The Carter administration yesterday proposed a new product liability code for use by the states to help resolve the growing legal confrontation between manufacturer and consumer.

The model law of seller-buyer issues, from the length of time a manufacturer is liable for its product to the duties of a consumer to check out a product and the extent of damages paid in the event of injury.

The new code marks the government's most extensive effort yet to bring order and uniformity to an area of commercial law that is rife with inconsistencies and uncertainties. Manufacturers, insurance companies and consumer groups have all called for reforms.

As a result of current confusion -- and also because of very expensive claims recently paid in several landmark liability cases -- many companies have been slapped with sharp increases in product liability insurance premiums. Such increases have been passed along in the form of higher prices to consumers. They have also served to discourage development of potentially risky n ew products, particularly in machine tools, pharmaceuticals, auto parts and sporting goods.

An increasing number of firms have even been electing to go without product liability coverage.

Like auto and medical malpractice insurance, product liability coverage has traditionally been up to the states to regulate. Only 18 states, though, have liability statutes and noon of them are as comprehensive as the model proposed by the administration, which addresses 17 major issues. Other states have relied on court precedents which keep changing.

"What we have tried to do is balance the interests of the manufacturers, insurers and consumers," said Victor E. Schwartz, a law professor on leave from the University of Cincinnati who chaired the special commerce Department committee that drafted the code.

The proposed standards will be published today in the Federal Register for public comment. The code will then be revised and published in final form later this year.

The model law:

State that manufacturers will be held liable for defects in construction of a product and spells out criteria to determine when they are also liable for defects in design and product warnings. Such criteria is currently garbled in existing case law.

Goes easier on retailers than manufacturers, requiring retailers to exercise only "reasonable care" in checking out products while applying the standard of "strict liability" to manufacturers. Most case law currently treats both groups of sellers the same.

Says that sellers will remain liable only during the "useful safe life" of their products, generally defined as 10 years. There are some exceptions, including such products as pharmaceuticals where the harm to consumers can take many years to manifest itself. There are also distinctions made between workplace products and consumer products.

Limits the extent of employer liability, in the event a worker is injured on a machine not properly maintained by the employer, to the extent of the employer's worker compensation liability.

Call for compulsory, non-binding arbitration for claims under $30,000. This is intended to help reduce litigation costs -- a major contributor to high insurance premiums -- and to speed the judicial process.

Sets a maximum award of $25,000 in cases where the injuries are not serious. In the event of serious injuries, the damagers are left to the jury to decide. Finally, the jury will decide whether punitive damages should be awarded but the judge will name the sum.

Although comprehensive in scope, the proposed standards do not address several issues that have been subject to considerabler debate and on which the courts have given no firm ruling. Among the issues not considered are whether the seller of used products should be treated the same as the seller of a new product, whether awarded damages can be made in periodic payments rather than in a lump sum as is now the practice and whether sellers of houses should be treated differently under the law.