In a recent product liability case I handled, Mr. Wang's company entered into an agreement with Company A to purchase and install a central air conditioning unit manufactured by Company B. Unfortunately, the unit experienced an unexpected breakdown. Mr. Wang attributed the malfunction to improper installation by Company A and inadequate oversight from Company B, prompting him to file a lawsuit against both companies seeking compensation. Company B, which I represented, is a well-respected manufacturer in the air conditioning sector.
Following the initial and appellate court proceedings, Company B was found liable. In response, we pursued a retrial, which was granted by the local Provincial High People's Court. The retrial successfully overturned the earlier decisions that mistakenly categorized "installation defects as product defects," resulting in a favorable outcome for Company B, which was ultimately not held liable. This case highlights the important legal distinctions between product defects and improper installation, providing valuable insights for businesses to reduce legal risks, maintain industry standards, and protect consumer rights in accordance with the law.
The question arises whether a product malfunction resulting from improper installation should be classified as a product defect?
Overview of the Case
In 2024, Mr. Wang and Company A entered into a Contract for the Purchase and Installation of Central Air-conditioning Equipment. Under this agreement, Company A was responsible for supplying Mr. Wang with central air-conditioning equipment and installation services provided by Company B. The contract outlined the rights and responsibilities of both parties, including equipment specifications, construction management, payment terms, and quality standards for the project. Mr. Wang fulfilled his payment obligations as stipulated in the contract, and Company A successfully completed the installation of the air-conditioning unit.
In January 2025, Mr. Wang discovered that the air conditioner was not functioning properly. Upon inspection, it was revealed that the drain pipe had been improperly connected to a sewer pipe emitting ammonia, which led to the corrosion of the air conditioner's copper pipe. Since the air conditioner was still under warranty, Mr. Wang requested a replacement from Company A, which was denied. Mr. Wang contended that the malfunction was due to Company A's installation error and Company B's inadequate supervision. Consequently, he initiated legal proceedings against both companies, seeking compensation for property damages and coverage of related litigation costs.
Key Issues
Based on the court's findings, it is clear that the air conditioner's malfunction stemmed from an installation error by Company A, which establishes their liability for compensation to Mr. Wang. The question of whether Company B, as the manufacturer, should also be held liable hinges on the following points of contention:
1. Is Improper Installation Considered a Defect?
The damage to the air conditioner was directly caused by Company A's improper installation, specifically the connection of the drainage pipe to a sewer pipe with an ammonia odor, leading to corrosion of the copper pipe. This situation was fundamentally a product defect issue. A product defect typically refers to unreasonable risks associated with the design, manufacturing, or labeling of a product that could result in harm to consumers. Improper installation arises from the installer's failure to adhere to specifications or adequately consider the installation environment, and is not inherently linked to the product's performance or quality.
Therefore, as Company B's defending attorney, I argued that improper installation should not be classified as a product defect, and thus Company B should not be held liable for any resulting damages.
2. Is the Manufacturer Liable for the Seller's Installation Actions?
Judicial interpretations of this issue vary. For instance, a local court in Henan province determined that although the product met relevant standards, the accident was attributed to improper installation. Despite the manufacturer emphasizing the need for qualified professionals in the installation manual, the court still found the manufacturer partially liable for not providing adequate guidance regarding the seller's installation. Conversely, in another case, the court in Beijing ruled that since the manufacturer was not involved in the actual installation and the product itself was free of defects, the plaintiff's claim against the manufacturer was not upheld.
As the defending attorney, I firmly asserted that Company B, the manufacturer of the air-conditioning units, did not have a contractual relationship with Company A and had not entered into any distribution agreements. Consequently, Company B was not obligated to oversee or regulate the installation practices of Company A. Company B has effectively communicated the necessary installation requirements through the product manual, thereby fulfilling its duty of care.
According to the principle of privity of contract, the contractual relationship between Mr. Wang and Company A is binding solely on those parties, which means Mr. Wang cannot hold Company B liable beyond the terms of the contract. Therefore, it is my position that Company B should not be held responsible for the installation actions taken by Company A.
3. Balancing Consumer Protection and Corporate Responsibility
In consumer-related disputes, striking a balance between consumer protection and corporate responsibility is crucial. On one hand, consumers must have their legitimate rights safeguarded, and they should be entitled to seek compensation from the responsible parties when issues arise with products or services. On the other hand, companies should reasonably share responsibility based on their role in the transaction to prevent undue hindrance to their operations and growth due to excessive liability. In this case, Company A, as the entity directly responsible for installation services, should be held accountable for any issues stemming from its installation practices. Conversely, Company B should not be jointly liable, given its lack of involvement in the installation and its fulfillment of reasonable advisory obligations.
Court Judgments Overview
1. Judgment of the Court of First Instance
The Court of First Instance determined that the damage to the central air conditioning unit in question was due to improper installation by Company A, categorizing this as a product defect. Consequently, the court ordered Company A to compensate Wang for losses amounting to 30,400 yuan. Additionally, referencing Article 1203 of the Civil Code of the People's Republic of China, the court noted that central air conditioners must be installed by professionals. It interpreted "defects" broadly, including installation issues as part of product defects. The court also found that Company B failed to adequately supervise Company A during the design and installation processes, thus holding Company B jointly and severally liable for the compensation.
2. Judgment of the Court of Second Instance
The Court of Second Instance upheld the initial ruling, affirming that Company A was responsible for the compensation. It also stated that Company B, as the manufacturer, bore joint and several liability for the installation-related defects. The court further highlighted the critical nature of professional installation for central air conditioning systems, asserting that installation defects, akin to product quality issues, can prevent consumers from using the products effectively. Therefore, it concluded that installation defects should be classified as product defects, making both the manufacturer and seller jointly liable.
3. Judgment of the Court of Retrial
In response to the perceived errors in the previous rulings, we emphasized the distinct roles of product installation and production, arguing for the independence of the producer, seller, and installer based on legal principles and practical considerations. Ultimately, we successfully persuaded the retrial court to initiate the retrial process and amend the judgment.
Upon review, the retrial court concluded that a product defect should be defined as an unreasonable danger inherent to the product itself. It determined that the damage to the central air conditioning unit was a result of improper installation, which does not constitute a defect of the product itself.
The court noted that Company B had adequately informed users about installation requirements through the product manual and had fulfilled its reasonable duty of care, thus bearing no obligation to oversee Company A's installation practices. As a result, the final judgment absolved Company B of liability.