From the perspective of a small business owner or operator, it is helpful to understand how product liability laws may affect your company.  This is especially important if your business organization is engaged in the manufacturing, distribution, or sale of products to the public. 

Issues such as product liability and defective products are typically associated with larger businesses like corporations, major retail chains, or joint business ventures.  However, products liability laws apply just as well to small businesses and start-up companies.  Small businesses are bound by state and federal laws when it comes to providing products that are safe and effective. 

What Factors are Considered When Determining the Liability of a Small Business?

Most products liability claims are based on general legal theories such as negligence, strict liability, and occasionally breach of warranty.  The most common factor in most products liability claims is that of negligence.  Negligence can be proved when:

  • The small business owes a duty of care to the consumer (i.e., providing a safe product and including warnings of possible dangers associated with the product)
  • The business breached their duty of care (i.e., by not following safety regulations)
  • The breach of duty was the actual and proximate cause of the plaintiff’s injury or losses
  • The breach resulted in actual, measurable damages to the plaintiff

If any of these factors are not satisfied, it will serve as a defense, and the small business cannot be held liable for products liability injuries.  For example, if the plaintiff cannot demonstrate that they actually suffered losses, the small business cannot be held liable for negligence. 

However, other legal theories such as strict liability and breach of warranty may involve a more complex legal analysis requiring the assistance of an attorney.  In general, courts will also consider the following factors in any products liability lawsuit:

  • Whether the manufacturer completed adequate testing of the product
  • Whether the company followed industry standards and customs when testing the product
  • Whether the small business was in compliance with the related regulations and laws (these will vary by jurisdiction and according to the type of product in question)
  • Whether the business has kept pace with scientific findings and developments related to the product

In other words, small business owners and operators should keep themselves well-informed regarding the standards and progress surrounding the particular industry that they are engaged in. 

What are Some Recommended Steps To Avoid Products Liability?

Of course, there is really no such thing as an “absolutely safe” product.  Even products that are considered very safe can become dangerous if used in the wrong way.  Therefore the most important step you can take is to make sure your products have the appropriate warning labels and instructions.  This may require foresight- you may need to get creative in order to anticipate the various ways in which a product may be mishandled or misused. 

Warnings and labels should be clear and concise, easy to understand.  Diagrams and pictures are helpful, as well as the use of multiple translations into different languages.  Many products liability claims arise because of “inadequate warnings”- that is, the warnings are either non-existent or difficult to understand. 

Finally, liability may depend on the specific role that your small business plays (manufacturer, assembly line, distributor, etc.).  It is sometimes possible for a small business to be held liable for products liability if it incorporates or uses a defective part in its product, even if the part was manufactured by a different company.  When dealing with multiple distributors or assemblers, it is helpful to negotiate a contract with other parties discussing liability amongst the parties.  

Do I Need a Lawyer for Issues with Small Businesses and Product Liability?

Small businesses can be a source of satisfaction and enjoyment for the owner/operator.  You should take steps to inform yourself on how to protect your business assets.  Products liability claims can be avoided through proper planning and by working closely with a lawyer for advice and guidance.  If you have become involved in a products liability dispute, an experienced defective products lawyer can represent you in court and determine the available defenses.