 4 TLJ 24.166 For the role of insurance see ALRC, Product Liability Research Paper No 2 (1989), ch 5.167 These warranties are considered below, in [23.180]ff.168 Prosser, “The Assault Upon the Citadel” (1960) 69 Yale LJ 1099 and “The Fall of theCitadel” (1966) 50 Minn L Rev 791.169 See [23.210] below.170 Laws v GWS Machinery Pty Ltd (2007) 209 FLR 53 at 85, [161]-[162] (Part V, Div 2A didnot apply to tractor tyre; Part VA did).171 The Australian Consumer Law is Sch 2 to the Competition and ConsumerAct 2010 (Cth).session: 5 October 28, 2010 page no: 18 folio no: 153@syd-tlrapp-p19/syd-tlrapp-p191/CLS_law/GRP_flemings/JOB_update10/DIV_19PROOF COPY