- Minimize Product Liability Risk with a Well-Written Contract
- January 25, 2017
- Law Firm: The Posey Law Firm P.C. - Austin Office
- Companies who have no US-based presence also have no jurisdiction for lawsuits. If your company is importing products, components, or raw materials, several issues should be carefully clarified in a contract. While a contract will not remove all financial liability for a product safety issue, it can give very specific guidelines for recourse in the event of a problem.
Quality inspection and safety testing of manufactured products you are selling is information you should have easy access to, as well as information on any required certifications. You should have this information in writing and in English detailing processes and procedures to ensure quality. If you have any responsibility for final design approval, make sure you have access to quality and safety information before certifying acceptance. A contract should also contain information that, if previously agreed upon safety and quality inspection processes and procedures are changed by the manufacturer, the distributor will be notified.
The manufacturer you are buying from should have product liability insurance from a US-based insurance company, and they should be aware of and agree to abide by regulatory agency requirements in the US. A contract should clearly state that you as importer and distributor are not liable for a safety issue related to defects of materials or manufacturing. Further, a contract should detail procedures for safety recalls and have a plan for who is financially responsible for performing the recall.
Safety materials that come with the product should be written by someone who can communicate well in English. If your company rewrites the material, you may assume some product liability.
According to attorney Jake Posey, managing shareholder of The Posey Law Firm, PC, a contract should review how quality or safety concerns should be brought to the attention of both the manufacturer and the distributor. It should also detail the manufacturer's responsibility to provide information and legal and financial support in the case of litigation in a US court or to assist in an investigation by a US regulatory agency.
An American importer and distributor assumes some responsibility for product liability, regardless of where the product was made. A contract can clarify how safety and quality issues are to be made transparent between a manufacturer and a distributor and can detail specific requirements and procedures for keeping consumers safe. These good faith efforts can reduce product liability risk for foreign-made imported goods.