Liability Lawyers Switzerland 2026: Works‑contract and Product‑defect Risks

Amendments to the Swiss Code of Obligations (CO) that took effect on 1 January 2026 have reshaped works‑contract liability and introduced mandatory rectification rights that every contractor, manufacturer and project owner must now accommodate. At the same time, the EU Product Liability Directive (PLD) is being transposed across member states, creating new cross‑border exposure for Swiss exporters whose goods, including software and AI components, reach the single market. For general counsel, risk managers and compliance officers, the combined effect is a compliance inflection point that demands immediate contract, insurance and operational reviews.

This guide, prepared for liability lawyers Switzerland practitioners and their clients, sets out the statutory changes, analyses the practical risks, and provides actionable checklists and sample clauses to help organisations adapt.

Executive Summary, Quick Takeaways for Counsel

Before diving into the detail, here are six headline points that every in‑house team should brief upward immediately:

• Mandatory rectification rights are now law. Since 1 January 2026, principals in works contracts can require the contractor to repair defects before claiming damages, a sequencing change that alters negotiation dynamics and contract structure.
• Blanket liability exclusions are narrower. Contractual clauses that purport to exclude liability for gross negligence or intentional concealment of defects remain unenforceable, and the 2026 Swiss Code of Obligations amendment tightens the space for broad waivers in works contracts.
• Product liability Switzerland exposure is rising. The revised EU PLD expands strict liability to digital products, AI‑enabled devices and component suppliers, Swiss exporters selling into the EU face higher claimant expectations even though the Directive does not apply domestically.
• Insurance markets are repricing. Industry observers expect underwriters to adjust product‑liability and recall policy wordings throughout 2026, with higher premiums and new exclusions for software and cyber‑physical risks.
• Contracts need redrafting now. Standard‑form works contracts, supply agreements and indemnity chains drafted before 2026 likely contain clauses that are now inconsistent with the amended CO or that fail to address EU PLD exposure.
• Act within 90 days. Immediate priorities are a contract audit, a product‑defect risk assessment and an insurance coverage gap analysis, the compliance checklist in Section 5 below maps these into a phased action plan.

What Changed on 1 January 2026, Statutory Overview and Timeline

Key amendments to the Swiss Code of Obligations

The amendments to works‑contract liability take effect under the revised provisions of the CO governing the contract for work and services (Werkvertrag). The central change is the introduction of a mandatory rectification right: a principal who discovers defects in the completed work can now demand that the contractor remedy those defects at the contractor’s cost before resorting to a price reduction or damages claim. This statutory right cannot be contractually excluded where the defect is attributable to the contractor’s fault.

The amendments also clarify the allocation of liability between contractors and subcontractors. Where a subcontractor’s work is defective, the principal retains a direct claim against the main contractor under works‑contract liability, but the main contractor’s recourse against the subcontractor is now subject to clearer procedural requirements, including timely notice and an opportunity for the subcontractor to inspect and repair.

Timeline of key legislative dates and obligations

What to do now: Obtain the consolidated text of the amended CO from the official Fedlex platform. Cross‑reference your existing template contracts against the new rectification provisions and schedule a legal review within 30 days.

Works‑Contract Liability: Who Is Liable, Mandatory Rectification Rights, and Limits

Liability allocation between contractor, subcontractor and owner

Under Swiss works‑contract liability, the main contractor bears primary responsibility for the quality and fitness of the delivered work. The 2026 amendments do not alter this fundamental principle, but they sharpen the procedural mechanics. The principal must notify the contractor of defects without undue delay following acceptance or discovery. The contractor then has a reasonable period, typically assessed by reference to the nature of the defect and the complexity of the repair, to carry out the rectification.

Where the defect originates in a subcontractor’s scope of work, the main contractor remains liable to the principal. However, the main contractor’s recourse claim against the subcontractor now requires that the subcontractor was given timely notice of the defect and an opportunity to inspect. Practically, this means main contractors need a contractual back‑to‑back notification mechanism. Failure to notify the subcontractor promptly could reduce the main contractor’s recourse claim or extinguish it entirely for certain categories of remediable defects.

Mandatory rectification (repair) rights versus damages

The most significant change for everyday contracting practice is the statutory hierarchy of remedies. Rectification rights now sit at the top of the remedial ladder. Before the 2026 Swiss Code of Obligations amendment, principals and contractors often negotiated the order of remedies contractually, and many standard forms allowed the principal to move directly to a price reduction or termination. That flexibility is now constrained: where a defect is objectively remediable and the contractor is willing and able to repair, the principal must generally allow the repair before escalating.

This does not mean the principal is locked into an endless repair cycle. If the rectification fails, if the contractor refuses to act within the reasonable timeframe, or if the defect is so fundamental that repair cannot restore the work to its contractual specification, the principal retains the right to claim a price reduction, rescind the contract or seek damages. The statutory test is one of reasonableness, and early indications suggest that Swiss courts will apply a pragmatic standard, weighing the cost of repair against the severity of the defect and the prejudice to the principal from delay.

Scope of exclusions and public policy limits

Can parties still exclude liability for gross negligence or defects after the 2026 amendment? The short answer is no, exclusion clauses that attempt to waive liability for gross negligence or for defects intentionally concealed by the contractor remain void as a matter of Swiss public policy under Art. 100 CO. The 2026 amendments reinforce this position by making the mandatory rectification right non‑excludable in cases of contractor fault.

Parties retain some freedom to shape liability for ordinary negligence and to set caps on the quantum of damages, provided those caps are not unconscionable. Industry observers expect that Swiss courts will continue to scrutinise liability caps using the same proportionality analysis applied before the amendment, but with heightened attention to whether the cap effectively nullifies the new rectification right. A cap set so low that it makes rectification economically impractical for the contractor could be struck down as incompatible with the statutory purpose.

What to do now: Review all template works contracts for exclusion and cap clauses. Flag any clause that purports to override the statutory rectification sequence or that excludes liability broadly for “all defects.” Redraft to comply with the amended CO and retain enforceable, proportionate caps.

Product Liability in Switzerland 2026, Manufacturer Obligations and EU PLD Cross‑Border Exposure

Manufacturer obligations under Swiss law

Swiss product liability law imposes strict (no‑fault) liability on manufacturers for damage caused by defective products under the Federal Act on Product Liability (Produktehaftpflichtgesetz, PrHG). A product is defective if it does not provide the safety that consumers are entitled to expect, taking into account its presentation, foreseeable use and the time it was put into circulation. Manufacturer obligations include adequate design, manufacture and testing, clear instructions and warnings, and, increasingly, post‑market surveillance to identify emerging risks after the product reaches the market.

The 2026 landscape has not changed the text of the PrHG itself, but the practical expectations on manufacturers have intensified. Swiss regulators and courts take note of international standards, and the convergence between EU and Swiss product safety expectations means that product‑defect risk management best practices are de facto aligned with the revised EU PLD even where the Directive does not formally apply within Switzerland.

How the EU Product Liability Directive impacts Swiss exporters

The EU Product Liability Directive impact on Swiss manufacturers is indirect but powerful. The revised PLD, which EU member states are transposing from 2026, expands the definition of “product” to include standalone software, AI systems and digital services. It also shifts the burden of proof in favour of claimants in cases involving technically complex products and introduces liability for online platforms that present themselves as the manufacturer.

For Swiss exporters, the practical consequences are significant:

• Software and AI exposure. A Swiss medical‑device manufacturer that embeds AI‑driven diagnostics and sells into Germany will now face strict product liability for defects in the software component, not just the physical device.
• Disclosure and evidence obligations. Under the revised PLD, claimants can compel disclosure of technical documentation. Swiss manufacturers must ensure that their product files, test records and risk assessments are maintained to a standard that will withstand scrutiny in EU courts.
• Extended liability chain. Importers and authorised representatives established in the EU may be jointly liable. Swiss manufacturers that rely on EU‑based distributors need to review indemnity arrangements and ensure adequate insurance coverage along the entire distribution chain.

Practical examples, medical devices and IoT products

Consider a Swiss IoT sensor manufacturer supplying connected devices to industrial customers in France and Germany. Under the prior PLD, liability attached primarily to the physical product. Under the revised Directive, a defect in the device’s firmware, for example, a software bug causing inaccurate readings that lead to production‑line damage, could trigger strict product liability in both jurisdictions. The manufacturer’s product‑defect risk management programme must now encompass firmware update protocols, version tracking and over‑the‑air patch capabilities as part of its post‑market surveillance obligations.

Similarly, a Swiss pharmaceutical company marketing combination devices (drug plus delivery device with embedded software) faces the expanded PLD scope for every digital component. The likely practical effect will be more rigorous pre‑market testing documentation and a requirement to maintain detailed post‑market incident logs accessible to EU competent authorities.

What to do now: Map every product that reaches EU markets. Identify which products now fall within the expanded PLD definition (software, AI, digital services). Update product files and indemnity clauses with EU distributors accordingly.

Practical Compliance Checklist for Manufacturers and Contractors

The compliance actions below are organised into three phases. Risk managers and compliance officers should assign ownership and set board‑reporting milestones for each phase.

Immediate actions (0–3 months)

• Contract audit. Review all active works contracts, supply agreements and subcontractor terms for compliance with the amended CO, particularly rectification rights, liability caps and exclusion clauses.
• Product inventory. Catalogue every product (including software and digital services) sold into the EU. Flag items that now fall within the expanded PLD product definition.
• Insurance gap analysis. Request current policy wordings from your liability insurer and compare coverage against the new statutory exposures, rectification costs, EU PLD claims and recall expenses.
• Notification protocol. Implement or update the defect notification protocol between main contractors and subcontractors to meet the amended CO’s timely‑notice requirements.
• Board briefing. Prepare a one‑page risk summary for the board or management committee, setting out the 2026 changes and the estimated compliance budget.

Short‑term actions (3–9 months)

• Template redraft. Engage liability lawyers in Switzerland to redraft standard‑form works contracts, incorporating mandatory rectification clauses, compliant liability caps and updated warranty periods.
• EU PLD alignment. For products sold into the EU, align technical documentation, labelling and instructions with the revised PLD requirements, including software version tracking and AI transparency disclosures.
• Post‑market surveillance. Establish or upgrade a post‑market surveillance system that covers firmware and software updates, customer complaints and adverse‑event reporting for EU markets.
• Training. Run workshops for project managers, contract administrators and quality teams on the new rectification sequence and what constitutes adequate defect notice.

Medium‑term actions (9–18 months)

• Insurance renegotiation. Renegotiate policy limits and wordings at the next renewal, using the completed risk assessment to justify coverage extensions for digital‑product risks, recall costs and cross‑border EU PLD claims.
• Supply‑chain indemnity review. Cascade updated liability and indemnity language through the full supply chain, from raw‑material suppliers through to EU‑based distributors, ensuring back‑to‑back protection.
• KPIs and governance. Embed product‑defect risk management KPIs into the enterprise risk management framework. Track defect notification response times, rectification completion rates, post‑market incident volumes and insurance utilisation.
• Regulatory monitoring. Assign responsibility for monitoring EU PLD transposition developments in key export markets (Germany, France, Italy) and for flagging any Swiss legislative follow‑up proposals.

What to do now: Download or adapt the checklist above as a project plan. Assign a compliance lead within 14 days and set a 90‑day milestone for completion of Phase 1.

Drafting Works Contracts Post‑2026: Sample Clauses and Negotiation Tips

Mandatory rectification clause

Every works contract governed by Swiss law should now contain an express rectification clause that reflects the statutory position. Below is a sample clause for illustration only, it must be adapted to the specific project and reviewed by qualified Swiss liability lawyers:

Sample Clause 1, Rectification Right: “Where the Principal identifies a Defect in the Work following Acceptance, the Principal shall notify the Contractor in writing without undue delay. The Contractor shall, at its own cost, commence rectification within [X] business days of receipt of the notice and complete the rectification within a reasonable period. If the Contractor fails to commence or complete rectification within the stated periods, or if rectification fails to restore the Work to its contractual specification, the Principal may at its election claim a price reduction, terminate the Contract or claim damages in accordance with the applicable provisions of the Swiss Code of Obligations.”

Limitation and exclusion clauses, what remains enforceable

Limitation clauses that cap the contractor’s aggregate liability at a stated sum or a percentage of the contract price remain broadly enforceable in Swiss law, provided they are not unconscionable and do not effectively override the mandatory rectification right. The following illustrative clause sets a proportionate cap:

Sample Clause 2, Liability Cap: “The Contractor’s aggregate liability under this Contract for all claims arising from Defects shall not exceed [X]% of the total Contract Price, provided that this cap shall not apply to (a) liability for gross negligence or wilful misconduct, (b) liability for personal injury, or (c) the Contractor’s obligation to perform rectification under Clause [Y] above.”

Note the carve‑outs: the cap does not limit mandatory rectification or liability for gross negligence, preserving compliance with Art. 100 CO and the amended rectification provisions.

Warranty periods and acceptance testing

The 2026 amendments make acceptance testing a critical contractual milestone because the rectification right is triggered by defects discovered after acceptance. Contracts should define:

• Acceptance criteria, objective, measurable standards the work must meet before the principal signs off.
• Inspection period, a defined window (e.g., 14–30 days) during which the principal conducts testing.
• Warranty period, the period after acceptance during which the contractor remains liable for latent defects, typically aligned with the statutory limitation period.

Sample Clause 3, Indemnity: “The Contractor shall indemnify and hold harmless the Principal against all third‑party claims, losses and expenses arising from Defects in the Work, including but not limited to product‑liability claims brought against the Principal under Swiss or EU law, to the extent that such claims result from the Contractor’s breach of its obligations under this Contract. This indemnity is subject to the aggregate liability cap in Clause [Z], except where the relevant claim arises from the Contractor’s gross negligence or wilful misconduct.”

Negotiation tip: Contractors will resist uncapped indemnities. Linking the indemnity to the liability cap, while carving out gross negligence, typically produces a commercially balanced position that both parties and their insurers can accept.

Insurance, Indemnities and Risk Transfer, What to Buy and What Insurers Will Want

Recommended covers and typical Swiss premium ranges

Manufacturer obligations under the 2026 framework make insurance a critical risk‑transfer tool. The table below summarises the principal covers that Swiss liability lawyers typically recommend for manufacturers and contractors operating in 2026.

Swiss product‑liability premiums vary widely by sector, turnover and claims history. Industry observers report that annual premiums for mid‑market manufacturers typically range from 0.05% to 0.3% of insured turnover, with digital‑product risks trending toward the higher end as insurers factor in the expanded EU PLD scope. Recall cover attracts separate, often significant, premiums and may be subject to sub‑limits and co‑insurance requirements.

Insurers increasingly require policyholders to demonstrate robust product‑defect risk management processes, including documented quality controls, post‑market surveillance and compliant contractual indemnities, as conditions of coverage. Failure to maintain these processes can trigger policy exclusions or reservation of rights at the claims stage.

What to do now: Request a coverage review from your broker before the next renewal date. Provide your insurer with the updated contract templates and product‑risk map from the compliance checklist above.

Litigation, Enforcement, Remedies and Next Steps for Counsel

Remedies, limitation periods and cross‑border enforcement

Swiss liability law provides a range of remedies for defective work and products: rectification (repair or replacement), price reduction, contract rescission and damages (including consequential loss where foreseeable). For product‑liability claims under the PrHG, strict liability applies regardless of fault, subject to recognised defences such as development risk and compliance with mandatory standards.

Limitation periods depend on the type of claim. Contractual works‑contract claims are generally subject to a five‑year limitation period from acceptance for immovable works and a two‑year period for movable works. Product‑liability claims under the PrHG must be brought within three years of the date the claimant became aware (or should have become aware) of the damage, the defect and the identity of the manufacturer, subject to an absolute cut‑off of ten years from the date the product was put into circulation.

For cross‑border enforcement, Switzerland’s participation in the Lugano Convention facilitates recognition and enforcement of judgments from EU and EFTA states. Swiss exporters facing product‑liability claims in EU courts should anticipate that successful judgments will be enforceable against Swiss assets under Lugano procedures, reinforcing the need for adequate insurance and contractual protections.

Six‑point action list for counsel:

• 1. Audit all template contracts against the amended CO within 90 days.
• 2. Map products reaching EU markets and assess EU PLD exposure.
• 3. Complete an insurance gap analysis and brief the board on recommended coverage.
• 4. Implement or upgrade defect‑notification and rectification workflows.
• 5. Establish post‑market surveillance for digital and AI‑enabled products.
• 6. Engage experienced liability lawyers in Switzerland to review high‑value contracts and advise on litigation strategy for legacy exposures.

Sources

1. Fedlex, Swiss Code of Obligations (consolidated law and amendment texts)
2. Swiss Federal Council, press releases and legislative history
3. Swiss Federal Office of Justice, legislative background
4. European Commission, Product Liability Directive (text and Q&A)
5. Borel & Barbey, firm alert on 2026 liability amendments
6. Bär & Karrer, insurance and liability analysis
7. ICLG, Product Liability comparative analysis
8. Swissmem, industry guidance on post‑market surveillance and manufacturer obligations