Chapter IV Compensation for Damage
Article 40 A seller shall be responsible for repair or change of the product, or for refund of the purchase price if the product he sold is found to be in any of the following conditions and, if losses are caused to the consumer who bought the product, the seller shall compensate for the losses:
(1) The product does not possess the properties as required and there are no prior indications of the same;
(2) The product does not conform to the product standards marked on it or its package; or
(3) The product does not conform to the quality conditions indicated by way of product directions, samples, etc.
After the repair, change, refund or compensation has been made in accordance with the provisions of the preceding paragraph, if it is the producer or another seller who supplied the product to the seller (hereinafter referred to as supplier) that should bear the liability, the seller shall have the right to recover his loss from the producer or the supplier. Where a seller fails to make the repair, change, refund, or compensation in accordance with the provisions in the first paragraph, the department for supervision over product quality or the administrative department for industry and commerce shall order the seller to do it. Where the sale contract or processing contract concluded between a producer and another, a seller and another or between a producer and a seller provides otherwise, the parties concerned shall act in accordance with the provisions of the contract.
Article 41 If a producer’s defective product causes physical injury to a person or damage to property other than the defective product itself (hereinafter referred to as another person’s property), he shall be liable for compensation. A producer shall not be liable for compensation if he can prove the existence of any of the following circumstances:
(1) The product has not been put in circulation;
(2) The defect causing the damage does not exist at the time when the product is put in circulation; or
(3) The science and technology at the time the product is put in circulation is at a level incapable of detecting the defect.
Article 42 Where physical injury is caused to a person or damage to another person’s property by a product’s defect resulting from the seller’s fault, the seller shall be liable for compensation.
Where the seller can identify neither the producer of the defective product nor the supplier thereof, he shall be liable for compensation.
Article 43 Where a defective product causes physical injury to a person or damage to another person’s property, the victim may claim compensation from the producer or from the seller of such product. Where the seller has made the compensation when it is the producer that should bear the liability, the seller shall have the right to recover the loss from the producer. Where the producer has made the compensation when it is the seller that should bear the liability, the producer shall have the right to recover the loss from the seller.
Article 44 Where physical injury is caused by defects in a product, the person liable shall compensate the victim for the expenses of medical treatment, expenses of nursing care during treatment, and the decreased earnings due to the loss of his working time; where the victim is disabled, the person liable shall, in addition, pay for the self-care equipment, subsistence allowances, disability compensation to the victim, living expenses necessary for any other person(s) supported by the victim, etc. Where such defects cause death to the victim, the person liable shall also pay for the funeral expenses, compensation for death, and the living expenses necessary for any other person(s) supported by the deceased before his death, etc. Where the damage to the property of the victim is caused by the defect in a product, the person liable shall restore the damaged property to its original state, or pay compensation at the market price. If the victims suffer other serious losses, the person liable shall compensate for such losses.
Article 45 The limitation period for bringing an action claiming compensation for the damage done by the defect in a product is two years, counting from the date on which the party concerned knows of or should know of the infringement of his rights and interests.
The right to claim compensation for the damage done by the defective product shall be forfeited upon the expiry of a period of ten years from the date on which the defective product causing the damage is delivered to the first consumer, except where the clearly stated period of safe-use has not expired.
Article 46 For the purposes of this Law, “defect” means one that constitutes an unreasonable threat to personal safety or to safety of another person’s property; where there are national or sectoral standards for ensuring human health, personal safety and safety of property to measure up to, ‘defect’ means failure to measure up to such standards.
Article 47 Where a civil dispute over product quality arises, the parties may seek settlement through negotiation or mediation. If the parties are not willing to do so, or if negotiation or mediation fails, they may apply to an arbitration institution for arbitration, as agreed upon between the parties; if the parties fail to reach an agreement for arbitration or the agreement is invalid, they may bring a suit directly before a people’s court.
Article 48 The arbitration institution or the people’s court may entrust a product quality inspection institution, as mentioned in Article 19 of this Law, with the inspection of a product quality. Chapter 5