Article 1207
Where a product is produced or sold despite knowing that it is defective, or effective remedial measures are not taken in accordance with the provisions of the preceding article, resulting in the death or serious damage to the health of others, the infringed party has the right to claim corresponding punitive damages.
1. The main purpose of this article
This article is about punitive damages for product liability.
II. Evolution of the Provisions
In the past, punitive damages in mainland China were mainly applied to the areas of consumer protection and product liability. None of the previous punitive damages were calculated based on the actual losses of the victims, nor did they take the consequences of damages as a condition for application. For example, article 49 of the 1993 Law on the Protection of Rights and Interests of Consumers stipulates that if a business operator commits fraud in providing goods or services, it shall, at the request of the consumer, increase the compensation for the losses suffered, and the amount of the increased compensation shall be double the price of the goods purchased by the consumer or the cost of receiving the service. Paragraph 2 of Article 96 of the Food Safety Law of 2009 stipulates that if a consumer produces food that does not meet food safety standards or sells food that he knows does not meet food safety standards, in addition to claiming compensation for losses, he or she may also demand compensation of ten times the price from the producer or seller.
This provision is derived from Article 47 of the original Tort Liability Law, which stipulates that: "Where a product is produced or sold knowing that it is defective, causing death or serious damage to the health of others, the infringed party has the right to claim corresponding punitive damages." On the basis of this provision, this article further refines the circumstances under which punitive damages are applicable, adding the circumstance that "no effective remedial measures have been taken in accordance with the provisions of the preceding article".
3. Interpretation of Provisions
This article is about the application of punitive damages to the liability for infringement of malicious products.
At present, the liability for punitive damages for infringement in mainland China is mainly applicable to three situations: (1) the product including food maliciously causes consumer damage, (2) the malicious service causes consumer damage, and (3) the malicious infringement of others' intellectual property rights causes damage. This article provides for the first case.
This article stipulates the scope of application of punitive damages, which is wider than that provided for in article 47 of the Tort Liability Law, and adds malicious infringement in tracking and observation defects in addition to the malicious production and sale of products.
The constitutive elements of product liability for which punitive damages are applicable are: (1) the product is defective, (2) the producer or seller is aware of the defective product, (3) the producer or seller continues to produce and sell the defective product, and (4) the victim is killed or seriously damaged to his health.
The constitutive elements for the application of punitive damages liability for malicious infringement in follow-up observation defects are:
(1) The product is defective and cannot be found due to the limitation of scientific and technological level when it is put on the market; (2) The producer or seller has found that the product has been put into circulation as defective; (3) The producer or seller fails to take effective remedial measures to stop sales, warn and recall in accordance with the law;
(4) The defective product causes the death of the victim or serious damage to his health.
If the above requirements are met, the infringer shall be liable for punitive damages, and the infringed party may request that it bear the liability for punitive damages in addition to the liability for actual damages. The specific calculation method is that if the damage caused by a general product meets the requirements for punitive damages, it shall bear punitive damages liability of less than twice the actual loss, and if the damage caused by food meets the above provisions, it shall bear punitive damages liability of less than three times the actual loss.
4. Cases
Zhu Mouwei v. Furui Commercial Bank, a product liability dispute
Facts: Zhu Mouwei purchased some red wine from Furui Commercial Bank, and after purchasing, it was found that the outer packaging instructions of the bottles of the above-mentioned wines were all in English, and there was no name, address and contact information of the Chinese agent, nor did there be any inspection certificate and other information. The court of first instance held that the red wine products involved in the case were pre-packaged imported wines, and the products did not have Chinese labels, which violated the labeling provisions of the Food Safety Law on imported pre-packaged foods, and were products that did not meet food safety standards. After discovering that the wine had no Chinese label, Zhu Mouwei continued to buy and filed a lawsuit with the local court, which can no longer be defined as a "consumer" in the legal sense and punitive damages are not applicable. The court of second instance held that consumers have the right to claim 10 times the amount of compensation from the merchant on the grounds that the food does not meet food safety standards, except for the defects in the labels and instructions of the food that do not affect food safety and will not mislead consumers. Although the red wine involved in the case did not have a Chinese label, Zhu Mouwei did not provide evidence to prove that the red wine involved in the case had food safety problems, and he also confirmed that it was not consumed and did not cause damage, so the punitive damages were not supported.
5. Analysis
The main purpose of punitive damages liability is to punish and deter the infringer, so as to make up for the shortcomings of the deterrent and deterrence functions of the liability for compensatory damages. In this case, the red wine product in question did not have a Chinese label on the outer packaging of the wine bottle, which violated the labeling provisions of the Food Safety Law (2015) on imported pre-packaged food, so the red wine product in question was a product that did not meet food safety standards. The seller should be aware that the label of the imported product does not comply with the law. According to Article 148, Paragraph 2 of the Food Safety Law (2015), consumers have the right to claim 10 times the amount from the merchant on the grounds that the food does not meet the food safety standards, except for the defects on the labels and instructions of the food that do not affect food safety and will not mislead consumers. Although the label of the red wine involved in the case did not meet food safety standards, it did not cause personal injury to Zhu Mouwei. In other words, the absence of a Chinese label on the red wine in question only constituted a defect in the label, and the defect did not affect food safety. However, the premise for the application of punitive damages in product liability is "causing death or serious damage to the health of others", and punitive damages cannot be applied in this case because it does not meet this constitutive element.