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Historical Background
On 14th May 1948 the establishment of the State of Israel was proclaimed, and the British Mandate over Palestine came to an end. The Declaration of Independence of the State set up a provisional legislature - the Provisional State Council - and a provisional government. These were to function until regular authorities were duly elected.
The first enactment of the provisional State Council was the Law and Administration Ordinance - 1948 which provided that the Law which existed in Palestine on the eve of the establishment of the State of Israel would continue to be in force, subject to any enactment of the new legislator and also subject "to such modification as may result from the establishment of the State and its authorities".
Theoretically, during the British Mandate the civil legal system was based on the Civil Code set by the ottoman Empire (which was the former ruler of Palestine), the Mejelle. According to the Palestine Order in Concil 1922, the Ottoman Laws were to continue to apply and the English principles of Common Law and Equity would prevail only in cases where the local law did not offer a solution. However, in fact, the Courts were eager to adjudicate on the basis of the English Law and many of the essentials of the English legal system were adopted by the Courts.
In addition, extensive legislation based on English Law was introduced into Palestine. The main law which we will refer to, in this respect, is the Tort Ordinance which was legislated in 1944 and which is still valid.
Since the sixties a major effort was undertaken to reform the existing civil legislation which, as mentioned, was mostly Mandatory and even Ottoman. A series of laws was enacted in the field of civil law, including the Contracts Law (General Provisions) - 1973, the Contract Law (remedies) - 1970. These laws were mainly based on the German Codex.
In addition, during the 1980's the Israeli legislator enacted a list of laws which were consumer oriented namely laws which were meant to protect the consumers. Among these laws are the Consumer Protection Law - 1981, Liability for Defective Products Law -1980, the Insurance Contract Law -1981 and others.
The Legal Basis for Product Liability in Israel
The Israeli Law provides consumers with a broad legal basis on which they can base a product liability claim. The various laws which may serve such consumer include several general laws (such as the Tort Ordinance and the Contract Laws), as well as several specific laws which were enacted in order to settle consumers' rights.
Hereinafter we will provide an overview of the relevant laws.
The Tort Ordinance
A consumer may base a product liability claim on two of the civil wrongs listed in the Tort Ordinance: negligence (Section 35) and the Breach of Statutory Duties (Section 63).
According to the Tort Ordinance, a party may be held liable for damage due to negligence if the following three conditions are fulfilled: (a) the party had a duty of care towards the injured party; (b) the party breached its duty of care; (c) as a result of the breach, the injured party sustained damage.
In several Court rulings, it was determined that a manufacturer and a distributor of a product owe a duty of care towards the end consumers, and should act prudently in manufacturing, marketing or advertising its products. see for example: C.A. 608/87 Nechushtan Lifts Ltd. v. Dr. Shoshany; C.A. 532/89 Kibbutz Nir David v. Miriam Shukrun PDI 46(2) 221; C.A. 557/77 Menachem Shaps v. Prima, PDI 32(3), 119
In the event of a breach of the duty of care, the wrongdoer is liable to indemnify the injured party for any loss or damage caused thereby.
The Tort Ordinance enables an injured party to base a claim also on the Breach of Statutory Duty. The failure of a person to perform a duty imposed upon him by any statutory law, may serve as a basis for imposing upon him civil liability under the Tort Ordinance. Such liability will be imposed in cases where the breached statute was intended to protect the injured party, and the damage caused as a result of the breach was of a nature contemplated by such a statute.
There are several statutory duties imposed in connection with manufacturing, sales and advertising of products. If damage is caused to a consumer as a result of the breach of such duty, then that consumer can base a claim on the breach.
For example, if a manufacturer produced a product which is subject to a statutory standard, and fails to fulfill the standard requirements, as a result of which a consumer suffers damage, then such consumer may base a claim against the manufacturer on the breach of statutory duties. (C.C. (Jerusalem) 984/95 Omry Ringel v. "HaPach")
We should note that the fact that a wrongdoer followed the laws and regulations requiring a certain standard, does not provide him with immunity from a claim based on negligence. Namely, if the standard of care provided by the law is lower than the standard of care which the Court considers as reasonable, then the wrongdoer may be found negligent although he did not breach any statutory duty (C.A. 145/80 Vaknin v. the Municipality of Beit Shemesh, PD 37(1) 113).
In general in a claim filed according to the Tort Ordinance the onus of proof lies upon plaintiff (as accepted in civil claims). However, the Tort Ordinance determines several situations in which the burden of proof is shifted from plaintiff to the defendant. One of these situations is when the damage was caused as a result of a "dangerous object". The Courts have defined an object to be deemed dangerous if "from the inherent qualities of the object its regular usage and maintenance involve a great risk and thus require the introduction of special precautions" (C.A. 374/62 Fishman v. the Attorney General, PDI 17,1478, p. 1506).
Therefore, if a party is injured as a result of a dangerous product, the Court may shift the burden of proof to the defendant which will be required to prove that he did not act with negligence.
Contract Laws
There is an unsolved legal question as to whether a manufacturer of a product has a contractual liability towards the end consumer, although there was no direct contract between them (See: C.M. (District Court of Tel Aviv) 27038/00 Metallurgique de Gerzat S.A. v. Wilenski in which the Court presented the various views on this issue without determining between them.
In any case, the seller of a product owes the buyer contractual duties, including the duty not to mislead the buyer (Section 12 to the Contract Law (General Provisions) -1973) and to fulfill the contract in a customary manner and in good faith (Section 39 to the said law) namely to provide the buyer with a product which conforms with the seller's undertaking and presentations.
In this respect we should also refer to the Sale Law - 1968 according to which a seller did not fulfill its obligation if it delivered to the buyer a product which does not conform with the agreement between the parties.
In cases where a party breached its contractual duties, the injured party has the right to cancel the contract , to sue for the execution of the contract, or to seek compensation for its damages arising from the contract (the Contracts Law (Remedies) -1970).
Consumer Protection Law -1981
The Consumer Protection Law applies to both the seller of a product as well as its manufacturer. The main duty set by the said law is the duty not to mislead a consumer as to any matter material to the transaction, including the nature of the product, its ingredients, etc. The Law prohibits the misleading of the consumer in various ways including through the packaging of the product, by advertising and through the label on the product.
In addition, the seller/manufacturer must disclose to the consumer every defect or other inferior quality which substantially reduces the value of the product.
Breach of the Consumer Protection Law can serve as a basis to both a civil claim and a criminal claim against the wrongdoer. The said law can also serve as a basis for filing a Class Action against a manufacturer (see details below).
In C.A. 1338/97 Tnuva Communal Marketing Centre v. Rafi Tufic, PDI 57(4) 673, a motion was filed to approve a Class Action, inter alia, based on the Consumer Protection Law. The claim originated when it was discovered that Israel's largest milk distributor, Tnuva, mixed a type of Silicone into its product without revealing this on the product's label, in order to prolong the product's shelf life. Although no physical damage was caused to the buyers, the Court ruled that Tnuva's misrepresentation as to the ingredients included in the milk damaged the consumers' freedom of choice, and thereby caused them mental anguish. Based on this damage, the Court allowed the filing of a Class Action against Tnuva.
Liability for Defective Products Law - 1980
The Liability for Defective Products Law imposes strict liability on manufacturers. Section 2(a) to the law provides:
"A manufacturer shall be liable to compensate any person who incurs bodily damage as a result of a defect in a product manufactured by such manufacturer, and it shall be immaterial whether or not the manufacturer was at fault."
As can be seen from the above, the Liability for Defective Products Law enables a consumer who suffered bodily injuries as a result of a defect in a product, to claim compensation without the need to prove the manufacturer's liability.
According to the said law, a product will be considered defective if:
(a) it is likely to cause bodily damage owing to a defect therein; or
(b) in the circumstances of the case, for reasons of safety, warnings or directions for handling and use are required, and they have not been provided or are inadequate to the danger involved
The law further states that a product will be presumed to have been defective if the circumstances of the case are more consistent with the conclusion that it was defective than with the conclusion that it was not.
The law defines the term "manufacturer" to include, in addition to the person who manufacturers or assembles a product for commercial purposes, also whoever presents himself as a manufacturer of a product, whoever imports a product to Israel, and whoever supplies a product whose local manufacturer or importer cannot be identified.
The Liability for Defective Products Law shifts the burden of proof from the bodily injured plaintiff to the manufacturer. The law includes a closed list of defences which can be raised by the manufacturer, such as � that the defect in the product was created after it left the manufacturer's control.
The law states that if a manufacturer proved that the particular product underwent reasonable safety inspections before it left his control, the defect will be presumed to have arisen afterwards. In this respect the Israeli Supreme Court ruled that sample checks are not sufficient; the manufacturer must prove that it has checked the specific product which caused the damage in order to rely on this defence (C.A. 166/88 Phoenicia v. Amar, PDI45(2),457, p.465-466), (hereinafter: the Phoenicia case). An additional defence which may be raised by a manufacturer, requires him to prove that he had not intended for the product to leave his control and that he took reasonable steps to prevent its leaving his control and to warn the public about the risk involved in the product.
The Liability for Defective Products Law limits the compensation which an injured party is entitled to claim under the law. The calculation of plaintiff's loss of earnings will disregard any income which exceeds a multiple of three times the average wage, and compensation for other than pecuniary damage will not exceed NIS50,000 � approximately $11,000.
However, the law does not derogate from the injured party's rights under the Tort Ordinance or under any other law, namely it is the injured party's right to decide on whether he prefers to base his claim on the Liability for Defective Product Law (and be released from the need to prove the manufacturer's liability) or on any other law (which does not limit the sum he can claim).
Distribution of Liability Between Tortfeasors
When more than one manufacturer caused the damage, and the parties fail to prove the extent of each wrongdoer's fault, then the liability will be distributed equally between all manufacturers of the damaged product (C.A. 143/79 Tavori Crystal v. Tempo Yerucham Factories (not published); C.A.214/89 Isralift Services Ltd. v. Rachel Hindi PDI49(1), 45.
Class Action
In April 2006 the Israeli legislator enacted the Class Action Law - 2006. The law sets the terms which are required in order to file a class action, and determines the procedures for the handling thereof.
Filing a class action requires receipt of the Court's approval. The Class Action Law sets the terms under which the Court may approve a class action, as follows:
(a) the claim involves material questions of facts and law which are common to the group and there is a probability that these questions will be decided in favour of the group
(b) a class action is the efficient and fair way to solve the conflict at hand
(c) there is a reasonable basis to assume that the interest of all members of the group will be represented and handled in an appropriate manner
(d) there is a reasonable basis to assume that the interest of all members of the group will be represented and handled in good faith
The law sets the mechanism to enable a person who does not wish to be included in the group to opt out of the group, and applies strict supervision over plaintiff's ability to settle the claim.
The Class Action Law details a list of laws and causes of actions under which one can sue within the framework of a Class Action. The only relevant law under which a class action can be filed in respect of product liability is the Consumer Protection Law.
Expected Future Developments
The Ministry of Justice has recently finalized the codification of the civil laws into one unified proposed law entitled Civil Codex (unofficial name).
This proposal has not yet been approved by the legislator and it has been published in order to enable the public to review the law and suggest amendments.
One of the purposes of the Codex is to create coherency between the various civil laws, inter alia, by applying the same definitions and principles to all the laws included therein.
The proposed Codex is meant to replace the Liability for Defective Products Law, the Tort Ordinance, the Contracts Law (General Provisions), the Contract Law (Remedies), the Law of Limitation, and others, however, most of the material provisions included in the said laws remain unchanged.
One of the changes which is expected to be included in the Codex, is the definition of the term "defective product" in the Liability for Defective Products Law. As mentioned above, according to the current law, a product will be considered as defective if it is likely to cause bodily damage owing to a defect therein. The proposed Codex provides that a product will be considered as defective if it is different from its design in a way that creates an unreasonable risk or if its planning, design or intended usage create an unreasonable risk.
Completion of the legislation of the civil codex may take a few years, however, the proposal may serve as a guideline for the Courts when they rule in respect of current claims brought before them. (see for example: C.A. (Haifa) Cohen David v. Hadar Insurance Co. Ltd.)
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