The appeal of Internet and mail order sales of consumer fireworks can not be overstated. The ability to reach a national marketplace from one location is a powerful incentive for any retailer that wants to increase sales revenues. However, before any fireworks retailer commences to offer consumer fireworks on the Internet or by mail order, it is appropriate that a risk-rewards analysis be performed. Understandably, some business owners are willing to take greater risks than others. Recently, a number of APA members have asked for my guidance, and this article should assist all consumer fireworks retailers in evaluating some of the risks associated with Internet and mail order sales (meaning delivery is made by common carrier).
The two most important issues that concern Internet and mail order sales of consumer fireworks are (1) exposure to strict liability concepts arising from injury to person and property and, (2) compliance with federal, state and local regulations.
Strict Liability. Any fireworks business is, generally speaking, subject to the legal concept of strict liability. The concept of strict liability is applied by the courts in product liability cases in which a seller is liable for any and all defective and hazardous products that unduly threaten a consumer’s personal safety. This concept applies to all members involved in the manufacturing and selling of any facet of the product.
Any fireworks retailer that sells any product in a defective condition unreasonably dangerous to the user or consumer or to his (or her) property is subject to liability for all physical harm suffered by the ultimate user or consumer, or to his (or her) property, if (a) the seller is engaged in the business of selling such a product, and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold. This rule applies although (i) the seller has exercised all possible care in the preparation and sale of the product, and (ii) the user or consumer has not bought the product from or entered into any contractual relation with the seller.
The failure to exercise control over the identity of the ultimate user or consumer is one of the obvious risks associated with Internet and mail order sales of consumer fireworks. Generally, retailers are able to qualify potential customers before consummating a sale when the sale is made at the retailer’s place of business. This benefit is substantially undermined when impersonal sales methods—e.g., Internet and mail order, are used.
Whereas mail order is akin to using a rifle, the Internet employs a shotgun approach. A retailer relying on mail order can limit the locale or region where the catalogs are delivered (although the retailer can not prevent the catalog from straying afar from the intended recipient); by comparison, the Internet is open to anyone and everyone. In either instance, the law of strict liability extends not only to the consumer that may place the order, but to all individuals that may ultimately use the product.
In short, the retailer’s exposure is potentially limitless. Efforts to include language limiting liability will be of no assistance, no matter how strongly worded, since the concept of strict liability provides no defense. Likewise, language designed to ‘qualify’ the purchaser—e.g., identify age, proof of valid permit/license, acknowledgement that product will only be used in compliance with applicable laws and regulations—provides little, if any, defense. Consequently, by engaging in Internet and mail order sales, a retailer may find himself hailed into a courthouse far removed from his actual place of business; invariably, the expense of defending a claim in a remote jurisdiction may far exceed the revenue derived from the purchase.
Also, your insurance carrier may take a dim view towards Internet and mail order sales and, a retailer can expect a punitive adjustment in premiums in the event that a claim arising from an Internet or mail order sale was to be submitted to it. It is a common practice for general liability policies to limit coverage to specified ‘schedule locations’; thus, caution must be exercised to ensure that coverage extends to Internet and mail order sales.
Regulatory Compliance. Consumer fireworks (1.4g) are not currently subject to regulation by the ATFE. Also, the CPSC permits Internet and mail order sales provided that the products being sold comply with all of its regulations. The DOT adopts the same position. However, extreme care must be taken to ensure that 1.4g products are not subject to re-categorization as a 1.3g display product. In this event, all bets are off.
Particular attention must be given to state, city and municipal regulations. In all likelihood, a permit or license will be required. The retailer is obligated to verify that the intended purchaser is lawfully entitled to purchase consumer fireworks. It is suggested that a copy of the permit or license be forwarded to the retailer, and made part of the file, before any sale occurs. It is also suggested that the common carrier be instructed to release all deliveries only to the purchaser personally, and not to anyone else, and to require the purchaser to provide proof of identity as well as a signature for the product.
The inclusion of a choice of venue provision in the marketing literature is of no value in the context of criminal and administrative proceedings since these proceedings must be initiated in the jurisdiction where the alleged violation occurred. In the context of a civil action (for example, arising from injury to person or property), the venue provision is likely to be set aside since the injured party, the place of injury, and the place of both purchase and delivery, all occurred in a jurisdiction other than the place of sale. In short, while recommended, choice of venue provisions provides the retailer with questionable protection. The same analysis applies to choice of law provisions.
In conclusion, while both Internet and mail order sales introduce a host of new issues and concerns to the retailer, the risk-rewards analysis may tip in favor of undertaking this type of sales activity.
Comments and questions can be directed to:
Donald E. Creadore, Esq.
425 Park Avenue – 31st Floor
New York, New York 10022
Tel. (212) 355-7200
Fax. (212) 583-0412
Email: creadore@aol.com
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Contact: Donald Creadore, Esq.
425 Park Avenue – 31st Floor
New York, NY 10022
Tel. (212) 583-0500
Fax (212) 583-0412
E-mail – creadore@aol.com
