A defect of the sold item causing a danger to users

Indemnification provisions and hold harmless provisions of B2B contracts in international trade regulate the issues of liability of the parties related to possible damages of the products that may occur on the buyer’s side.

These provisions are referred to as “indemnification provisions” and “hold harmless provisions”.

Let’s see what their role is on the practical example.

Let’s imagine the following situation: a new type of interactive toy for children is about to be introduced to the European market. The manufacturer has subjected the toy to numerous tests and trials, including in terms of its safety. All legal requirements were complied with, before the toy was placed on the market. The sale of the toy on the European market was to be handled by a Polish company owned by Adam. It has obtained an exclusivity clause for distribution.

As a result of errors during the production process, a batch of toys has a significant defect. One of the small elements of the toy can be easily detached and causes a danger to children. Despite the actions aimed at withdrawing the defective batch of the product from the market, damage and harm can still occur.

Firstly, it’s important to assess whether the faulty product qualifies as a hazardous product, meaning it fails to provide the expected level of safety during the regular use. If so, the responsibility of the producer would be involved.

Furthermore, the extent and parties responsible for any damages caused by the defective product largely depend on the specific terms and conditions mentioned in the agreement between the parties involved, including the indemnification provisions. The scope of liability of the manufacturer and Adam will therefore depend on what the parties agreed in the contract.

The purpose of introducing indemnification provisions and hold harmless provisions to the contract is precisely to spread the risk associated with the conclusion of the contract between parties. They may regulate issues such as a commitment by one party to the other to protect it against specific claims by third parties, including those resulting from defects in things and their consequences, such as damage or harm.

For this reason, indemnification provisions are often among the most important points in negotiations between the parties regarding the conclusion of a B2B contract in international trade.

Joanna Lubecka
attorney