Consumer Contracts and Rights of Protection

Consumer Contracts and Rights of Protection: Do you know your rights and obligations?

Consumer contracts are governed by an extensive body of consumer protection law which aims to provide consumers with rights that cannot be taken away. The principal consumer protection rules are found in:

Rights when buying goods and services

Implied terms in contracts for sale of goods

The SGA implies certain terms into a contract for the sale of goods. These are classified as conditions under contract law. Goods must:

  • Come with good title (section 12, SGA). (Also implied are the warranties of quiet possession and freedom from encumbrances).
  • Correspond with their description (section 13). For example, a dish that is described as "ovenproof", but shatters when used under the normal conditions for making a casserole, has been misdescribed and would not conform to the contract.
  • Be of satisfactory quality (section 14(2)). Quality includes:
    • state, condition and fitness for all purposes for which goods of that kind are commonly supplied;
    • appearance and finish;
    • freedom from minor defects;
    • safety; and
    • durability.
    A seller may be protected if they specifically draw unsatisfactory quality to the consumer's attention before the contract is made, or if the consumer examines the goods before the contract is made and finds (or should have found) a defect (section 14(2C))

Public statements to consumers about the characteristics of a product (especially in advertising or on labelling) are also relevant to whether goods are of satisfactory quality: they must be factually correct and form part of the seller's contract with the consumer (section 14(2D), SGA). However, sellers have a defence if they can show that:

  • They were not aware of the statement for good reason.
  • The statement had been corrected in public before the conclusion of the sale.
  • The decision to buy the goods could not have been influenced by the statement.
(Section 14(2E), SGA.)

A consumer benefits from a six month presumption under section 48A(3) of the SGA where he wishes to rely on one of the EU remedies introduced into the SGA by the SSGCR. It will be presumed that for the first six months after delivery the goods were inherently defective at the point of delivery. However, after this six month period, the burden of proof is reversed and a consumer will have to show that the goods were defective at the time of delivery, which may be difficult to prove.

Although it is not statutory guidance and is not a definitive indication of how the courts would treat the issue, according to the guidance from the Department of Business, Innovation and Skills (BIS), A trader's guide: the law relating to the supply of goods and services (the BIS Guidance), a consumer cannot hold a seller responsible for:

  • Fair wear and tear.
  • Misuse or accidental damage by the consumer.
  • Where consumers have  tried their own repair or had someone else attempt a repair, and this has damaged the goods.

A seller cannot exclude, or restrict liability for the breach of, these implied terms in consumer contracts (section 6, UCTA).

Remedies: goods

In a contract for the sale of goods, a consumer has certain remedies when goods do not conform with the contract for sale. The first two are common law remedies and the remainder were introduced into the SGA by the Sale and Supply of Goods to Consumers Regulations 2002 (SI 2002/3045) (SSGCR), to implement the Directive on certain aspects of the sale of consumer goods and associated guarantees (99/44/EC). The existence of parallel regimes makes it difficult for consumers and retailers to understand the law, and can lead to unnecessary disputes.

The relationship between these regimes has been scrutinised, and criticised, by the Law Commissions' in their report on Consumer Remedies for Faulty Goods in 2009.

Common law remedies for goods

Rejection. Consumers can reject goods and require their money back as long as they complain within a reasonable time. "Reasonable time" is not defined the SGA, but a consumer will need time to examine goods to check that they are satisfactory (section 35(2), SGA). A court will decide what is a reasonable time, taking into account all the circumstances. A consumer will lose this right to reject if he "accepts" the goods.

Damages. Buyers can claim damages, which will generally equate to the cost of repair or replacement of the goods, and they may also be able to claim compensation for damage caused by faulty goods, depending on the facts. Buyers may struggle to successfully claim for consequential losses such as distress, inconvenience or disappointment. If buyers have accepted the goods, their only remedy is damages.

Acceptance

Section 11(4) of the SGA states:

"where a contract of sale is not severable and the buyer has accepted the goods or part of them, the breach of condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the goods as repudiated, unless there is an express or implied term of the contract to that effect."

A buyer who has accepted the goods can only sue for damages, so it is important to know when acceptance has occurred. The buyer's right to examine the goods and acceptance are governed by sections 34 and 35 of the SGA, and can occur in three ways:

  • By intimation to the seller that the consumer has accepted the goods. Consumers must have a reasonable opportunity to examine the goods, so even if they have signed a delivery note, they will not be deemed to have accepted them (section 35(1)(a)).
  • Through an act after delivery inconsistent with the seller's ownership (section 35(1)(b)).
  • By retention of the goods beyond a reasonable time. What is reasonable is a question of fact and whether the consumer has had a reasonable opportunity to examine the goods must also be considered (section 35(4)). Unfortunately, case law to date on what amounts to a reasonable time provides little guidance on how long this period lasts. The Scottish Court of Session found in David Douglas v Glenvarigill Company Limited [2010] CSOH 14 that a period of 15 months was too long to permit rejection for a latent defect in a car and awarded damages instead.
Time limits for bringing claims

The time limit for contractual claims is six years under section 5 of the Limitation Act 1980. The six-year period runs from when the breach of contract occurred, which, in practice, is taken to be the date on which the goods were provided. However, this time limit depends on the goods in question and does not mean that goods have to last for this length of time.

Where a consumer wishes to rely on one of the EU remedies in section 48A for defective goods, he benefits from a six month presumption that the goods were defective on delivery (section 48A(3) ). This means the consumer does not have to prove the defect was in the goods when delivered for this period. However, after this time, the burden of proof is reversed and a consumer will have to show that the goods were defective at the time of delivery, which may be difficult to prove in practice.

Minimising losses

There is a general duty under contract law to take reasonable steps to mitigate a loss. (The BIS Guidance also states that consumers should act reasonably when seeking redress and should not add unnecessary costs.) Consequently, a consumer should:

  • Report faults as soon as possible, to make it easier for to show that the goods were inherently faulty at the point of sale, and to prevent the goods from deteriorating further.
  • Service goods as appropriate, follow user instructions and look after them, so that a consumer does not contribute to any existing or inherent fault.

Consumers may be able to claim damages if they suffer loss as a direct consequence of a product being faulty.

Additional remedies where selling at a distance

If goods are sold by distance means (for example, mobile phone, e-mail, web, telephone, fax or interactive television), sellers need to comply with the Distance Selling Regulations.

There are four main obligations on sellers of goods and services by distance means. They are:

  • To provide up-front information to consumers before the contract is concluded.
  • To provide certain information to consumers before the delivery of the goods or supply of the services requested.
  • To commit to delivering the goods and/or services within 30 days.
  • To provide a seven (working) day cooling-off period, during which consumers can withdraw from the contract without penalty and without giving a reason. The start date for this period differs between contracts for goods and contracts for services, and when the relevant information was provided by the seller. The only charge that can be made to consumers for exercising their rights is the direct cost of returning the goods. If the trader does not give consumers details about their right to cancel the contract, the period is extended from seven days to three months.

There are certain exceptions to the rules, such as the supply of products that, by their nature, may not be returned (such as perishable food) or bespoke products

Unfair commercial practices

The Consumer Protection Regulations implement the Unfair Commercial Practices Directive (2005/29/EC) into UK law. Broadly, the Consumer Protection Regulations prohibit unfair commercial practices, such as misleading or aggressive practices. Unfair commercial practices are a criminal offence under regulation 3(1) of the Consumer Protection Regulations.

The Consumer Protection Regulations are enforced by the OFT and Trading Standards. Consumers do not have a direct right of action against sellers under the Consumer Protection Regulations. In March 2012, the Law Commission and the Scottish Law Commission recommended providing consumers with a new direct civil right against a trader for misleading or aggressive practices


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