Every business runs risks. Whether it is a large, medium, or small-scale enterprise; registered or otherwise. The failure or success of businesses is largely dependent on their ability to manage their risks. Such risks could be economic, political, or market risks. In addition to the foregoing risks, players in the manufacturing sector are exposed to likely risks associated with personal injuries resulting from the use of their manufactured products.
Due to globalization and the development of international trade, many international businesses in the distribution chain, including manufacturers, distributors, and retailers, export a variety of products to different countries, putting them at a higher risk of lawsuits filed against them for personal injury claims from consumers who use their products in distant countries.
Such lawsuits arising from Product Liability claims could potentially cost these businesses millions of dollars in settlements, payment of damages, and legal fees. In 2002, an international tobacco company paid $28 million in damages to a claimant for concealing the dangers of smoking cigarettes which resulted in lung cancer.
Therefore, there is an urgent need for businesses to effectively manage risks resulting from product liability claims along with other risks. As there are potential costs involved in product liability claims.
Product Liability Claims:
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Product Liability claims are actions brought by consumers against the manufacturers, distributors, or retailers of a product, either jointly or severally, for injuries sustained by the consumers as a direct result of their usage of the product. The idea is that persons who produce these products should be held liable when a defect in the product causes injuries to a consumer while using the product. These businesses are considered to have a legal and moral right to ensure the safety of consumers using their products.
Types of Product Liability:
There are three types of product liability under which a consumer may bring product liability claims. These include:
a. Manufacturing Defects
This defect occurs during the manufacturing process, or due to the use of substandard and poor-quality materials. With manufacturing defects, the design of the product may be safe, but there was a defect in the process of assembling the product. For instance, allowing foreign materials into an edible product, attaching parts of products incorrectly or leaving sharp edges are all considered manufacturing defects.
b. Design Defects
This defect occurs when the product is inherently defective due to the product design regardless of the manufacturing process. This is usually a design flaw. Such as a mechanical defect in cars that causes them to flip over at sharp bends or poorly integrated AI in self-driving cars that causes accidents. A self-driving company’s AI has reportedly caused 17 fatal crashes since May 2022. In February 2023, the company had to recall more than 360,000 vehicles equipped with Full Self-Driving over concerns that the software prompted its vehicles to disobey traffic lights, stop signs and speed limits.
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c. Failure to issue a Warning or Breach of Warranty.
This occurs when the products are inherently dangerous as part of their operation in the normal cause. In these cases, failure to issue a warning may lead to product liability claims by an injured consumer. An example of a failure to warn was when due to the failure of a tobacco company to warn about the dangers of smoking cigarettes, a US Court awarded $28 million to a consumer. This resulted in a warning on every box of cigarettes sold around the world.
Product Liability Claims in Nigeria:
· Federal Competition and Consumer Protection Act, 2018.
· Standards Organisation of Nigeria Act, 2015.
· National Agency for Food and Drug Administration and Control Act.
· Sales of Goods Act.
· Common Law.
In Nigeria, Product Liability developed as part of the common law, applicable by the Statutes of General Acceptability (SOGA). As such, for a considerable time, Product Liability claims were brought under either the Common Law Tort of Negligence or the Doctrine of Strict Liability.
Product Liability claims may also be brought under the general laws of contract and the Sales of Goods Act 1893, where there has been a breach of contract based on misrepresentation of merchantability of goods.
The Federal Competition and Consumer Protection Act (FCCPA), 2018 is presently the foremost law regulating product liability claims in Nigeria. Among its functions, the FCCPA seeks to protect Nigerian consumers against exploitative practices,
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defective goods, and misrepresentations in contracts for the supply of goods and services, in other words, it establishes the grounds for product liability claims in Nigeria. These provisions are contained in sections 114 – 140 of FCCPA.
The Standards Organisation of Nigeria (SON) Act, 2015 and the National Agency for Food and Drug Administration and Control (NAFDAC) Act, 2004 stipulate standards that products are required to meet before they can be sold in Nigeria. These standards ensure the quality and safety of the products sold. A mark of certification from the SON and the NAFDAC, where applicable, presupposes compliance with adequate standards set for manufacturers and could go a long way in establishing a defence against product liability claims.
Causes of Action for Product Liability Claims in Nigeria:
An action for negligence may be brought against the manufacturer by a consumer. This is because the law presupposes that there is a duty of care owed by the manufacturer to the consumer in the manufacture of the product and such duty has been breached by the manufacturer. Under Nigerian Law, a manufacturer owes a duty of care to consumers who use its product. This was established in Donoghue v Stevenson (1932) AC 562 and has been cited with approval and applied by the Supreme Court in Nigerian Bottling Company Limited v Ngonadi  1 NWLR (Pt 4) 739.
In Donoghue v Stevenson, Mr. Stevenson was held liable to Mrs. Donoghue who fell ill after consuming a bottle of ginger beer produced by Mr. Stevenson, which unknown to her, had a decomposed snail in it. The House of Lords in that case held that the manufacturer, Mr Stevenson owed a duty of care to her which was breached because it was reasonably foreseeable that the failure to ensure the product’s safety would lead to harm to consumers.
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In Nigerian Bottling Company Limited v Ngonadi  1 NWLR (Pt 4) 739, the Supreme Court confirmed the decision of the lower Court which found the Nigerian Bottling Company liable for injuries sustained by Mrs Ngonadi when an Evercold refrigerator it sold to her exploded and led to severe injuries.
2. Strict Liability
An action commenced under the Doctrine of Strict Liability, as opposed to Negligence, does not require proof of the fault of the manufacturer or breach of a duty of care. The manufacturer is liable once the product is defective, even if the manufacturer was not negligent in making the product. In Okwejiminor v Gbakeji & Nigerian Bottling Company PLC  5 NWLR (Pt 1079) 172, the manufacturer was held liable for the injuries suffered by the consumer even though it was shown that the manufacturer took all reasonable care.
The FCCPA in sections 136-138 provides for strict liability on the part of the manufacturers where it is established that the consumer has suffered an injury as a result of the use or consumption of their products.
Consumers may also apply to the Standards Organisation of Nigeria under the Standards Organisation Act where it is shown that a manufacturer’s products are hazardous products and have not complied with the provisions of the Act.
4. Breach of Contract
Where an action is founded on breach of contract a party need not have suffered any injury to institute a product liability claim. Such a claim may be commenced under contract law or the sale of goods laws of the various states of Nigeria when a party has breached the terms of a contract in respect of
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the specification of the goods supplied or has failed to supply goods that are fit for purpose or are of merchantable quality.
Defences against Product Liability Claims in Nigeria:
1. Defence Of Non-Defect:
A company can raise a defence that its product was not defective, and the injury was caused by something else. In the case of Boardman V. Guinness (Nig) Ltd, (1980) N.C.L.R 109, the consumer claimed that his injuries resulted from the sediments contained in the beer bottle that he drank as he became ill as a result of the drink. The lab reports found bacteria, but the bacteria had no causal link to the illness. The manufacturer argued that their beer brewing process was an internationally recognized standard, and the Court found in their favour and dismissed the claim.
2. Defence of Assumption of Risk:
A company can argue that the user knew about the risks associated with the product and voluntarily assumed those risks. For example, a person who rides a motorcycle knows that there is a risk of being injured in an accident. Under Nigerian Law, the defence of consent, or volenti non fit injuria, may avail a company if it is shown that the consumer was aware of the risk associated with using the product and consented to the risk, expressly or impliedly.
In John Holt v. Leonard Ezeafulukwe (1990) 2 NWLR (pt. 133) 520 C. A, the consumer knew that some of the fish purchased were in a bad state; the consumer was warned against accepting bad fish. In fact, the health authorities had marked the stock for destruction and subsequently destroyed the stock. The consumer still went ahead to select from the bad stock. The Court of Appeal held that the consumer’s claim could not succeed because he knew the nature of the product. In other words, he assumed the risk.
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3. Defence of Misuse:
In its defence, a company can argue that the product was misused, and that the injury was caused by the misuse, not by a defect in the product. For example, a person who uses a power tool to cut metal when it is designed to be used for woodcutting could be considered to have misused the product, and the company cannot be held liable for injuries resulting from such misuse.
4. Defence of Statute of Limitations:
The company can argue that the claim is time-barred. In Nigeria, under Section 8 (1), Limitation Act and Section 9 Limitation Law, Lagos where a product liability claim is based on negligence, it must be filed within three years of the date of the injury. On the other hand, where the action is based on a simple contract, the action must be filed within six years of the contract—Section 7 Limitation Act and Section 8 (1) (a) Limitation Law, Lagos. Where a product liability claim is not filed within this time, the action is deemed statute-barred.
5. Defence of Contributory Negligence:
The company can argue that the user was contributorily negligent and that their negligence contributed to the injury. For example, a person who fails to wear a seatbelt in a car accident could be considered to be contributorily negligent.
6. Third-Party Liability:
If a component or part of the product was manufactured by another company, the liability may shift to that entity if the defect can be traced to the product. However, for this to apply it must be expressly stated in the
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contract between the manufacturer and the third party. Likewise, where an act of a third party directly caused the damage and not a defect in the product, the Company may not be held liable.
In Shell Petroleum Development Company of Nigeria Ltd. v. Otoko and Ors, a stranger removed a bolt from the manifold which led to the spillage of crude oil on the Andoni Rivers and Creeks. The Court held that where the damage is shown to be a result of a malicious third party, the defendant cannot be said to have caused it. The consumer cannot even claim that the defendant should have taken precautions against the act of the stranger.
Risk Management Strategies for Companies:
1. Product Testing and Quality Control:
Implementing rigorous testing and quality control procedures will ensure that products meet safety standards and are free from defects. While achieving zero defects is unlikely, constant testing and quality control may constitute evidence that such a defect is such was not reasonably foreseeable, and the Company may likely avoid liability for product liability claims brought under the tort of negligence.
2. Proper Documentation:
Maintaining detailed records of every aspect of product development, including design, manufacturing, and quality control can be invaluable in demonstrating due diligence and crucial in establishing the lack of defects.
3. Product Liability Insurance:
Investing in Product Liability Insurance may help mitigate the financial risks associated with potential claims. Companies should also ensure that the product liability insurance covers potential legal costs and damages. This is
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especially important in Nigeria’s evolving legal landscape. Insurance companies such as NSIA Insurance and Sanlam Insurance are Nigerian Insurance Companies that offer product liability insurance.
4. Warnings and Instructions:
Providing clear and comprehensive warnings and instructions for product use, as well as investing in professional design and placement of product warnings and instructions can help in establishing the assumption of risk defence. Product warnings and instructions should be easily understandable to the average consumer.
5. Regular Updates on Regulations and Regulatory Compliance:
Staying informed about changing Product Liability regulations in Nigeria and ensuring regular review and compliance with relevant standards will check any potential action resulting from noncompliance with the provisions of the law. These include regulations passed by the FCCPC as well as sector-specific regulators such as the Standard Organisations of Nigeria, and NAFDAC.
6. Supplier and Contractual Agreements:
Drafting clear agreements with suppliers and subcontractors that specify quality standards and outline liability in case of defects is crucial, especially when using components or materials from third-party suppliers. Establishing clear contractual agreements allocates responsibility in the event of a defective product.
7. Recall Protocols:
Developing procedures for swift product recalls if defects are discovered can mitigate damage to a company’s brand by enhancing the ability to promptly remove faulty products from the market. This also demonstrates a commitment to consumer safety.
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8. Employee Training:
Continuously training employees on product safety protocols, quality control and compliance with regulations will ensure they are aware of their roles in maintaining product quality.
9. Customer Feedback:
Encouraging and actively collecting customer feedback aids early detection of potential issues with products. Setting up a system to investigate and address any reported issues may pre-empt and avoid product liability claims.
10. Legal Counsel:
Establishing a relationship with legal experts well-versed in Nigerian product liability law can provide ongoing guidance and help with legal strategies. Such a legal expert can guide companies on risk management and defence strategies.
In Nigeria, as in other countries, companies must prioritize product safety and be prepared to defend against product liability claims. Effective risk management involves a combination of preventative measures, compliance with regulations, and a well-thought-out legal defence strategy.