Product Recall: Who Bears the Costs in the Supply Chain
Recall costs, recourse against the supplier and the new Product Liability Act
According to media reports, a major car manufacturer is calling electric vehicles back to workshops because of defective battery cells; the company names production defects at suppliers as the cause. Every manufacturing SME knows the pattern: the defect arises at the front of the supply chain, the costs fall at the end.
When a Manufacturer Must Recall
Manufacturers must monitor their products even after delivery. If a safety risk emerges, they are obliged under the case law on § 823 Abs. 1 BGB to avert dangers to the life, health and property of third parties. This may go beyond a warning and require dangerous products to be withdrawn from circulation as effectively as possible (BGH, judgment of 16.12.2008 – VI ZR 170/07). According to that judgment, however, the manufacturer must bear the costs of repair or replacement in tort only where this is necessary to avert the danger; otherwise this is a matter for the sales contract. In addition, authorities may order recalls under product safety law.
The Supplier Is a Manufacturer Too
The Product Liability Act (Produkthaftungsgesetz, ProdHaftG) establishes strict liability (liability without fault) for personal injury and for damage to other items used privately (§ 1 Abs. 1 ProdHaftG). It does not compensate recall costs as such. A manufacturer is not only whoever builds the end product but also whoever makes a component (Teilprodukt) or a base material (Grundstoff) (§ 4 Abs. 1 ProdHaftG). It is not liable if the defect was caused by the design of the end product or by instructions of the end manufacturer; it must prove this (§ 1 Abs. 3, Abs. 4 ProdHaftG).
Recourse: The Supply Contract Decides
Whether the end manufacturer can recover the actual recall costs from the supplier depends mainly on the supply contract and on sales law. Even without fault, the supplier of a defective part must, as part of subsequent performance (Nacherfüllung), also bear the costs of removal and installation (§ 439 Abs. 3 BGB). Further damages require that the supplier is responsible for the defect, that is, acted intentionally or negligently; this is, however, presumed (§§ 437 Nr. 3, 280 Abs. 1 BGB).
If the purchase is a commercial transaction for both sides, the duty to inspect the goods and give notice of defects (Rügeobliegenheit) also applies: the buyer must inspect the goods without undue delay, as far as this is practicable in the ordinary course of business, and notify defects without undue delay. Defects that could not be detected on inspection must be notified without undue delay after their discovery. Otherwise the goods are deemed approved (§ 377 HGB). Quality assurance agreements often shift these duties; their validity as general terms and conditions (Allgemeine Geschäftsbedingungen) must be assessed case by case.
New Product Liability Law from December 2026
On 8 October 2026 the Federal Parliament (Bundestag) passed the Act to Modernise Product Liability Law; on 16 October 2026 the Federal Council (Bundesrat) did not call the Mediation Committee (Vermittlungsausschuss). The Act implements EU Directive 2024/2853 and is to enter into force essentially on 9 December 2026. In future software will expressly count as a product, the circle of liable persons will be widened, and injured parties will receive easier proof and claims to disclosure of evidence. The new law applies to products placed on the market from 9 December 2026; for older products the previous law remains in force.
Practical Checklist for Businesses
Review supply contracts and quality assurance agreements for provisions on recall costs, liability limits and notification periods
Organise and document incoming goods inspection so that the duty to give notice of defects is met
Establish product monitoring and a recall plan with clear responsibilities
Review insurance cover: recall costs are often insured only under separate cover
Include software components and updates in liability management
Conclusion
Anyone who does not want to leave recall costs to chance should regulate them in the contract before a defect arises. Please do not hesitate to contact us if you have any questions.
Status: 21 October 2026
NIETZER Rechtsanwälte · Attorneys at Law (USA) · Heilbronn · www.unternehmensrecht.com
This article is for general information purposes and does not replace legal advice in an individual case.
