Product Liability and Warranty Litigation in Bosnia and Herzegovina

Bosnia and Herzegovina (“BiH”) has a complex legal and administrative structure. Due to its constitutional and political organisation, the country operates across several levels of authority – the state level, two separate and distinct administrative entities, i.e., the Federation of Bosnia and Herzegovina (“FBiH”) and Republika Srpska (“RS”), as well as Brčko District (“BD”) as a separate administrative unit. Each of these levels of governance has its own legislative authority, depending on the type of matter concerned. In addition, the entity of FBiH consists of ten (10) cantons and each of them has its own governmental structure as well as local legislation, regulations and policies for certain matters. BiH also has candidate status for EU membership, which means it has undertaken the commitment of harmonising its legal framework with EU law. However, this harmonisation has not yet been completed.

Grounds for bringing product liability claims in BiH are contractual, tort and statutory, as encompassed by the legal framework. 

In BiH the primary legislation that establishes the foundations of product liability and warranty litigation are the entity-level and Brčko District-level Laws on Obligations (in local language “Zakon o obligacionim odnosima”, abbreviated “ZOO”). These laws on all three levels are for the most part identical, and based on the law that was adopted in the 1970s and which applies generally to all persons (consumers and non-consumers) and which has no specific consumer-protection provisions.

Consumer protection was introduced in BiH subsequently, by separate laws, such as the state level (BiH) Law on Consumer Protection (in local language “Zakon o zaštiti potrošača” abbreviated “ZZP”), which applies only to sales to consumers. In addition to the state-level law, RS has adopted the RS Law on Consumer Protection while FBiH is currently in the stages of adopting its own consumer protection legislation. 

The existing consumer protection legislation to a large part refers to the Law on Obligations regarding product liability, but contains some additional obligations. The FBiH/RS/BD Law on Obligations are virtually identical in matters concerning product liability.

Under the Law on Obligations, sellers are liable for material defects of products that exist at the time of transfer of risk to the buyer, or that are caused by causes which existed at the time of transfer of risk to the buyer, even if the seller was not aware of such defects (except in cases of insignificant defects). The Law on Obligations sets out what constitutes a material defect of the product. It also provides that the seller shall not be liable for defects which were known or could not be unknown to the buyer at the time of the agreement, unless the seller declared that the product did not have any defects or that it has certain properties or specifications. The liability can be limited or excluded by contract, unless the seller knew about the defect but did not notify the buyer or when the seller had a monopoly position.

In addition, as a special form of liability, the Law on Obligations provides that damage caused by a dangerous item (product) shall be presumed to be caused by such dangerous item (product), until proven otherwise. The manufacturer is also liable for dangerous properties of the item if it has not taken all measures to prevent foreseeable damage by issuing warnings, using safe packaging, or other appropriate measures. 

In addition to the general rules on liability for defects, when the seller delivers technical goods (such as machines, engines, or similar goods) with a warranty certificate issued by the manufacturer guaranteeing proper functioning for a specified period from delivery, the buyer may, if the product does not function correctly, request from both the seller and the manufacturer that the product be repaired within a reasonable time or replaced with one that functions properly. During the warranty period, the buyer may demand repair or replacement regardless of when the defect occurred and is entitled to compensation for any loss of use from the time the request was made until fulfillment. In cases of minor repairs, the warranty period is extended by the duration of lost use, while in cases of replacement or substantial repair, the warranty period restarts from the date of replacement or return of the repaired item. If only a part is replaced or substantially repaired, the warranty restarts for that part only. If the seller fails to repair or replace the item within a reasonable time, the buyer may terminate the contract or request a price reduction and claim damages. 

There is no single definition of product, as different definitions are provided under different laws and these definitions are generally not harmonised. 

Under the BiH Law on Consumer Protection, a product is any item resulting from human activity that is intended for consumers or is likely to be used by consumers, delivered whether or not it is to be paid for, in the course of commercial activity, and regardless of whether it is new, used, or remanufactured. Products include finished products as well as raw materials and component parts. They encompass all types of products, including agricultural products. Under the RS Law on Consumer Protection, a product is any good or service that may be placed on the market, including public services, immovable property, rights, and obligations. The Law on Obligations does not contain a definition of products, but only makes the division between goods and services, so generally goods would be considered as products under the Obligations Act. 

Definitions of products also exist in the BiH Law on Market Surveillance, as well as the BiH Law on General Safety of Products, including the differentiation between a safe product and dangerous one. 

The legal framework doesn’t distinguish between tangible and intangible products, which means that generally software would also be covered by the definition of products, however this remains untested in practice. 

In BiH there is no formal distinction between consumer and industrial products, but consumer protection rules apply only in B2C transactions.

Generally, under the Law on Obligations buyers can bring product liability and warranty claims, while under the consumer protection legislation this can be done by consumers. Consumers can also request protection from the Ministry of Foreign Trade and Economic Relations of BiH and Ombudsman for Consumer Protection in BiH. 

In addition, the general tort provisions under the Law on Obligations establish that whoever suffered damage is eligible to bring a claim for damage compensation. 

In general, the rights and obligations of the deceased are transferred through inheritance, meaning that heirs could generally pursue claims for product liability and warranty. 

A claim for non‑material damage that a person suffered may be transferred to their heirs only if that claim has been recognised by a final decision or by a written agreement. However, in case of death of a person his close family members have a right for independent claims for compensation of non-material damage (loss of family member). 

Under the Law on Obligations the damages that are recoverable generally include material losses as well as non-material losses. For both types of damages, the law prescribes certain conditions that need to be met. 

In case of material losses, the injured party is generally entitled both to compensation for ordinary damage and for foreseeable lost profit. If the restoration of the previous condition does not completely eliminate the damage, the liable party must provide monetary compensation. The court assesses the amount of compensation by taking into account all relevant criteria to place the injured party in the position they would have been in had the loss not occurred. 

In pursuing non-material losses, the injured party will need to present in accordance with the Law on Obligations what type of non-material loss has occurred, and court will proceed usually on a case-by-case basis in assessing the claim for non-material loss. 

The BiH legal system does not permit punitive or exemplary damages. 

A “defective” product can be defined as having material (physical) and/or legal defect, although in product liability claims (especially in respect of consumers) mostly material defects are involved.

Generally, a material defect exists: (i) if the product does not possess the properties required for its ordinary use or for being placed on the market; (ii) if the product does not possess the properties required for the particular use for which the buyer is acquiring it, and which was known to the seller or ought to have been known to the seller; (iii) if the product does not possess the properties and characteristics that were expressly or implicitly agreed upon, or that are prescribed; or (iv) when the seller has delivered a product that does not conform to the sample or model, unless the sample or model was shown solely for informational purposes.

Legal defects exist where any third‑party has rights in respect of the product that excludes diminish, or restrict the buyer’s rights, and of whose existence the buyer was not informed, nor did the buyer consent to take the product encumbered by such third-party right(s).

In addition to statutory rules, the manufacturer or the seller can be liable for defects under contractual warranty, which generally warrants that the product will function properly for a prescribed time, in which case defects will exist if the product fails to function properly for the entire duration of the warranty period. 

Under the current legislation, generally the burden of proving a defect is on the claimant. However, under the RS Law on Consumer Protection, if a defect appears within 12 months from the date of purchase of the product, it shall be presumed that the defect existed at the moment when the risk passed to the consumer, unless the trader proves otherwise by means of expert opinion, or if that presumption is incompatible with the nature of the product or the nature of the defect.

In case of request for damages, the claimant needs to prove also the defect and the causality between the damage and the defect (except in cases of liability for dangerous products, in which case such causality is presumed).   

The burden of proof is generally on the party that claims a defect exists or the party that is claiming damages. The party needs to prove the defects, the damage and the causal link between the two. An exception exists for compensation of damage in instances when the damage arises in connection with a dangerous product or a dangerous activity, when such damage will be presumed to originate from that product or activity, unless it is proven that they were not the cause of the damage.

Under the BiH Consumer Protection Law, if the seller disputes the existence of a defect, they must provide a written response to the consumer within eight days of receiving the claim. If the seller continues to dispute the defect and the consumer maintains their claim, an authorised court expert or a competent institute in BiH must issue a professional opinion on the validity of the claim. If the expert analysis confirms that the product or service is defective, the seller is responsible for covering the costs of the expert examination. In RS Law on Consumer Protection provides any defect that appears within 12 months of purchase is presumed to have existed at the moment the risk passed to the consumer, unless the seller proves otherwise through expert analysis or if the presumption is incompatible with the nature of the product or defect. If the seller disputes the defect in writing after 12 months but within two years, the consumer may request an expert opinion, and the seller must cover the cost if the defect is confirmed. The expert opinion in such cases may be provided by an authorised court expert, an authorised service centre, or another authorised institution.

Generally, the courts will first assess if a defect exists, i.e.: (i) if the product does not possess the properties required for its ordinary use or for being placed on the market; (ii) if the product does not possess the properties required for the particular use for which the buyer is acquiring it, and which was known to the seller or ought to have been known to the seller; (iii) if the product does not possess the properties and characteristics that were expressly or implicitly agreed upon, or that are prescribed; or (iv) when the seller has delivered a product that does not conform to the sample or model, unless the sample or model was shown solely for informational purposes.

Furthermore, the courts will assess whether the defects were known or should have been known to the buyer, whether they were hidden and the existence of the defect (or cause of the defect) at the moment of the transfer of risk and the timely notification to the seller. 

It should be noted that the court will assess this on a case by case basis and will consider all relevant provisions that regulate the issue of defective products or breaches of regulatory requirement or safety standards, and generally any non-conformance with regulatory requirements or safety standards will be considered as the product not possessing the properties required for its ordinary use or for being placed on the market.

Under BiH legal framework, liability depends on the specific legal framework used. 

Under the general rules of the Law on Obligations, the seller is liable for the defect.

In cases of contractual warranty (for machines, motors or technical goods), both the seller and the manufacturer can be held liable for defects.

Under the BiH Law on General Product Safety manufacturers, and any other entity or person in the supply chain that can potentially cause defects is responsible for the safety characteristic of the product. 

Under the Law on Obligations, if multiple parties are responsible for damage, the parties are generally jointly liable. Joint liability also applies when multiple individuals independently cause damage but their individual contributions cannot be determined, or when it is clear that one of several connected persons caused the damage but the exact perpetrator cannot be identified.

In addition, the liability would generally be determined based on the contract between the parties.  

In case of contractual warranty cases, the buyer can request liability from either the seller or the manufacturer, based on joint and several liability. 

Generally, defences can include claims that the product does not contain a defect, that the defects were known or had to be known to the buyer, that the buyer has inspected the product and that the defects were visible, that the damage occurred due to a cause external to the product, that the damage was caused by the damaged party or a third person and that the effects couldn’t be foreseen, avoided, or eliminated, that the damage was caused solely by a third party or that the defendant can be found not liable if the injured party also contributed to the damage. Moreover, a defendant can also invoke the defence that the reporting of the defect was untimely.  

Under the Law on Obligations, generally the debtor’s liability can be contractually limited or excluded, except for intent or gross negligence In addition, the seller can limit or exclude liability for material defects of the products, however, such exclusion will be null and void if the defect was known to the seller but did not notify the buyer about it.

In addition, the court may, at the request of the interested contracting party, annul a contractual provision excluding liability for ordinary negligence, if such an agreement resulted from the debtor’s monopolistic position or, in general, from an unequal relationship between the contracting parties.

The contracting parties may also agree on the maximum amount of damages that the debtor is obliged to compensate. Such an amount shall be valid provided that it is not in obvious disproportion to the damage and unless the law provides otherwise for a specific case. In the event of a limitation of the amount of compensation, the creditor is entitled to full compensation if the impossibility of performing the obligation was caused intentionally or by the debtor’s gross negligence.

However, in respect of consumers, under the BiH Law on Consumer Protection, provisions in consumer contracts which are unfair or cause damage to the consumer will generally be considered as null and void. Among others, in the general terms of standard‑form contracts a provision on limitation or exclusion of liability would generally be considered as null and void, but would depend on the specific circumstances. 

The statutory limitation periods depend on the specific claim involved.

Under the BiH Law on Consumer Protection, if the defect is visible, the consumer must report to the seller within 8 days from receipt of the product. If the defect was hidden, it must be reported within 2 months from discovery, but in any case within 24 months after the product was received. This does not apply to products that come with a written warranty, in which case the terms of such written warranty shall apply.

Under the Law on Obligations, in ordinary contracts for sale of goods, the buyer must inspect the product as soon as possible. If both parties are present the buyer must report any visible material defect to the seller immediately. In case of hidden defects, the buyer must notify the seller within 8 days from the discovery of the defect. For both visible and hidden defects in commercial contracts, notification must be given without delay. In case of hidden defects, the seller is not liable for defects which appear after six months from the delivery of the item if the defect was known or could not remain unknown to the seller.

Regarding contractual warranty, the manufacturer and seller shall be liable for the duration that has been determined in such warranty. Furthermore, the buyer’s rights against the manufacturer under the warranty certificate expire one year from the date on which the buyer requested the repair or replacement of the product, meaning that the buyer must initiate court proceedings within this period if the manufacturer/seller did not act in accordance with the warranty.

Moreover, claims for compensation of damage caused by a defective product become time barred within the limitation periods that apply to compensation of damage in general, which means that such claims become time barred within a subjective period of 3 years from the moment the injured party became aware of the damage and the liable person, and within an objective period of 5 years from the occurrence of the damage.

Product liability claims in BiH often involve implied contractual warranties, particularly with the application of Law on Obligations. 

Under BiH consumer law, products must meet mandatory safety and quality standards, and businesses must provide truthful and accurate information regarding the goods they sell. When a product fails to meet these standards, the seller is responsible, functionally equivalent to an implied warranty of quality.

Consumer contracts must be fair, transparent, and free of deceptive or hidden terms. A product must correspond to what a reasonable buyer would expect from the description, purpose, and type of good. This corresponds to the civil‑law version of an implied warranty that the product will function for its ordinary use.

In case of written contractual warranty, the manufacturer and seller shall be liable for the duration that has been determined in such warranty.

Remedies that are available for breach of contract or warranty regarding defective products under the BiH consumer protection legislation are: repair, replacement, and refund. In the Law on Consumer Protection in RS there is also a possibility of reducing the price if both parties agree. 

These mechanisms presuppose an underlying legal expectation that the product was supposed to be of a particular standard. 

In addition, under the Law on Obligations, a buyer who has timely and duly notified the seller of the defect may:

1. demand that the seller remove the defect or deliver another item free of defects (performance of the contract);
2. demand a reduction of the price; 
3. terminate the contract (in which case the buyer shall have to return the product and have the right to a refund), and
4. in each of the above cases, the buyer is also entitled to compensation of damages.

Punitive damages do not exist in the BiH legal system. 

However, parties can agree on contractual penalties for breach of certain obligations in their contract. 

Under BiH Civil Procedure Law there are no broad pre-trial disclosures or discovery elements. 

As a rule, each party is obliged to prove the facts on which it is basing its claim and provide the relevant evidence. If one party is referring to a document and states that the other party has such document, the court can request such other party to deliver such document. The other party cannot refuse it if has itself referred to such document as evidence, if it has a legal obligation to show or deliver such document, or it the document’s contents mean that it is a joint document of both parties (for example a contract). Otherwise, the party can refuse to deliver such document.

In BiH there is no formal class action litigation system. 

However, the possibility of a lawsuit for protection of collective interests is provided under the Civil Procedure Law. The eligible claimants are associations, bodies, institutions or other organizations which deal with protection of legally determined interests such as consumer rights. 

It should be noted that for the lawsuit to be submitted in such an instance the interests need to be gravely violated or seriously jeopardised. 

Product liability lawsuits are typically funded by claimants themselves. 

The matter of third‑party funding is not regulated, but generally there is nothing that would prohibit third-party funding.

Each party shall initially bear its own litigation costs during the proceedings, however in BiH the “loser pays” principle applies, meaning that ultimately litigation costs shall be borne by the party that loses the case. 

Hence the losing party bears court costs and statutory legal fees. In cases of partial success, the court may decide that each party bears its own costs or that one party compensates the other proportionally to the achieved success. Furthermore, the court may order one party to cover all costs incurred by the other if the unsuccessful portion of the claim is negligible and did not generate additional expenses. 

Contingency fees are permitted, provided that the contingency fee agreement is executed in written form (including correspondence via e-mail) and in FBiH that the agreed percentage shall in no case exceed thirty percent (30%) of the total amount recovered or achieved. Recovery of litigation costs from the other side may be limited, for example by the amount of fees payable under the Attorneys’ Tarriff, meaning that contingency fees or fees paid in excess of the Attorneys’ Tarriff would generally not be recoverable from the losing party.

Product liability court practice is very limited and not publicly available in BiH.

However, in one recent example the court established that a provision in a contract for sale of goods stating that the buyer accepts the item ‘as seen’ does not necessarily exclude the seller’s liability for hidden defects. In the case of the sale of a used product, if the seller could have known about the defects because they used the product, the fact that the seller did not guarantee the product’s proper functioning does not release them from liability for hidden defects.

Dispute arose between a seller of technical equipment (kitchen machinery) and the buyer of the goods for the purpose of providing food service to the employees. The equipment at issue included a used industrial bread oven that allegedly suffered recurrent failures after purchase.

Although framed as a sale of goods/hidden defects dispute rather than strict tort product liability, the ruling provides guidance on liability for defective technical goods (including used equipment) in the FBiH which is highly relevant for suppliers, manufacturers, and purchasers of machinery. 

As an EU candidate country, BiH is expected to align its legislation with EU legislation, including regarding product liability. However, this process will likely take several years. 

In addition, FBiH is in the process of adopting entity-level legislation on consumer protection, however it is unclear when this may be adopted.