Privity of Contract

There are a whole series of steps and parties involved in manufacturing a product and
bringing to the consumer. Each of these steps will involve separate contracts for goods or
services along the way. This can potentially pose problems for the consumer. If the product is
defective, how, where and who caused the defect? It may have been poor quality materials,
an error in the manufacture process, poor storage or transport conditions between factory and
distributor or rough handling in delivery.

Ultimately the consumer has one contract – between them as buyer and the seller of the
finished good to them. While Sale of Goods legislation implies terms of quality and
description, it only affects parties to the contract. Privity of Contract limits the consumer. The
buyer cannot sue these other parties under contract law because he/she does not have a
contractual relationship with them.

Customer can sue the Retailer, in contract law. The consumer Is not party to contracts with
the product manufacturer or distributor and therefore cannot sue in contract law. Liability
may be passed back along the chain if e.g. the Retailer sues the Distributor under and in turn
the Distributor sues the Manufacturer. This chain of liability may be broken by rules on
exclusion of liability in sales contracts between Manufacturer, Distributor and Retailer where
deemed to be ‘Fair & Reasonable’ and not Consumer based sales.

Terms implied by ss.13-15 of Sale of Goods Act 1893 [Re Quality & Description] cannot be
excluded where the buyer deals as a consumer.

S55(4) 1893 Act [ as subs. S22 1980 Act) provides that:

“In the case of a contract of sale of goods, any term of that or any other contract exempting
from all or any of the provisions of section 13, 14 or 15 of this Act shall be void where the
buyer deals as consumer and shall, in any other case, not be enforceable unless it is shown
that it is fair and reasonable. (Note: for caselaw on Fair and Reasonable:

see pp.210/211 White- where she gives an interesting insight on what will be considered to be
fair and reasonable exclusion for some of the contracts discussed above and more case
A valid exclusion clause in Contracts A or B above may prevent actions based on those
contracts from succeeding.

Product Guarantee
Product Guarantee is a document from the manufacturer guaranteeing the quality of the
goods and offering remedies such as repair or replacement of the goods (on certain terms)
should they prove defective. Generally referred to as Manufacturer’s Guarantees or
Warranties. Product guarantees can be provided free, or bought or a combination of both (e.g.
1st year free with an option to extend by way of purchase for a longer period.) At common
law, the status of such guarantees is uncertain because there is no privity of contract between
the buyer (consumer) and the manufacturer. Therefore it is unclear as to the legal basis for
enforcing such a guarantee. Ss 15-19 of the 1980 Act has gone some way to resolve much of
the uncertainty.
See also EC (Certain Aspects of the Sale of Consumer Goods and Associated Guarantees)
Regulations 2003 (consumer-focussed)

Section 15 of the 1980 Act – Defines a product guarantee as:

“Any document, notice or other written statement, however described, supplied by a
manufacturer or other supplier, other than a retailer, in connection with the supply of any
goods and indicating that the manufacturer or supplier will service, repair or deal with the
goods, following purchase.”

A Product Guarantee Must be in writing and oral guarantees are outside scope of legislation.
Guarantee can be provided by any of the parties in the supply chain (manufacturer,
distributer, wholesaler, importer) – BUT NOT the retailer (who already has privity of
contract with the buyer). This Applies to the supply of goods and not just sale of goods
arrangements. The Act does not define if it is provided free or paid for, therefore, it can be
assumed both types including extended warranties are covered.

Section 16 of the 1980 Act describes the minimum guarantee, and it states that a guarantee
must:
 Be clearly legible
 State clearly the supplier’s name and address
 State clearly the duration of the guarantee
  State clearly the procedure for presenting a claim
 The claim procedure shall not be more difficult than ordinary commercial procedures
 State clearly what the supplier undertakes to do
 Provide clear details of what charges apply, if any

Section 16 (6) 1980 Act states that Failure to comply with requirements is an offence.
Although it is not stated, it is assumed such failure does not affect existence of guarantee
itself.

Section 6 of the 1980 Act sets out the penalties for Non Compliance:
“Fine not exceeding £500 (€635) or 6 months in prison (Summary Conviction). Fine not
exceeding £10,000 (€12,700) or 2 years in prison (Indictment)”

ss 17 - 19 1980 Act – Liability under a Guarantee Manufacturer / Supplier & Seller may be
liable under guarantee to buyer

S 19 (1) of the 1980 Act sets out the liability of manufacturer & Other suppliers:
 The Buyer can maintain an action against any manufacturer or supplier who fails to
observe the terms of the guarantee as if they has sold the goods to the buyer and
committed a breach of warranty
 The Terms of guarantee are given contractual effect as if they were warranties (not
conditions)
 Where a term of a guarantee is breached, a buyer can maintain an action for damages
against the manufacturer/supplier for breach of warranty BUT buyer cannot reject the
goods or terminate the contract.
 A court may make an order of specific performance – i.e. order the seller or
manufacturer/supplier to take action to observe the terms of the guarantee as an
alternative to awarding damages.
 Buyer for s19 includes all persons who acquire title within duration of guarantee
including done and successor – attaches to goods – not the person / owner.

S17 1980 Act provides the liability of seller and S17 (1) states that:
“Where Seller delivers a guarantee to the buyer, howsoever it is delivered, the seller is
liable to the buyer for observance of the guarantee.
S17(4) states that: “These rights are additional to the buyer’s rights under s19 of the 1980
Act.
This applies where retailers sell goods which contain a guarantee in their packaging which
cannot be inspected before purchase – but Sellers can avoid liability by expressly excluding
themselves at the time of delivery of the goods s17(1)”

S17 1980 Act – Liability of Seller

 S17 (1)- Where Seller delivers a guarantee to the Buyer, howsoever it is delivered,
Seller is liable to the buyer for observance of the guarantee.
 S17(4)- These rights are additional to the buyer’s rights under s19 of the 1980 Act.
This applies where retailers sell goods which contain a guarantee in their packaging
which cannot be inspected before purchase. However, Sellers can avoid liability by
expressly excluding themselves at the time of delivery of the goods s17(1)

Ss 17 & 18 of the 1980 Act expressly make manufacturers and sellers liable for guarantees.
S18 in particular clarifies that the rights of a buyer under a guarantee are additional to their
rights at common law and under statute

The important thing to note is that the legislation does not provides in any way that the
manufacturer ought to provide a guarantee. Statutory obligations provide no legal obligation
to offer a guarantee, but once actual guarantee is offered, they have to observe the guarantee.

The statutory provisions contain no legal obligation to offer a guarantee in the first place and
The legislation does not prescribe a minimum promissory content for guarantees.

After Sales Services:

After sales services do not relate to honouring a guarantee. Sellers often offer an after sales
service as a competitive edge or a way of marketing their sales offering to the customer. The
services are generally offered by the retailer directly or outsourced by the retailer to a
specialist service firm to do so. Generally the manufacturer is not involved, other than
ensuring availability of spare parts to enable the after sales service to be carried out. There is
no obligation on sellers to offer after-sale services. It is only when a seller makes such an
offer that the legislation comes into play. Such an offer is contractually binding in the form of
implied warranty. Generally the coverage of After sales service is fairly minimal under the
1980 Act.

S12 - 1980 Act – After Sales Services

In a contract for the sale of goods there is an implied warranty that spare parts and an
adequate after-sales service will be made available by the seller in such circumstances as are
stated in an offer, description or advertisement by the seller, on the manufacturer’s behalf or
on his own behalf, for such stated period or, if no period is stated, for a reasonable period.

S12(2) -1980 Actprovides that “The Minister can, by order, define, in relation to a class of
goods, what such a reasonable period is. This power has never been exercised.”

S12(3) – 1980 Act Any terms seeking to limit this provision are void

Product Liability
In addition to any contractual liability arising under either the sale of goods legislation or any
guarantee/after-sale service offer provided at the time of sale, a supplier of goods may be
liable to a buyer for losses caused by a defective product under Common Law or Statute.

Common Law
At common law a supplier of goods can be liable to a consumer if, as a result of negligence in
the production or distribution of a product, the product is defective and causes injury to a
consumer or other user. In such cases, the supplier is liable under the Law of Tort.

The seminal case is Donoghue v Stevenson [1932] AC 562. In this case, May Donoghue’s
friend bought her a ginger beer at a Café in Scotland. The half-decomposed remains of a dead
snail poured out of the bottle at the end. May Donoghue suffered shock at the sight of the
snail and fell ill (gastroenteritis. She took legal action against Francis Minghella (Café
Owner) and David Stevenson (Ginger Beer Manufacturer).

The court found that no contract existed between the café owner and Donoghue – her friend
had bought the ginger beer as a treat. The case against the café owner was dropped and costs
awarded against the plaintiff, Donoghue. Stevenson also argued lack of contract but as he had
actually made the offending product, the case was appealed to the House of
Lords.

On appeal, the House of Lords found in favour of the plaintiff (Donoghue). Lord Atkin held a
duty of care was owed to ‘…persons who are so closely and directly affected by my act that I
ought reasonably to have them in contemplation…’

Stevenson made ginger beer intended for public consumption. He therefore owed a duty of
care to the consumer regardless of having sold it to a café in between and having no direct
contract with the consumer. Donoghue v Stevenson created an obligation on manufacturers,
independent of contract, to take precautions against injuries resulting from the ordinary,
nonnegligent use of [Link] the ultimate consumer – and thereby changed the nature of
consumer law for good.

Back in 1994 was the first Irish opportunity to build on Donoghue v Stevenson in Kirby v
Burke & Holloway [1944] IR 407. The facts of the cases are similar to Donoghue – larvae
contaminated jam.

Gavan Duffy J broadly approved Donoghue decision. In his book, Quill remarked that
Though Gavan Duffy also relied more on judicial writings of US Justice Oliver Wendel
Holmes he still arrived at the Donoghue decision.

The main advantage of Tort here is that it is not restricted by the doctrine of Privity of
Contract in contract lawSo i. t’s not just the immediate purchaser who can take a claim in tort
law, but any consumer of the product (remember, Donoghue didn’t purchase the ginger beer,
it was given to her), however distant from the manufacturer. As noted by Quill (Torts in
Ireland, 3 EDN, p 91) it is the ‘Ultimate Consumer’ principle.

The two main challenges in taking a claim under Tort Law is

Need to Prove Negligence – Onerous burden of proof on Plaintiff. They are 3 key elemts:

a. Duty of Care - Prove that the Defendant owes a duty of care to the Plaintiff
 b. Breach of that Duty of Care- Prove that there was a breach in that duty of care by the
Defendant
c. Causation- Prove that breach by the Defendant actually caused the resulting loss to
the Plaintiff

Manufacturer
Lambert v Lewis [1982] AC 225 Manufacturer of a towing hitch owed a duty to passing
motorists who were hit by a runaway trailer which detached from a vehicle due to a design
defect in the hitch.

Suppliers
Keegan v Owen [1953] IR 267 Defendant supplied swing boats to a carnival and was held to
be under a duty to keep them properly maintained. Plaintiff was injured when stopping one of
the boats by hand (wire nail caught on the plaintiff’s hand). Held defendant, as supplier, was
[Link] is worthy to note that plaintiff was a voluntary assistant helping with the
operation of the swing boats and not a user or a consumer. He was still owed a duty because
defendant had provided insufficient staff to operate the swing boats and could, therefore,
have anticipated the presence of an assistant provided by the carnival organisers

Repairer
Power v Bedford Motor Co & Harris Bros Ltd [1959] IR 391 Bedford Motors liable to driver
of a car because they negligently repaired the steering. Harris Bros also liable for negligently
failing to discover the defect during the course of subsequent maintenance work on the car.
Lavery J
‘…It is clear in principle that the obligation is not confined to manufacturers of goods but
extends to persons undertaking repairs to articles which will be dangerous to users who
should be in contemplation if there is a want of reasonable care in the work. It must also
apply to persons doing work on an article which they foresee would be used by others
without examination…’

Manufacturers, repairers, installers and assemblers, suppliers and retailers all owe a duty of
care in relation to the products for which they are responsible.
O’Leary v Buckley (1995) Plaintiff lost the sight in one eye from a stone ejected from a
lawnmower that defendant had repaired. Costello P declined to impose liability on him as the
accident was attributable to a design defect which …a reasonable person in [his] position
carrying out repairs and testing the machine afterwards could not reasonably have discovered.
Costello P further observed that …it is different for somebody in the position of an expert
nationally in machines than an ordinary person, such as Mr Buckley…

Note: Where repairs are carried out by a nonexpert, a duty of care may not be recognised.
(see case below)

Brown v Cotterill (1934) 51 ILTR 21 Plaintiff injured by a tombstone due to being erected
negligently. Plaintiff was not a consumer or user of the product, but court regarded her as
coming within the scope of the mason’s duty. Mason could not shift responsibility onto the
person who had contracted with him to erect the tombstone because: …persons who employ
monumental masons to erect tombstones rely on the mason’s skill and not on their own
examination, and there is therefore, nothing in their acceptance of the mason’s work to
exempt him from liability for defective work…

To Whom is a Duty of Care owed?

=
Donoghue v Stevenson [1932] Based on the Neighbour principle. Anyone the defendant
should reasonably have foreseen as being harmed.
=
Power v Bedford Motor Co [1959] Purchaser of car was killed as a result of negligent repair
work carried out by Defendants for the former owner. So the repairer (garage) was liable .
&
Brown v Cotterill [1934] The mason owed a duty of care to a child in a churchyard.

What is the Standard of Care?

=
Reasonably Prudent Manufacturer E.g. Manufacturers of products, retailers and suppliers
may fall under a duty to warn those who are likely to use the products of dangers attaching to
such use.
=
O’Meara v O’Brien and B Braun Medical Ltd (High Court, 30 June 1999 ) Carney J imposed
liability on manufacturer for failing to mention known dangers associated with use of an
autoclave machine. P suffered severe burns when steam emanated from the machine.

What if the danger only becomes known after the product is released?
=
Continuing Duty At Common Law a Manufacturer/Supplier owes a continuing duty (i.e. they
must make customers aware of any new information on a product).
=
Hobbs (Farms) v Baxendale Chemical Co. [1992] 1 Lloyd’s Rep. 54 Baxendale produced a
polyurethane product described as ‘self -extinguishing’. Hobbs used product to insulate his
shed and it caught fire. Between Hobbs purchasing the insulation and the fire Baxendale
became aware that it should not describe the product as ‘self - extinguishing’. Failure to
inform Hobbs of this meant it was liable to Hobbs for 80% of the damage caused. .

Causation
Prove that breach by the Defendant actually caused the resulting loss to the Plaintiff.
Causation is difficult to prove and it must prove that it must prove that the Manufacturer’s
negligence actually caused the injury or damage.

Cassells v Marks and Spencer p.l.c. [2002] 1 IR 179

Mrs Cassells bought a summer dress for her sixyear-old daughter in Marks & Spencer.
Daughter stood too close to the fire and her dress caught fire and she was burned. The dress
had a permanent label attached to the inside of the dress warning to keep away from fire.
When the dress stood in the shop there were two temporary labels warning of the
flammability of the dress. Supreme Court held that Marks and Spencer had not been
negligent and were not liable to the daughter
O Byrne v Gloucester, Unrep, SC 3 November 1988
15-year-old girl burned when standing next to a gas fire wearing skirt manufactured by
defendant. Defendant knew of flammability of skirt but did not put a label on it warning of
danger. Court held defendant was negligent. Had girl known of skirt’s flammability, she
would have been more careful. Lack of label caused girl to be burned.

Duffy v Rooney and Dunnes Stores (Dundalk) Ltd, High Court, Laffoy J, 23 April 1997,
affirmed Supreme Court, 23 June 1998.
Jacket purchased for toddler by grandmother. Toddler stood next to fire wearing jacket and
was burned. Laffoy J: given potential risk of harm, reasonably prudent manufacturer would
have put label on jacket. Therefore defendant was negligent. BUT: Grandmother admitted she
would have bought jacket whether or not it had a warning on it. Also, child was wearing
pants and top which both had warning labels on them. Also there was no fireguard in place.
Court held that there was a lack of causation: cause of the injury was the lack of a fireguard
and not the lack of a label.

Limits to type of loss that may be compensated under Tort Law

Traditionally, tortious liability was restricted to ‘dangerous defects’ (defects which involved
physical damage to the person or other property, as opposed to defects in the product itself).
However, liability for non-dangerous defects was recognized in Junior Books v Veitchi
[1983] 1 AC 520. Followed in Ireland in Ward v McMaster [1985] IR 29. Murphy v
Brentwood DC [1991] 1 AC 98: UK has reverted its position: liability under the Donoghue v
Stevenson principle should be confined to dangerous defects and should not apply to
qualitative [Link] in Ireland remains unclear

Statutory
Defective Products Act 1991 amended EC (Liability for Defective Products) Regulations
2000. came from EC Directive on Product Liability (1985) amended Council Directive
1999/34.

Defective Products Act 1991

Section 2, 1991 Act: The producer shall be liable in damages in tort for damage caused
wholly or partly by a defect in his product. The onus is on the injured party to prove the
damage, the defect, and a causal link between the two.
Section 4, 1991 Act: The onus shall be on the injured person concerned to prove the damage,
the defect and the causal relationship between the defect and damage. Note: Liability under
the Act is STRICT. All a plaintiff needs to do is prove the damage, the defect, and that the
damage was caused by the defect. Producer will be liable for an injury caused by a defective
product regardless of how careful he was in producing it.

In Henderson v AEI Inc [2005] IEHC 390, 12 May 2005 The case concerned breast implants
that had leaked a carcinogenic substance. Master Honohan in the High Court held that: The
liability is in no way contingent upon proof of any want of care. It is a strict liability. There is
no standard of care. There is no need to prove carelessness... if the plaintiff proves the
necessary elements of her claim under the Statute (defect, damage, causal link) she will have
succeeded.

Each of the 5 Key Elements below is defined in the act

Product: (Section 1, 1991 Act). ❑ This means all movables, including primary agricultural
products which have not undergone initial processing, and ❑ includes movables even though
incorporated into another product or into an immovable, whether by virtue of being a
component part or raw material or otherwise, and electricity.

Injured Person: (Section 1, 1991 Act). ❑ This means a person who has suffered damage
caused wholly or partly by a defect in a product or, if he has died, his personal
representative” (Section 1, 1991 Act). ❑ This includes anyone who buys the product,
receives it as a gift, user of the product or innocent bystander.

Producer: Section 2 1991 Act. The manufacturer or producer of a finished product, or any
raw material or of a component part of a product, or in the case of the products of the soil, of
stock-farming and of fisheries and game, which have undergone initial processing, the person
who carried out such processing, or any person who, by putting his name, trade mark or
other distinguishing feature on the product, has held himself out to be the producer of the
product, or any person who has imported the product into a Member State from a place
outside the European Communities in order, in the course of any business of his, to supply it
to another.

This term is widely defined. Encompasses not only the obvious candidates- those who
manufacture finished products, component parts or raw materials and processors of
agricultural produce- but also importers and suppliers in certain instances and persons
holding themselves out as producers. A person may be regarded as holding himself out as a
producer by engaging in conduct such as putting a trade mark on the product or using some
distinguishing feature of this business in connection with the product. Although the Act
indicates the type of conduct which may give rise to a finding of holding out, it does not
clearly specify when it will do so.

A supplier can be regarded as a producer where the identity of the producer cannot be
discovered by reasonable steps. The injured party requests the supplier to identify the
producer. That request is made within a reasonable time of the occurrence of the damage
(while the injured party is unable to identify the producer. The supplier fails to supply the
information (or the identity of his own supplier) within a reasonable time of receipt of the
request.

Defect / Defective: Section 5 1991 Act

For the purposes of this Act a product is defective if it fails to provide the safety which a
person is entitled to expect, taking all circumstances into account, including— (a) the
presentation of the product,
(b) the use to which it could reasonably be expected that the product would be put, and
(c) the time when the product was put into circulation. A product shall not be considered
defective for the sole reason that a better product is subsequently put into circulation. This list
is not exhaustive and other relevant circumstances may be considered by a court (e.g.
Instructions, warnings etc.)

Damage: Section 1 (1) 1991 Act

Damage means: (a) death or personal injury, or
(b) loss of, damage to, or destruction of, any item of property other than the defective
product itself.
Thus any damage to the product itself cannot be compensated for under this legislation and
pure economic loss cannot be compensated for under this legislation. Contrast: In a claim in
contract law, an award of damages for breach of a contractual term may include damages for
death, personal injury, damage to other property and economic loss.

Defences for Producers

Section 6 1991 Act This sets out defences for producers.

A producer is not liable under the Act if he proves that:
1. He did not put the product into circulation;
2. The defect came into existence after the product was put into circulation;
3. The product was not manufactured for sale or for any form of distribution for an economic
purpose;
4. The defect is due to compliance with statutory requirements;
5. At the time the product entered circulation, the defect could not be discovered
(‘Development Risks’ Defence) 6. He is the manufacturer of a component or producer of a
raw material and the defect is attributable to a design flaw in the product. The courts will
look at scientific knowledge beyond the relevant industry:

EC Commission v UK [1997] CMLR 923

Relevant state of knowledge is not confined to established practices within the particular
industrial sector in which the producer operates. Rather, it is based on scientific knowledge
generally, including the most advanced level of such knowledge, provided that knowledge
was accessible at the time when the product in question was put into circulation.

Time Limitations
Section 7, 1991 Act:
❑ Limitation period for actions under the Act is 3 years from the date of the damage or
injury.
❑ Where such damage or injury is not immediately apparent, the limitation period starts to
run from the date on which the injured party became aware or should reasonably have
become aware of the damage, the defect and the identity of the producer. Section 7(2), 1991
Act:
❑ However, a final cut-off point for producers is provided for in the legislation and no claim
can be brought more than 10 years after the product was put into circulation.

The Sales Law Review Group made a number of recommendations as regards guarantees and
after sale services:
❑ There should be single set of statutory rules on product guarantees in future legislation. ❑
Future legislation should retain existing statutory approach whereby rights under a guarantee
apply to all purchasers of goods covered by a guarantee.
❑ The implied warranty as to the availability of spare parts and an adequate after sale service
at s.12 of the 1980 Act should be retained in future legislation.

pWhite argues that there is a “strong case for direct producer liability for consumer buyers”:
The strongest argument for imposing direct liability is that in many instances the producer
will be the person responsible for the consumer’s complaint as where the defect originates in
the manufacture or design. Moreover, the consumers expectations concerning the
goods...may derive from advertising and promotional materials from the producer as much as
sales talk from the supplier. In certain circumstances, it may be easier to pursue a claim
against the producer than the seller