This clause determines who pays when a product must be recalled from customers because it's dangerous or defective. Recall costs are extremely high: they include retrieving products, destroying them, notifying customers, and sometimes compensation to affected people. In the US, the Consumer Product Safety Commission can force recalls, and in the UK, the Health and Safety Executive can do the same. Without this clause clearly assigning responsibility, both parties might argue the other should pay. For example, if you sell toys and they're found to contain toxic paint, the recall could cost £2 million—this clause decides if you or your supplier bears that cost.
If you're the seller/distributor, insist that the manufacturer or supplier bears all recall costs, since they designed and made the product. Include language requiring them to indemnify you for third-party claims (customer lawsuits). If you're the manufacturer, try to limit recalls to defects you actually caused, and exclude recalls due to customer misuse or regulatory changes that happen after you've sold the product. ---
Frequently Asked Questions
What does this clause mean in simple terms?
This clause determines who pays when a product must be recalled from customers because it's dangerous or defective.
Why should I care about this clause?
Recall costs are extremely high: they include retrieving products, destroying them, notifying customers, and sometimes compensation to affected people.
What are my options?
In the US, the Consumer Product Safety Commission can force recalls, and in the UK, the Health and Safety Executive can do the same.
How does this affect small businesses?
Without this clause clearly assigning responsibility, both parties might argue the other should pay.