Consumer Law - Effectiveness of guaratees
Consumer Law Assignment 2 Answer:
A manufacturer’s guarantee has become an expected standard feature of the sale of ‘consumer durables’. Sometimes the manufacturer can express his confidence in the product, formally in the shape of a written guarantee or warranty which accompanies the goods. The guarantee is normally for a period of 12 months from the date of purchase. However you cannot claim for any consequential loss or inconvenience under a guarantee. It is also often a sales tactic when selling white, brown or grey goods, promoting good customer after care, thus subsequently increasing sales.
The guarantee usually consists of an undertaking by the manufacturer to repair or replace faulty goods within a certain period of time. With cars it is usually regarded as a ‘manufacturers warranty’ that is, in general for a duration of 3 years when you have purchased a car new from the showroom.
There has been very few cases to show the effectiveness of guarantees, most of them were over 30 years ago, some of them are no longer good law.
The consumer may find that his rights under a manufacturer’s guarantee are easier to enforce than his Sale of Goods Act (SOGA) 1979 rights against his supplier, where he may have considerable difficulty in proving that the goods were not of satisfactory quality. However since the introduction of the EU directive, part 5A ‘additional rights of buyer’ the consumer enjoys a reversed burden of proof entitlement where it is up to the supplier to prove that goods did not conform to the contract of sale, within the first 6 months of purchase, but not after. It would also need to be established that under section 35 of the SOGA, whether or not the consumer accepted the goods by retaining them beyond a reasonable time. This is illustrated in Bernstein v Pamson Motors Rougier J in his ratio went onto say: ‘by keeping the car for 3 weeks, Mr Bernstein has accepted the car and was entitled therefore to damages only’. The amendments of sec 35(5) mean that the law is now more favourable to the buyers as recently in Clegg v Olle Anderson the buyer was able to reject the yacht after 7 months.
In general all a guarantee can do is supplement your statutory rights under the SOGA. In Rogers v Parish Lord Mustill in his obiter went on to say: The manufacturers warranty did not require the buyer to accept defects of which he could otherwise complain, since the warranty was an addition to his rights and not a subtraction from them, so that the existence of the warranty did not indicate that the buyer was expecting a vehicle of lower standard than that which he would have been entitled to expect without the warranty. How much they add is problematic. It can also depend on the type of guarantee or warrantee you have. Some maybe useless, in other words the devil is in the fine print, there maybe clauses such as the consumer having to pay the carriage charge to send it to the repairer and sometimes even the cost of labour. It’s in these instances; it can render the guarantee virtually useless. There is also the possibility that the manufacturer may say that there is nothing wrong with product and that it has been mishandled.
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It is also important to note, that if the consumer wants to prosecute for breach of contract under the guarantee, his only rights are those granted in the guarantee. He cannot claim against the manufacturer that his statutory rights have been infringed under SOGA, this is often misunderstood by the consumer.
The question arises of whether a manufacturer is bound to honour the promises contained in his guarantee. Prior to the consumer regulations 2002, the legal position was far from clear. You would have to establish whether or not the guarantee can form the basis of a contract between the consumer and the manufacturer? Well providing that there was consideration, offer and acceptance, then yes. If the consumer could show that he knew about the gurantee before he bought the goods, he would be able to establish the existence of a unilateral contract by applying the reasoning involved in Carlill v Carbolic Smoke Ball Co or even a collateral contract with the manufacturer via the retailer. The liability of the manufacturer of defective goods which are under guarantee could be established in another way. The guarantee often takes the form of a postcard, which the consumer must complete and send off to the manufacturer (the burden and inconvenience of this to the consumer being the ‘consideration’) within a certain period of time, thus then being a bilateral contract.
In the past, guarantees often contained an exception clause in cases concerning negligence, which deprives the consumer of the rights he might otherwise had against the manufacturer. Section 5 of the Unfair Contract Terms Act 1977 now prevents this practice, by providing that any clause in the manufacturers guarantee purporting to exclude or restrict liability in negligence, for loss or damage will be unenforceable against the consumer. In Adams v Richardson, Lord Denning amusingly, severely criticized such clauses and stated ‘if he wishes to exclude himself from liability he should say so plainly. Instead of heading it boldly ‘GUARANTEE’ he should head it ‘NON GUARANTEE’ for that is what it is’.
Since 1 November 1978 manufacturers have been required to include a statement in their guarantees to the effect that the consumers statutory rights are unaffected by the terms of the guarantee. Failure to make such a statement is an offence by virtue of orders made under the Fair Trading Act 1973.
The problems with the ‘effectiveness’ of guarantees were highlighted in an office of fair trading report (consumer guarantees) published in 1984. Over the years proposals for reform where made by various governing bodies. A private members ‘Consumers Guarantees Bill’ was introduced in 1990, but was lost because of lack of parliamentary time and government opposition. The European Directive on the Sale of Consumer Goods and Associated Guarantees, adopted on 7th July 1999, introduces the notion of a legally enforceable guarantee. The UK has implemented the requirements of the Directive by the Sale and Supply of Goods to Consumer Regulations 2002, which came into force on 31 March 2002. Where goods are sold or supplied to a consumer and a consumer guarantee is offered, then the guarantee will be legally binding as a contractual obligation and must be available on request, be clear and in plain English. It is important to note however that sellers and manufacturers are not legally bound to give guarantees.
The extended warranty provides the same sort of cover that a guarantee does, but usually lasts for 4 years. Consumers should be advised that in general ‘extended warranties’ that are usually supplied by the retailer are not worth the paper they are written on! They are excessive in price and the list of exclusions is usually twice as long as what is covered. The purchase of an extended warranty, usually results in increasing the sales person’s bonus and significantly increasing the retailer’s profits. There should be recommendations/regulations for capping the price the retailers selling these extended warranties to consumers as they are so excessive, as it was done with bank charges and mobile phone call charges. This came about and concerns about the vast profits made through extended warranty sales led to a major clean-up of the industry 2 years ago and the introduction of tighter controls on sales. Since April 2005, electrical goods retailers have had to show the extended warranty's price alongside the goods on display and in their printed material. Importantly, retailers must now give you 45 days to cancel your extended warranty and get a full refund where no claim has been made. They must inform you of your right to do this at least 20 days before the end of the cancellation period. They must also allow you to end your extended warranty at any time after buying it and offer a pro-rata refund even if you have made a claim.
There can be really generous extended warranties in that they can cover; accidental damage, theft and general wear and tear were the product no longer works. I suppose it is worth considering in this instance, but there is even a workaround for this, by paying a smaller premium (than what it costs for extended warranties) to get an upgrade on ones home contents insurance. This is also piece of mind whereas some warranties are not with insurance companies and become insolvent and unable to provide the contracted services.
Another alternative to an over-priced, not so useful extended warranty is that if you shop for it there are several credit-card companies that will give you a free extended warranty on certain household goods purchased using their card.
If you are having work done on your home such as damp cures, wood preservation or double glazing, you may be offered a long-term guarantee against faulty work that can last as long as 30 years. Long-term guarantees can be useful because they continue beyond the six year cut off point for legal claims under the general law.
It is advantageous to use a firm that offers an insurance-backed guarantee; otherwise it will be worthless if the firm offering the guarantee goes out of business, unless goods where purchased by credit card or hire purchase then there may be redress through section 75 of Consumer Credit Act (CCA)1974 as amended 2006. It states that the lender of money for a purchase is jointly responsible with the seller for the purchaser getting the goods or service purchased, or receiving a full refund if they do not receive the goods or service. In this instance a claim can be made for breach of contract in that the service you have bought (the extended warranty) have not been delivered. Overseas transactions where not covered under the CCA until it was overruled in Office of FairTtrading v Lloyds TSB Bank
Returning to hire purchase agreements; caveat emptor when it comes to purchasing goods with an extended warranty on hire purchase. A customer from the Citizens Advice Bureau in Nottinghamshire settled a ‘hire purchase’ agreement. However, the 'small print' on the back of the agreement stated that he had to continue paying an extended warranty in full, even if he gave up the car that the warranty covered!
My advice to pushy salesman trying to sell an extended warranty should be that they should ask the salesperson how much commission they stand to earn from selling the product, and follow this by pointing out that if the goods are of such low quality that they are expected to need repairs within the first few years then perhaps it would be better to look for an alternative product!
So what can you do if your beloved iPod expires on the wrong side of its guarantee or your bargain DVD player from Asda plays its last film? It is clear that retailers will try to shirk there responsibility by denying any liability, claiming they have no expertise in the area this is both in and out side of the guarantee period. They will try and convince the consumer that they should go back to the manufacturer or pay for the repair themselves. Which? Sent undercover shoppers to 12 major UK chains with a complaint about an 18 months VCR that had broken down 6 months after the guarantee had expired. 80% of the visits, staff either stated or implied wrongly that the problem was nothing to do with them, and washed there hands of it It is important to note that your rights don't expire after 12 months, when a guarantee comes to an end, despite the fact that traders might seek to persuade you otherwise. The SOGA gives you rights for, potentially, six years and those rights are only limited under the Limitation Act 1980 , which says you cannot pursue a [claim] after six years.' However' you would have to look at what you have bought, what you have paid and if it is reasonable for it to last that long'. 'The key point, if it fails after the first 12 months, is whether it is of "satisfactory quality" according to Section 14 of the SOGA, and that includes an element of durability. That gives you the right to have it repaired, replaced or from part 5A a reduction on the purchase price or repeal the contract. It isn't enough that it's in good condition and works fine on the day it is sold; it has to last for a reasonable amount of time afterwards’. In an unreported case Which? recently successfully represented a driver suing a motor parts firm over an engine timing belt and tensioner that failed after five years - outside its three-year warranty - on the grounds that it had only done 60,000 miles and should have run for at least 80,000.
So as a conclusion to my findings is a manufacturer’s guarantee any worth at all, well yes and no depending on various factors. It cannot be stressed too strongly that any rights which the consumer may have under a manufacturers guarantee do not cut down his rights against the retailer under the SOGA. As for extended warranties don’t waste your money as there are several alternatives.
Lowe, R and Woodroffe, G (2005) Consumer Law and practice, 6th edn. London Sweet and Maxwell pg 61
 2 All ER 220
 EWCA Civ 320
 QB 933. 4
Lowe, R and Woodroffe, G (2005) Consumer Law and practice, 6th edn. London Sweet and Maxwell pg 62.
 1 QB 256
 WLR 1645 at 1649
Atiyah, P and Adams, J (2005) the sale of goods, 11th edn, Pearson Longman Pg 299
Anon. (2005) ‘In focus- Hire purchase and conditional sale update’, 28 CLT, 9
Mack, J (2004) ‘Extended Warranty? No, thanks.’ [online] Available: [2007, 26th March]
Wilson, A (2006) ‘Satisfaction Guarantee’ [Online] Available: [2007. March 26th]
Anon. (2006) ‘Consumer Credit Act 1974’ [Online] Available:
 EWCA Civ 626
Anon. (2005) ‘In focus- Hire purchase and conditional sale update’, 28 CLT, 9
Robins, J (2007) ‘Beat the out-of-guarantee blues’, [Online] Available: [2007, Feb.12th]
(Anon.) (2001) ‘Passing The Buck’ [Online] Available: [2007, March.26th]`
Robins, J (2007) ‘Beat the out-of-guarantee blues’, [Online] Available: [2007, Feb.12th ]