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Court:

OLG Stuttgart, Judgment of 24 September 2009, 7 U 89/09

Topics:

Product

Own-brander

Supplier

500 Euro Threshold

Articles:

Articles 2, 3(1), 9 PLD

S-s 1, 4 PLA

Facts:

In several parts of a building, ball valves were built around the water meters, in order to prevent water leakage. The ball valves were defective, as expert evidence showed. In one apartment on the first floor, water leaked out while the owners were on holidays. The water ran into two other apartments on the ground floor and one further apartment on the ground floor that the administrator of the building used as a show apartment. The damage was paid for by the building insurer who then sued the company that had put its brand name on the ball valves.

Legal Questions:

Is a product that has been integrated into a building still a product, and can it be said that the building is property other than the product itself?

What is the consequence of the mixed private and commercial use of a building?

Is the own-brander liable even if the persons who suffered damage were not even aware of the brand?

Decision:

The OLG Stuttgart held the own-brander liable for the damage.

First of all, the court ruled that the ball valve was a 'product'. It was explicitly clarified, in section 2 Product Liability Act (Article 2 Product Liability Directive), that the classification as a product is not lost when a product is integrated into a building, although under German property law, it automatically becomes part of that building and is therefore transferred to the ownership of the owner of the building. This was designed to ensure that building materials are not excluded from product liability law. For the same reason, the building is property other than the ball valve.

The court held that an apartment is usually used for private purposes, as required by section 1 Product Liability Act. However, the property must also have been actually used for private purposes, and the question here was whether this criterion must be applied to each apartment owner individually or whether one had to look at the building as a whole. The court did both, because under German law, the apartments were in the separate property of the individual owners, whereas the building as such was joint property. Thus, as far as the building was concerned, the court found that its purpose was mainly private (with only one commercially used apartment), but as far as the individual apartments were concerned, the damage to the show apartment was held not to be recoverable under the Product Liability Act.

The defendants were clearly not producers but they had bought the ball valves from a company that had imported them from China. They had, however, marked the ball valves with an imprinted 'K', which made them recognisable. Here German doctrine distinguishes between traders' brand names and producers' brand names. Only producers' brand names trigger the liability of own-branders since they make the impression that the brander has produced the product himself and therefore guarantees for its safety. In the instant case, the court argued that it was not obvious from the 'K' that the own-brander was not a producer but only a trader, and that therefore the defendants were liable. Interestingly, the court decided that it did not matter that the apartment owners (i.e. the consumers) had actually never seen the ball valve and therefore the brand name since they had been installed by the builders company.

Finally, it may be worth mentioning that although only the insurer acted as claimant, the threshold of 500 Euro of s 11 Product Liability Act still applied to each assigned claim of each apartment owner so that it had to be deducted several times.

Comment:

This case is one where the Product Liability Act really makes a difference. Under general tort law, the own-brander is not necessarily treated like a producer. The own-brander would not be liable for manufacturing defects or design defects but only for instruction defects. In the instant case, however, instruction was not the issue, and the defendants had also not been aware of the issue so that they would not have been liable for warning defects. Thus, the Product Liability Act does fill a gap here in that it treats the own-brander like a producer.

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