product liability

Reading time: 4 minutes

Considering modern technological developments, it has become necessary to rethink product liability regulations, as a result of which the European Parliament and the Council have adopted Directive 2024/2853 (“Directive“) on liability for defective products and repealing Council Directive 85/374/EEC. The aim of the Directive is to promote a balance between the responsibility of economic operators and a high level of consumer protection. To comply with the Directive, whose provisions must be implemented by Member States into their national legislation by 9 December 2026 at the latest, the Ministry of Justice has drafted amendments to private law, including a comprehensive review of the product liability rules of the Act V of 2013 on Civil Code (“Civil Code“). In this article, we present the new rules on product liability.

What is a product?

The comprehensive reform of EU regulations was prompted by technological developments: the spread of digital and smart devices has brought new risks, which are addressed by the Directive and, through its implementation, by Hungarian regulations. One of the most significant innovations is that, based on the Directive, the Civil Code extends the concept of a product: Under the new provisions, any movable item is considered a product, even if it is incorporated into or connected to another movable item or immovable property, including electricity, digital manufacturing files, raw materials, and software. This means that the new liability rules will apply to products placed on the market or put into service after 9 December 2026, including digital manufacturing files and software, whether they are sold as stand-alone products or integrated into other devices.

However, free and open-source software developed or made available in the course of non-commercial activities is exempt from these regulations.

Who bears the responsibility?

The basic principle of product liability is that, to protect consumers, it imposes obligations on economic operators who are responsible for damage caused by defective products. Under the new rules, the scope of persons who can be held liable is expanded, meaning that product liability may be imposed on the following economic operators:

The manufacturer of the product is primarily responsible for any defects in the product, i.e., the party who develops, manufactures, produces, labels the product as the manufacturer, or develops, manufactures, or produces the product for their own use.

If the defect is caused by an integrated component, the manufacturer of that component shall also be liable if the component was incorporated into a product under the manufacturer’s control.

If the product or its component parts originate from a manufacturer operating outside the European Union, responsibility lies with the company importing the product into the EU, i.e. the company placing the product on the EU market, and the manufacturer’s authorized representative.

If the importer or the manufacturer’s authorized representative is also not based in the EU, then the logistics service provider is responsible, i.e. anyone who offers at least two of the following services in the course of their commercial activities: storage, packaging, addressing, and shipping of a product, without owning the product in question.

The distributor shall also be liable if the person responsible cannot be identified and, at the request of the injured party, does not identify the economic operator or distributor listed above.

In addition, if a natural or legal person substantially modifies a product without the manufacturer’s knowledge or control and then distributes or puts it into service, that person is also considered a manufacturer under the law and may be liable for product damage.

A new provision is that the manufacturer of a defective product is jointly and severally liable for product damage with other economic operators cooperating with it, such as the component manufacturer or importer, so that the consumer can claim full compensation from any of them. The economic operator providing compensation to the injured party may then recourse against the other responsible economic operators.

When is a product considered defective?

A product is considered defective if it does not provide the level of safety that is generally expected of that type of product or that is required by EU legislation or relevant domestic regulations. When assessing the level of safety, factors such as the reasonably foreseeable use of the product, the date of placing on the market, and the reasonable expectations of consumers must be considered. At the same time, the mere fact that a more advanced or modern version becomes available after the product’s release—whether in the form of an update or a completely new product—does not in itself render the previous model defective. The basis for assessing a defective product is therefore not its comparison with the latest technological standards, but rather whether it provides the level of safety that could be expected at the time of its manufacture.

When can the manufacturer, importer, or other economic operator be exempt from liability?

Economic operators may be exempted from product liability under certain conditions if they can prove that the defect causing the damage did not arise within their sphere of responsibility or was not foreseeable.

The manufacturer or importer shall be exempt from liability if they can prove that they did not place the product on the market or put it into service. The distributor may be exempt if they can prove that they did not make the product in question available on the market.

Any economic operator may be exempted from liability if they can prove that the defect in the product was not likely to exist at the time of placing on the market, putting into service or distribution, or that it only arose after that time. However, this provision shall not apply if the defect of the product is related to a service associated with the product under the manufacturer’s control, to software accompanying the product (including software updates or upgrades), to the absence of software updates or upgrades necessary to maintain safety, or to a material modification of the product.

Liability shall also be excluded if the defect of the product results from compliance with legal requirements (e.g., adherence to a mandatory technical standard that caused the defect), or if the defect could not have been detected based on the state of scientific and technical knowledge at the time the product was placed on the market or put into use, or while the product was still under the manufacturer’s control.

Unchanged provisions

The manufacturer and other liable parties are subject to product liability for a period of 10 years. The injured party must still prove the defect in the product, the damage suffered, and the existence of a causal link between the defect and the damage. There is a three-year limitation period for asserting claims, which begins from the date on which the injured party became aware or could reasonably have become aware of the occurrence of the damage, the defect in the product, and the identity of the responsible economic operator.

Summary

The Directive and its domestic implementation bring significant changes to product liability regulations. With these amendments, both the definition of “product” and the scope of parties who may be held liable for damages caused by defective products are expanded. The concept of a product now includes software, digital manufacturing files, and related services, meaning that the liability framework also applies to modern, digital, and complex technologies. This implies that economic operators will need to act with greater caution and awareness in the design, manufacture, distribution, and modification of products in the future.

The aim of the new regulation is to strengthen consumer protection against modern product risks, while at the same time imposing greater liability on economic operators. In light of these changes, it is essential for the affected companies to review their operations, internal processes, contracts, and liability insurance practices.

Photo source: pexels.com, Lukas