Under the new Regulations the onus of proof is on the seller to show that the buyer was not enticed into the contract by the misrepresentation (ss.14(2E)(c)). It can be argued that as there is no requirement of ‘reasonableness’ the test can be construed as being subjective. However, it should be noted that there is no definition of what a ‘public statement’ is in the Regulations. This leaves the question open as to how exactly the courts are going to interpret this phrase in coming case law.
Fair Wear and Tear
Consumers cannot be expected to hold the seller responsible for fair wear and tear. The fault needs to have been present on the day of sale even though it only became apparent later on, or a misdescription of the goods, or a lack of durability that suggests the goods were not of satisfactory quality to start with.
Remedies
The consumer now has a number of remedies. These comprise the two previous remedies of rejection and compensation and four new ones of repair, replacement, partial refund or full refund (rescission).
Regulation 5 implemented new consumer rights into the SGA 1979. Section 48(A)–(F) SGA deals with these ‘new rights’. The aim of the proposed sections is to give consumers additional remedies for goods that, upon delivery, do not conform to the contract. The Regulations have provided a tiered hierarchical system for different remedies.
Both the systems use the terms of the contract as a means by which a claim can be brought. The traditional system immediately categorizes the breach as either a serious one that goes to the heart of the contract or a less serious one from which damages can be claimed. However, the new Regulations do not differentiate between serious and less serious in this way.
Initially, if the goods are faulty on delivery, the buyer has the right to make the seller repair or replace the goods. The seller must do this within a reasonable time and with as little inconvenience to the buyer as possible. He must also bear the cost of repair and delivery of the goods to the consumer (s.48B(2)(a) & (b).
Under the Regulations the buyers right to repair or replacement is not absolute. If it is impossible, or disproportionately expensive, for the seller to replace or repair the goods, then under s.48A(2)(b) the buyer has the right to require the seller to reduce the price of the goods or to rescind the contract. To seek reduction of the price or rescission of the contract, the remedies of repair and replacement must not be available.
The regulations give guidance on the circumstances in which repair or replacement would be deemed to be disproportionate, either it is disproportionate in comparison to the other remedy available (replacement vs. repair) or it is disproportionate in comparison to an appropriate reduction in the purchase price or rescission. Generally something will be disproportionate if the price to repair it or replace it would be unreasonable, taking into account the value the goods would have had if they had conformed to the contract of sale, the significance of the lack of conformity and whether the other remedy could be effected without significant inconvenience to the buyer.
What a reasonable time or significant inconvenience is will depend upon the nature of the goods and the purpose for which the goods were acquired. However, the precise wording of the section suggests that the possible disproportionate nature of the claim could tilt the balance of control over to the seller, in that he could then decide which of the remedies best suited him. It could be argued that the seller will try to go for the cheapest option and claim that the rest of the remedies are disproportionate in comparison to it. This does not seem to be in the intended spirit of the application. However it will become a practical reality in some cases.
Under the traditional approach it was possible to have the goods repaired, replaced, reduced in price or you could rescind the contract. These remedies that are available to you, are available dependant upon the seriousness of the breach. If it was a breach of warranty then you could pursue a reduction in the price and/or a claim for damages, under s.53(1) SGA, but could not rescind the contract. If the breach was of a condition then it is possible for the buyer to either have the goods replaced or repaired or he could rescind the contract and sue for damages.
In using the sellers right to claim disproportion, it can be argued that in fact the two systems operate fairly similarly. The Regulations decipher between a serious breach and a small one by using the disproportionate test. If the defect is small, the breach is small, and it would probably be disproportionate to replace or repair the goods whereupon the seller would reduce the price of the goods. This would probably achieve the same result as would have been achieved under a warranty. Similarly a serious fault, or a serious breach, would allow the purchaser the remedy of repair or replacement and if neither of those were available then he could rescind the contract. The main difference in the two approaches being that the remedy of rescission is only available under the 2002 Regulations after the remedies of repair and replacement are impossible or disproportionate. It has been argued that one of the main aims of the new Regulations was to make the remedy of rescission a last and final option.
Under s.48E(2) SGA, implemented by the 2002 Regulations, the court has the power to order specific performance of any obligation imposed on the seller. An order can be made unconditionally or on such terms and conditions as to damages, payment of the price and otherwise as seem just to the court. In this way the court will be able to reflect any usage by the buyer of the actual goods. This helps to maintain the court’s overall power to grant relief and enables them to grant remedies that are appropriate in the circumstances.
Transfer of Risk
Regulation 4 deals with the passing of risk and is implemented into the SGA through s.20(4). Under this regulation the consumer is only responsible for the goods once he has received them, and only then does the risk pass. The seller cannot pass the risk by giving the goods to a delivery company as stated by s.34(4).
Under the pre-regulations system s.20(1) SGA provided that the goods remained at the sellers risk until the property in them was transferred to the buyer. Risk passed therefore with ownership rather than possession. The question then became, when does the property pass to the buyer? The answer to this depended upon whether the goods were specific goods or unascertained goods. Specific goods are defined as goods identified and agreed upon at the time of sale. Unascertained goods are goods that become identified and agreed upon only after the contract is made. They are a specified quantity of goods from an unidentified bulk.
If the goods are specific then the property will pass as soon as the parties intend it to pass (s.17 SGA 1979). To establish when the parties intended it to pass reference could be made to the terms of the contract and the circumstances of the case. In a hypothetical contract it is possible to consider that the contract would specify the time for delivery and the time for payment, however, it would be rare for the contract to deal with the time when the property is to pass to the buyer. In this situation, where it was impossible to determine the intentions of the parties, then the rules in s.18 are applied.
If the goods are unascertained goods then no property will pass until the goods become ascertained. For the goods to become ascertained the parties must identify the specific goods that relate to that specific buyer as distinct from any bulk. The reason for this is that when goods are in an unascertained bulk they are individually unidentifiable as belonging to a certain buyer and as such there can be no unconditional appropriation of the contract. If the court is unsure if the goods have been ascertained they can look for guidance from s.18 SGA 1979.
Essentially, under s.18 (Rules 4 & 5), the property will have passed to the buyer when the goods have either; been unconditionally appropriated to the contract by either the seller or the buyer regardless of delivery; or at the time of delivery the buyer signifies his acceptance of the goods or he retains possession of the goods without giving notice of rejection. If the seller retains his ‘right to disposal’ before delivery then there can be no unconditional appropriation to the contract. This means that the goods are at the sellers risk until they have been delivered to and paid for by the buyer (s.19 SGA 1979). However, generally when the seller is authorized to send the goods to the buyer, delivery to a carrier for that purpose will normally constitute a complete performance of the seller’s duty (s. 32(1) SGA).
The liability of risk in transit was dealt with in s.31(1) SGA. Under this section when the seller gave the goods to the carrier for the purpose of them being transferred to the buyer it was prima facie deemed to be delivery of the goods to the buyer. This rule applied to both specific and ascertained goods. The consumer therefore carried the risk during transit for those categories of goods. The seller seemed to have the advantage by being able to blame any damage on delivery. However, the 2002 Regulations introduced s.32(4) into the SGA 1979. This section states that where the buyer deals as a consumer the above provisions under s.31(1) are to be ignored. It specifically states that in pursuance of a contract of sale, where the seller has been authorized to send the goods to the buyer, that delivery of the goods to the carrier is not delivery to the buyer. As such it reverses the nature of the risk of delivery to one that the seller is liable for. This undoubtedly advantages the consumer in the present climate and gives consumers the ability to shop across boarders with much more confidence.
Acceptance
The traditional system was based on fundamental principles of offer and acceptance. Under these principles acceptance only took place when either the buyer informed the seller that he had accepted the goods, or where the buyer took delivery and did some act that was consistent with being the owner, or where the buyer retains the goods for more than a reasonable length of time without informing the seller that he rejects them (s.35 SGA). However for the first two of these will only amount to acceptance if the buyer had a reasonable opportunity of examining the goods either before the contract was made or after delivery (s.35(2)).
A much more stringent approach has been taken in the 1999 Directive and consequent 2002 Regulations. Regulation 5 introduced into the SGA as s.48A states at ss(3) that goods that do not conform to the contract of sale at any time within 6 months of the goods being delivered, will be taken as not conforming at the date of delivery. However this is a rebuttable presumption and if the seller can show that the goods did conform at that date then this section would not apply.
There is a stark contrast to be observed between the two approaches. The traditional system is based on whether the buyer had a reasonable time to inspect the goods and whether he had treated them as his own, and if so then he lost the right to rescission of the contract. The new approach aims to protect buyers from goods that become faulty within 6 months of delivery. In doing so it ignores the principle of acceptance and allows buyers to bring a claim regardless of the opportunity to inspect the goods.
However, the new regulations will take account of how much the buyer has made use of the goods when determining the remedy available to him and the amount of damages payable (s.48(C3) SGA. Whether a court would grant a new remedy of rescission at six months after the delivery date is perhaps doubtful, at least in the absence of the seller complying with the requirement to repair or replace. In assessment of the benefits to consumers it is probably best to say that this system is fundamentally simpler than the traditional one. It also gives a greater number of consumers the ability to bring a claim for faulty goods, even though the result may be similar to what might have been reached under the traditional system.
Guarantees
Regulation 15 introduced provisions relating to ‘commercial guarantees’. It was stated that where goods are sold which offer a consumer guarantee, then the guarantee is enforceable as an obligation of the seller. The Regulation sets out the form, content and requirements of consumer guarantees and gives powers to enforcement authorities to apply for an injunction in the event of non-compliance. It is argued that this does not change the position for consumers because it does not make sellers provide a guarantee, it just establishes that if one is given it must conform to their standards and be legally binding.
Conclusion
The Directive provides a minimum set of common consumer rights on faulty goods within the EU with the aim of encouraging people to shop across boarders knowing they have protection for faulty goods. They are a simple and easily comprehensible set of guidelines that can be absorbed much easier by the consumer population than the traditional approach which was confusing and complex.
The Directive and the ensuing Regulations have clarified and strengthened consumer rights in a number of key areas. Of particular note is the addition of four new remedies of repair, replacement, partial refund or rescission. However, because of the disproportionality test, the remedies of repair and replacement may in large measure be dictated by the seller who would opt for a reduction in the purchase price. It is submitted that in these circumstances the benchmark for reduction in price should equate broadly to the cost of repair. It is also noted that rescission is not available when non-conformity is minor.
A particularly strong feature of the new legislation relates to goods that are faulty within six months of delivery whereby the consumer can request repair or replacement. The legislation assumes that these goods were faulty on the date of delivery and the onus of proof switches to the seller to prove that they were satisfactory at the time of delivery.
The implied terms in the pre-existing legislation corresponds to a great extent with the elements of conformity of contract. An exception is the liability in respect of public statements that are misrepresentations on the part of the seller. The onus of proof is on the seller to show that the public statements were not relevant to the contract. This change could help ensure that sellers use correct information about the product and its characteristics if they are to avoid these problems.
The Directive has considerably strengthened the position of the consumer in the transfer of risk, and in doing so, facilitated and encouraged consumers to trade inter and intra EU countries. This alteration of the law means that the seller retains responsibility for the goods through delivery, the risk has changed from being a problem for the consumer, to being a problem for the seller. The Directive should also encourage consumers to trade on the internet with other traders in the EU as it gives protection to new and second hand goods.
From a consumers perspective this change in the law is to be welcomed regardless of the improvements, whether they are marginal or material. But possibly the greatest advantage to the average consumer is that, together with the broad geographical jurisdiction, the new system is simple and easily comprehensible and the law is laid out in a clear precise manner in intelligible language.
Bibliography
- Paul Dobson; Sale of Goods and Consumer Credit; Sweet & Maxwell; p30-168
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Consumer Rights and Cross Boarder Shopping in the European Union;
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Directive 1999/44/EC of the European Parliament and Council of 25 May 1999 on certain aspects of the sale of consumer goods and associated guarantees;
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EC Directive 1999/44/EC on Certain Aspects of the Sale of Consumer Goods and Associated Guarantees – First Consultation 2001;
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Richard Ascroft; The Sale and Supply of Goods to Consumer Regulations 2002;
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Unfair Contract Terms Act (1977) s.12(1)&(2)
Paul Dobson; Sale of Goods and Consumer Credit 6th Edn; p109
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