Business law. Fact sheet. Business to consumer Sale of goods law

Transcription

1 Business law Fact sheet Business to consumer Sale of goods law This fact sheet ONLY covers transactions where the Trader is a business and the buyer is a Consumer. A Consumer means an individual acting for purposes that are wholly or mainly outside that individual s trade, business, craft or profession. For business to business transactions, please see our fact sheet on Business to business Sale of goods law, because the law is different, particularly when it comes to rights and remedies. Generally, when any contract is entered into at the Consumer s home, their place of work, the home of another individual, or on an excursion organised by the Trader away from the Trader s business premises, or where the goods and services are sold by means of the internet, digital television, mail order (including catalogues), and phone and fax communications, then the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 apply. These give the Consumer a bundle of additional rights, and place onerous obligations on the Trader. For contracts of this nature, please see our fact sheet on Business to consumer Distance and doorstep selling. 1. Consumer Rights Act 2015 The Consumer Rights Act 2015 ( the Act ) came into force, in England and Wales on 1 October 2015, and it alters, amends, and harmonises the rules regarding the supply of goods, services and digital content, when the contract is between a Trader and a Consumer. The Act applies to all transactions which take place on or after 1 October Transactions that pre-date the Act will be subject to the old law, which is largely contained in the Sale of Goods Act 1979 (as amended) and other regulations. The Act provides a single set of rules which will apply to all contracts where goods are supplied, including sale, hire, hirepurchase and work/materials contracts, and new rules will also apply to the supply of services. The Act: Amends parts of the Sale of Goods Act 1979, the Supply of Goods (Implied Terms) Act 1973, the Supply of Goods and Services Act 1982, the Misrepresentation Act 1967 and the Unfair Contract Terms Act Revokes and replaces the Supply of Goods to Consumers Regulations 2002 and the Unfair Terms in Consumer Contracts Regulations Deals ONLY with the relationship between Trader and Consumer. The Sale of Goods Act 1979 (as amended) still governs business to business contracts. Introduces simpler terminology, concepts and definitions, e.g. Trader and Consumer. Introduces a new short-term right to reject for non-conforming goods (30 days). Gives the Consumer the right to seek a repair or replacement, and if this is not successful, introduces a final right to reject, if, after only one attempt at repair or replacement, the (non-conforming) goods are still defective/faulty. Applies to every transaction for the sale and supply of goods (including hire purchase, hire, part exchange and contracts for work and materials). Covers, for the first time, digital content, as distinct from goods and services. Stipulates that where the Trader has also installed the goods, but has done so incorrectly, the goods are deemed to be defective/faulty. 1

2 Key definitions Trader means a person acting for purposes relating to that person s trade, business, craft or profession, whether acting personally or through another person acting in the Trader s name or on the Trader s behalf. Consumer means an individual acting for purposes that are wholly or mainly outside that individual s trade, business, craft or profession. In other words, the purchase must be primarily for non-business use in order to be protected under the Act. Buyers who are LLPs, PLCs and/or Limited Companies are not Consumers and are therefore not protected under the Act (any redress they have is under the Sale of Goods Act 1979 (as amended)) see our factsheet on Business to business Sale of goods law. Business includes the activity of any government department or local or public authority. Goods means any tangible moveable items, but that includes water, gas and electricity if and only if they are put up for supply in a limited volume or set quantity. Digital Content means data which is produced and supplied in digital form. 2. Contracts for goods Under the Act, certain standards apply to every transaction for the sale and supply of goods (including hire purchase, hire, part exchange and contracts for work and materials). If these standards are not met, the goods are deemed to be non-conforming. The goods must: Be sold with good title (section 17). The Trader must have the right to supply the goods. Be of a satisfactory quality (section 9). Goods must be of a standard that a reasonable person would regard as satisfactory. Quality is a general term, which covers a number of matters including: o o o o o Fitness for all the purposes for which goods of that kind are usually supplied. Appearance and finish. Freedom from minor defects. Safety. Durability. In assessing quality, all relevant circumstances must be considered, including price, description, and the Trader or the manufacturer's advertising. A Consumer cannot claim for defects that are brought to his attention before the sale, or where the Consumer examines the goods before the contract and this inspection ought to have revealed the defect(s). Be fit for a particular purpose (section 10). When a Consumer indicates that goods are required for a particular purpose, or where it is obvious that goods are intended for a particular purpose (whether or not that is a purpose for which goods of that kind are usually supplied) and a Trader supplies them to meet that requirement, the goods should be fit for that specified purpose. This does not apply if the circumstances show that the Consumer does not rely on the skill or judgment of the Trader. The purpose must have been made known to the Trader before the contract is made. Match the description, sample or model (sections 11, 13 and 14). When a Consumer relies on a description, sample or display model, the goods supplied must conform to it, except for any differences which were brought to the Consumer s attention before the contract was entered into. The explanatory notes to the Act give the example of a Consumer viewing a television on the shop floor, but receiving something boxed from the storeroom. Where installed by the Trader, be installed correctly (section 15). When the goods supplied are installed by the Trader, or under the Trader s responsibility, then if the installation is incorrect, the goods are deemed to have not conformed to the contract. NB: where it is the installation itself which is defective, the Consumer does not have the short-term right to reject the goods, but only a right to a repair/replacement of the goods, followed by the final right to reject the goods if this is unsuccessful. This is of course in addition to their rights with regard to the service (the installation) as set out in paragraph 4 below. If however it is the goods themselves which are defective, then the Consumer does have the short-term right to reject them, from when the Trader tells the Consumer that the installation has been completed. 2

3 Where the goods are an item which includes digital content, then if the digital content is defective, then the goods are also deemed to not conform to the contract (section 16). This includes where the digital content is not of satisfactory quality, fit for purpose, matching its description, etc. Unless agreed, delivered without undue delay, and in any event not later than 30 days after the day on which the contract is entered into (section 28). In certain circumstances failure to comply can allow the Consumer to terminate the contract. A Trader must explain to and agree with the Consumer at the outset if delivery will be later than 30 days. Remain at the Trader s risk until they come into the physical possession of either the Consumer, or a person identified by the Consumer to take physical possession of the goods (section 29). If goods are delivered to a courier commissioned by the Consumer, then risk passes upon delivery to that courier. Other points: Created goods (for example a made to order piece of furniture) are to be treated as goods, rather than the end product of a service (section 5). The Act provides that the Consumer has no remedy for the non-conformance of goods which are caused by defects in materials which the Consumer has supplied to the Trader (section 19). When there is a mixed supply of goods and services or digital content, the goods provisions apply to the relevant goods, the services provisions to the relevant services, and the digital content provisions to the digital content (section 1). When the Trader has not complied with its obligation to provide certain information, in certain circumstances, under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (see below), the Consumer may recover his costs as a result of the Trader s breach (sections 12 and 19). 3. Remedies for non-conforming goods Short-term right to reject (section 22) If, when supplied, the goods do not meet the above requirements, there is a short period during which the Consumer is entitled to reject them. This short-term right to reject goods lasts for 30 days unless the expected life of the goods is shorter, as with highly perishable goods (the 30 days begin with the first day after all of the following have happened: ownership/possession has been transferred to the Consumer, the goods have been delivered, and where installation is part of the contract, this has taken place). If the Consumer prefers, initially, not to exercise the short-term right to reject, they can, instead, ask for a repair or replacement, during this initial 30-day period. If this is done, the period is paused so that the Consumer has the remainder of the 30-day period, or a further 7 days (whichever is longer) to check whether the repair or replacement has been successful, and to then decide whether or not to reject the goods. When a Consumer rejects goods, he can claim a full refund, or in the case of hire, a refund for any part of the hire that was paid for but not supplied. A refund must be given without undue delay, and in any event within 14 days of the Trader agreeing that the Consumer is entitled to a refund. Any refund cannot be reduced for the use of the goods by the Consumer within the 30 days. In order to exercise the short-term right to reject (i.e. within the initial 30 days) the onus is on the Consumer to prove that the goods are not of satisfactory quality, fit for purpose, etc. With other alternative remedies, explained below, the position changes, and for the first 6 months after delivery the burden of proof is on the Trader to show that the goods are not defective. The Trader is normally responsible for the cost of collecting the rejected goods from the Consumer. However, the contract can require the Consumer to return the goods to the place where he took possession of them. The costs of any return or collection must be paid by the Trader, except for the costs of the Consumer in returning the goods in person to the place where he took physical possession of them (e.g. a Consumer simply taking the goods back to the shop). The Consumer is not required to return the goods to this place unless this was agreed from the outset as part of the contract. 3

4 Where the Trader is both supplying the goods and installing the goods, then where it is the installation itself which is defective, the Consumer does not have the short-term right to reject the goods, but only a right to a repair/replacement of the goods, followed by the final right to reject the goods if this is unsuccessful. This is of course in addition to their rights with regard to the service (the installation) as set out in paragraph 4 below. If, however, it is the goods themselves which are defective, then the Consumer does have the short-term right to reject them, from when the Trader tells the Consumer that the installation has been completed. Right to repair or replacement (section 23) When there is a breach of contract, but the Consumer has lost, or chooses not to exercise his short-term right to reject goods (i.e. within the 30 day period), he will thereafter be entitled, in the first instance, to claim a repair or replacement. The Trader must do this at no cost to the Consumer, within a reasonable time and without causing significant inconvenience. The Consumer cannot choose one of these remedies above the other if the chosen remedy is either impossible or disproportionate as compared to the other remedy, and once the Consumer has chosen a remedy, he must give the Trader a reasonable time to provide that remedy. With this remedy (as opposed to the short-term 30 day right to reject), if the defect is discovered within 6 months of delivery, it is assumed that the fault was there at the time of delivery unless the Trader can prove otherwise or unless this assumption is inconsistent with the circumstances (for example, obvious signs of misuse). If more than 6 months have passed, the burden of proof switches back to the Consumer. Right to price reduction or final right to reject (section 24) If after just one attempt at repair or replacement, the goods still do not meet the necessary requirements, the Consumer is entitled to ask for either a price reduction or to reject the goods. The Consumer does not have to give the Trader multiple opportunities to repair or replace, although he can do so if he wishes. The Consumer can also exercise this right if, having sought a repair or replacement, these are not provided within a reasonable time or without causing significant inconvenience to the Consumer. The right also applies if both repair and replacement are impossible or disproportionate from the outset. Where a repair or replacement fails, is not available, or was not provided within a reasonable time and without causing significant inconvenience to the Consumer, he can choose whether to keep the goods or return them. If he keeps the goods, then his claim will be for a reduction in price; if he returns them, he is rejecting them. A price reduction must be an appropriate amount, which will depend on all the circumstances of the claim. If the Consumer rejects the goods, then he is entitled to a refund. This refund may be reduced to take account of any use the Consumer has had from the goods. However, no deduction can be made for the Consumer having the goods simply because the Trader has delayed in collecting them. Furthermore, no deduction can be made from the refund, where goods are rejected within 6 months of supply, except where the goods are a motor vehicle. The Consumer may also be able to claim compensation for losses that have been incurred, for example, the cost of any property damage caused by the goods, compensation for personal injury and compensation for the additional cost of buying equivalent goods if they are more expensive elsewhere. Again, with this remedy (as opposed to the short-term 30 day right to reject), if the defect is discovered within 6 months of delivery, it is assumed that the fault was there at the time of delivery unless the Trader can prove otherwise or unless this assumption is inconsistent with the circumstances (for example, obvious signs of misuse). If more than 6 months have passed, the burden of proof reverts back to the Consumer. This final right to reject or seek a price reduction still continues, in principle, after more than one attempt to repair/replace. The right arises as soon as a first attempt at repair/replacement has failed, but can, for example, be exercised after subsequent attempts to repair have been unsuccessful. Whilst this does mean that there will be an increasing onus on the Trader to get the repair/replacement right at first instance, it does not mean that the Consumer will always succeed, as the Consumer will still need to show that the goods do not conform to the contract, and this will be increasing difficult with the passage of time. The Trader is normally responsible for the cost of collecting the rejected goods from the Consumer. However, the contract can require the Consumer to return the goods to the place where he took possession of them. The costs of any return or collection must be paid by the Trader, except for the costs of the Consumer in returning the goods in person to the place where he took physical possession of them (e.g. a Consumer simply taking the goods back to the shop). The 4

5 Consumer is not required to return the goods to this place unless this was agreed from the outset as part of the contract. Rules on partial rejection If a Consumer receives goods under a contract, or goods comprising an instalment, some of which are faulty/defective and some of which are not, the Consumer can do one of the following: Reject all of the goods. Reject all of the faulty/defective goods. Reject some of the faulty/defective goods. However, when the goods form part of a commercial unit, then the Consumer may not reject some of the goods in that unit but keep the others. For example, if the Consumer bought a three-piece-suite, but there was a fault with one of the chairs, the Consumer would not be entitled to reject only that chair. Delivery of wrong quantity Where there has been a delivery of the wrong quantity of goods, the rules are: The Consumer may reject the goods, but if he chooses to accept the goods, then he must pay the contract rate for what he receives, e.g. if the Consumer ordered 10 books, but received 5 and wishes to accept these, he must only pay for 5, but likewise if he receives 15, and wishes to keep them all, he must pay for 15. If more is delivered that was contracted for, the Consumer has the additional option to reject the excess and keep the contracted amount. General rules of contract law will determine whether or not the contract can be treated as at an end. Instalment deliveries The Consumer is not required to accept delivery in instalments unless he agrees to it. If he does agree, and one or more of the deliveries is faulty/defective, then, depending on the circumstances, the Consumer may have the short-term right to reject in respect of the whole of the contract or just the instalment. Rules regarding delivery (section 28) Unless otherwise agreed, the contract is to be treated as including a requirement that the Trader must deliver the goods to the Consumer. Unless a time is agreed, it will be implied that the goods must be delivered (a) without undue delay and (b) in any event, not more than 30 calendar days after the date on which the contract is entered into. If the Trader fails to comply with the above rules regarding delivery, then if any of the following apply, the Consumer may immediately treat the contract as at an end: The Trader has refused to deliver the goods. Delivery of the goods by or within an agreed timescale was essential, taking into account all the relevant circumstances at the time the contract was entered into (similar to the general concept of time being of the essence). Before the contract was made, the Consumer told the Trader that delivery no later than 30 days, or by or within the agreed time period, was essential. If the above does not apply, then instead the Consumer may specify a new period for delivery (one that is reasonable and appropriate), and if the Trader does not comply with this new timescale, the Consumer may treat the contract as at an end. In circumstances when the Consumer is entitled to treat the contract as at an end, the Trader must reimburse all payments made under the contract without undue delay. Rules regarding risk (section 29) The goods remain at the Trader s risk until they come into the physical possession of either (a) the Consumer or (b) a person identified by the Consumer to take possession of the goods. If the goods are delivered to a carrier commissioned by the Consumer (and not one offered by the Trader) then risk passes to the Consumer on delivery to that carrier. 5

6 4. Contracts for Services Under the Act, certain standards apply to every contract for the supply of services. A Trader supplying a service must meet the following standards: The service must be carried out with reasonable care and skill (section 49). This means that the Trader must, as a minimum, work to the same standard as any reasonably competent person in that trade or profession. The focus is on the quality of the service and the way it has been carried out, rather than the end result. There is no definition of what constitutes reasonable care and skill. Information said or written to the Consumer is binding where the Consumer relies on it (section 50). This will include quotations and any promises about timescales or about the results to be achieved. If a price is not agreed, the service must be provided for a reasonable price (section 51). A contract will often specify a price, or it will be clear about how the price will be calculated (for example, an hourly rate). However, where the price is not agreed beforehand, the price must be reasonable. The service must be carried out within a reasonable time (section 52). Often, a contract will specify a date or time for the service to be performed or completed. Where there is no agreement about time, the timescale must nevertheless be reasonable. 5. Remedies for non-conforming services Right to repeat performance (section 55) If the Trader breaches the contract by failing to meet the required standards for the supply of services, the Consumer can expect the Trader to put things right. Repeat performance work must be done at no cost to the Consumer, within a reasonable time and without causing significant inconvenience to the Consumer. A Consumer cannot ask for repeat performance where it would be impossible to finish providing the service to the required standard. Right to price reduction/refund (section 56) The Consumer can claim a price reduction where repeat performance is impossible or cannot be done within a reasonable time and without causing significant inconvenience. A price reduction can also be claimed where the service is not done within a reasonable time or where the Trader breaches a requirement arising from information they have given about something other than the service itself. The price reduction can, where appropriate, equate to a full refund in certain circumstances. 6. Contracts for both goods and services When there is a mixed supply of goods and services or digital content, the goods provisions apply to the relevant goods, the services provisions to the relevant services, and the digital content provisions to the digital content. 7. Digital content What is digital content? The Act defines 'digital content' as meaning 'data which are produced and supplied in digital form'. This definition is therefore extremely wide, and includes, for example: Computer games. Virtual items purchased within computer games. Television programmes. Films. Digital books. Computer software. Mobile phone apps. Systems software for operating goods - for example, domestic appliances, toys, motor vehicles, etc. Statutory rights regarding digital content Digital content must be: 6

7 Of satisfactory quality. Fit for a particular purpose. As described. These statutory rights for the supply or intended supply of digital content apply only if the Consumer has to pay a monetary price as part of the contract. The Trader is only likely to be liable for fee digital content if it causes damage, for example to the Consumer s computer. 8. Remedies for non-conforming digital content Initially, the Consumer has the right to repair or replacement, and secondly, the right to a price reduction. Repair/replacement If the goods are non-conforming, a Consumer can request a repair or replacement. The Trader must: Do this within a reasonable time and without significant inconvenience to the Consumer. Bear any necessary costs incurred in doing so, including, in particular, the cost of any labour, materials or postage. The Consumer does not have the right to remedy a quality defect by means of repair or replacement if it is either: Impossible, or Disproportionate compared to another available remedy (e.g. if a Consumer downloads a film on to his device, which has no sound, and the Trader accepts that they are responsible for this defect, and the Consumer to request a repair to the digital content on his device, this would be disproportionate compared to the Trader simply providing a replacement download). If a Consumer has requested or agreed to a repair, then he cannot request a replacement until a reasonable time has been given for this to be carried out, as long as significant inconvenience is not caused. The same applies, if the Consumer has initially agreed to a replacement and then wants a repair. If the Consumer shows that the digital content is defective within six months of its supply, it is to be taken as being defective on the day it was supplied. Price reduction The Consumer has the right to require a price reduction if either: The remedies of repair and replacement are not possible, or The Consumer has requested repair/replacement, but this has not been carried out within a reasonable time and without significant inconvenience to him. Where there is a right to a price reduction, this must be paid without undue delay, and in any event within 14 days of the Trader agreeing that the Consumer to this remedy. The amount must be an appropriate reduction in price and may be the full cost of the digital content in appropriate circumstances. 9. Refunds To the extent that the Consumer has paid money under the contract, whether in relation to goods, services, or both, when he/she is entitled to a refund (see above), the refund should be: The same amount of money (so delivery and other related charges must be refunded). Paid without undue delay and in any event within 14 days beginning with the day the Trader accepts the Consumer is entitled to a refund. Returned using the same method as was used for payment by the Consumer, unless agreed otherwise. Not subject to deductions for making the refund (section 20). 10. Other claims The Act does not prevent the Consumer from seeking other remedies, whether the contract is with regard to goods, services, or both (sections 19 and 54). Such remedies may include, but are not limited to, claiming damages, seeking specific performance of the contract (i.e. 7

8 forcing the Trader to comply), exercising a right to treat the contract as at an end, or relying on breach(es) in any claim brought by the Trader against the Consumer. 11. Excluding a Consumer s right and remedies The Act clearly states that a Trader cannot do this, i.e. exclude or limit its liability with regard to any of the terms which the Act requires to be treated as terms of a Consumer contract. As such, the statutory rights contained in the Act, relating to the quality etc. of the goods, and the Consumer s rights, are ring-fenced and protected, and cannot be reduced or taken away by the Trader. Any terms purporting to do this will be unfair, and of no effect. The Act also prevents, in contracts with Consumers, the exclusion or restriction of liability with regard to delivery and risk, which are treated as terms of the contract. 12. Common queries I m only the retailer I m not responsible for faulty goods The Act clearly places an obligation on the Trader to sell goods of a satisfactory quality. This is known as strict liability and cannot be avoided, say, by referring the customer to the manufacturer under the terms of the guarantee. A guarantee or warranty will always be in addition to Consumers statutory rights and those statutory rights can never be avoided. So, if a Consumer has a complaint that goods are not of a satisfactory quality, their complaint is against the Trader. It is then up to the Trader to pursue the suppliers or manufacturers for damages on an indemnity basis subject to any terms and conditions of any supply contract. Furthermore, the Trader may be liable for any public statements about the goods that are incorrect even though those statements are made by the manufacturer, importer or producer. The goods are perfectly fine can the Consumer reject? Generally, the answer would be, no. However, this is subject to exceptions, such as sales that are covered by the Distance Selling or Doorstep Selling regulations, certain Consumer credit transactions, and where the Trader has made a misrepresentation. Although some stores will replace goods as a matter of policy, the law states that Consumers can only reject goods which are either faulty or not of a satisfactory quality. If the Consumer selects goods and later decides they are the wrong colour or not the size they wanted, although the goods themselves are of a satisfactory quality, they will have no legal right to reject the goods or recover damages. If goods are damaged and the particular damage was specifically brought to the attention of the Consumer prior to purchase, then again, the Consumer will have no right to reject. The Consumer signed for the goods can he reject? Yes, in the circumstances outlined in this factsheet, a Consumer can reject goods even after he has signed for them, provide there is a breach of contract under the Act, and he has not had a genuine opportunity to properly inspect the goods. I don t believe the Consumer has a genuine complaint Often, there will be a dispute as to whether the goods actually are faulty. The Trader may not accept that the goods are faulty or defective, and may, for example, believe that the Consumer has damaged them. In order to exercise the shortterm right to reject (i.e. within the initial 30 days) the onus is on the Consumer to prove that the goods are not of satisfactory quality, fit for purpose, etc. With other subsequent remedies, explained above, the position changes, and for the first 6 months after delivery the burden of proof is on the Trader to show that the goods are not defective. Where there are technical issues involved, as may be the case with a car or computer, a report from an independent expert would be a good start to either support or rebut any claim that goods were faulty. Better still, work together with the Consumer and agree to appoint a joint expert who will be able to provide a report you will both agree to be bound by and accept the outcome. Such a course of action will also have the advantage of possibly avoiding unnecessary court action. What about signs to deter complaints? Not a good idea. Signs that seek to restrict a Consumer s statutory rights are illegal and will soon attract the attention of the local trading standards officer. No refunds under any circumstances should never be displayed because there are certain circumstances when the Consumer will be entitled to a refund if the goods are faulty and rejected within a reasonable period of time. Remember also that sale of goods law applies equally to used or second hand goods. So, if the defects were not specifically brought to the Consumer s attention, or were not discoverable upon reasonable inspection, the Consumer may still be legally entitled to reject faulty goods and claim a full refund. No refunds without 8

9 valid till receipt will again be caught because the till receipt has no legal standing. By all means ask for proof of purchase but that can be provided by other means such as a cheque stub, statement or credit card statement. The price is not right It is commonly believed that goods on display, in a shop window for example, is an offer for sale and the Consumer is entitled to pay the price shown on the price tag, even though a labelling mistake has been made and the price is wrong. That is not the case. Goods displayed, either on the shelf or in a shop window, with a particular price are what is legally known as an invitation to treat. It s an invitation to the prospective Consumer to make an offer to buy the goods. A legally binding contract is only formed when an offer is made (by the Consumer), that offer is accepted (by the Trader) and there is payment of, or a promise to pay, consideration (the price). So, where the Consumer makes an offer to purchase goods at the price shown but the mistake is noticed before acceptance of that offer e.g. before the sales assistant takes the money and puts it in the till, no agreement (contract) has been reached. The Trader is not obliged to sell the goods at the price shown and the Consumer cannot insist on paying the lesser price. If, however, the mistake went unnoticed and the offer had been accepted (by putting the money in the till) a contract has been concluded and the Consumer probably got a bargain (unless the mistake was obvious). Do I have to return a deposit? Once a contract is formed, it is legally binding on both parties. A deposit may be left while goods are ordered from a Trader or until the Consumer is able to collect them. Whether the deposit must be returned depends on the circumstances. The key issue is that a deposit, if the amount is reasonable, can be retained by the Trader if the Consumer does not purchase the goods (especially if the deposit is expressed to be non-refundable). However, if the amount taken as a deposit is larger than a reasonable amount (generally a deposit should be in the region of 10%), the law could potentially consider it to either be a part-payment, a penalty, or an unfair term under the Act, rather than a deposit. If this is the case, the Consumer may be entitled to have some or all of the deposit returned to him, especially if the Trader cannot justify how it actually compensates him for his losses, and why he is not able to mitigate his losses. All innocent parties to a breach of contract are under a duty to mitigate their loss so a Trader would have to make reasonable efforts to try to resell the goods in question. Therefore, if for example a Consumer pays a 20 deposit on a table which costs 200 and then decides that he does not want it, the Trader can retain the deposit (even if he can sell it to another Consumer straight away). However, if a Consumer pays 100 deposit for a table which costs 200 and then decides that he does not want it, he may be able to argue that he should be entitled to have some or all of the money returned to him. This is particularly the case if the Trader can re-sell the table and cannot justify how the 100 is a reasonable sum of money to compensate him for any financial losses. As a Trader, it is vital that you specify that the payment you are taking from the Consumer is in fact a deposit and you should clearly set out that this will not be returned to a Consumer if he is in breach of contract. If the Trader is unable to supply the goods as ordered the Trader will be in breach of contract even though the breach may not be their fault. In such circumstances, the Consumer may be forced to go elsewhere in order to purchase comparable goods. If those goods are more expensive, the Trader may be liable to pay not only the returned deposit but also the difference between the price originally agreed and any extra cost that the Consumer has incurred as a result of the breach of contract. Can I offer a credit note instead of a refund if the goods are faulty? A Consumer does not have to accept a credit note and can insist on a refund or exchange (if appropriate). Nevertheless, if a Consumer is willing to accept a credit note, it may be a useful way of resolving a dispute. With goods, is the short-term right to reject lost if the Consumer requests a repair or replacement within the initial 30 days? No, if the Consumer requests a repair/replacement, the initial time period (30 days) stops, and there is a waiting period whilst the goods are repaired or replaced. The Consumer then has 7 days within which to reject the goods, or, if later, the original time for exercising the short-term right, extended by the waiting period. So, for example, if the Consumer seeks a repair 7 days after the purchase, and the repair takes 10 days, the Consumer still has another 23 days, once the goods are returned, to exercise the short-term right to reject, assuming the goods are still defective. With goods, what is the position if, say, the goods develop a fault after 12 months? First of all, as more than 6 months has passed since the Consumer purchased the goods, the burden of proof is on the 9

10 Consumer to show that they are faulty (i.e. not of satisfactory quality or fit for purpose), before they can proceed. Assuming they can do this, the Consumer is, at that point, only entitled to ask for a repair or a replacement. The Trader can refuse either one of these if they can show it is disproportionately expensive compared to the other remedy. In other words the Consumer cannot, for example, insist upon a replacement when in fact the goods can be cheaply and easily repaired. Once the appropriate remedy has been agreed, the Trader must carry this out within a reasonable time. If the Trader is either (a) not able to do so within a reasonable period of time, (b) not able to do so at all, or (c) if the repair or replacement proves unsuccessful (i.e. the goods are still faulty/defective), then the Consumer is entitled to either reject to goods or seek a price reduction. The Consumer does not have to give the Trader a second chance to get it right. If this happens, and the Consumer then rejects the goods, they must hand them back to the Trader, and any refund they receive will be reduced by an amount to reflect the fact that they have had 12 months worth of use out of the goods. If the Consumer does not want to give the goods back, then they will instead receive an appropriate and reasonable price reduction in all the circumstances, and taking into account the fact that the Consumer is retaining the goods. The Consumer cannot, in this example, after 1 year, simply expect the Trader to offer a refund or price reduction without first affording him an opportunity to repair or replace the goods. Does the Consumer have to show that the goods were defective on delivery? If the Consumer is seeking to exercise their short-term right to reject (within 30 days), then the burden of proof is on the Consumer, to show that the goods are defective/faulty. However, this burden is reversed, if, during the first 6 months, the Consumer is, instead, seeking to exercise either his right to a repair/replacement, or his right to a price reduction or his final right to reject (after an unsuccessful repair/replacement). After the initial 6 months, the burden of proof shifts back on to the Consumer, who thereafter has to prove that the good are non-conforming. This is somewhat confusing as effectively in the first 30 days after purchase, the burden of proof depends on what remedy the Consumer is seeking. How does a Consumer reject goods? There is no set method under the Act. It does not have to be given in writing. However, it must be clear enough to be understood by the Trader. With regard to services, what does the Act mean when it says they must be provided with reasonable care and skill? There is no specific definition of reasonable care and skill so each case will be decided on its own facts. The explanatory notes to the Act give the following example If an individual engages a high-cost, specialised gardener to landscape his garden, that gardening service must be provided with reasonable care and skill. If the gardener does not cut and treat the grass to the industry standard, it is likely that a court would find that the gardener did not exercise reasonable care and skill and the Consumer would have the right to the remedies explained in the Act. A Consumer might expect a lower standard of care and skill from a quick and cheap repair service than a more expensive and thorough one. With regard to services, what is meant by a reasonable price to be paid for the service? There is no specific definition of a reasonable price so each case will be decided on its own facts. The explanatory notes to the Act give the following example If a home owner engages a plumber to fix an urgent leak, he/she may not take the time to discuss the price before fixing the problem. The price might not be in the contract if the plumber did not know the problem before he/she arrived to fix it. If the leak was fixed in ten minutes and with only a 50 replacement part, 1,000 is unlikely to be a reasonable price to pay. Again, with regard to services, what is meant by within a reasonable time? There is no specific definition of a reasonable time so each case will be decided on its own facts. The explanatory notes to the Act give the following example An individual engages a builder to rebuild a 1 metre high, 25 metre long garden wall. At the outset, the individual agrees the price with the builder, but not a deadline for completion of the work. If, six months later, the work has not been completed, the builder would most likely not have carried out the work within a reasonable time. Can I exclude my liability as seller? No, when the sale is to a Consumer by a Trader, the implied term of satisfactory quality can never be excluded. Exclusion clauses purporting to restrict a Trader s liability in such circumstances will be of no effect. Individuals selling goods privately (i.e. not Traders) are not under any obligation to ensure that goods meet the statutory requirement in respect of satisfactory quality. However, the provisions dealing with ownership and the right to sell, and 10

11 goods corresponding with their description, apply to all sales, including those made by private sellers and cannot be excluded. 13. Alternative Dispute Resolution Dealing with consumer complaints can be a difficult process for traders and there are options available for resolving customer disputes, without the need of involving the court. These options are often called ADR processes and it stands for alternative dispute resolution. Using ADR is not mandatory for most traders but the regulations do require almost all businesses which sell directly to consumers to point the consumer to a certified ADR scheme where they cannot resolve a dispute in-house and declare whether or not they intend to use that scheme. What traders have to do? When traders reach deadlock with a consumer in dealing with a dispute, you have to supply the consumer with details of an appropriate certified ADR provider (the name and address) in a durable medium, for example in a letter or an , and you need to state whether you are obliged or prepared to submit to an ADR procedure operated by that provider. A list of certified providers is maintained on the CSTI (Trading Standards) website and can be found by clicking here. Traders are required to give consumers the details of an ADR provider but do not have to agree to use ADR. If you trade online with consumers you also need to consider the following: Where a dispute cannot be settled directly, the trader should provide the consumer, on paper or another durable medium, with the information on relevant ADR entities and specify if he will make use of them. provide consumers with an accessible electronic link to the ODR Platform on your website, the link: include your address on your website; provide a link to the ODR Platform in any s regarding offers in relation to consumer sales or service contracts; provide relevant information, where applicable, in your general terms and conditions applicable to the website operator s online sales and service contracts. Further information can be found in our factsheet on Alternative Dispute Resolution (ADR) and Online dispute resolution (ODR) Platform. 14. Links All local authorities will have Trading Standards departments to assist consumers and retailers with any consumer problems. Details will be in your local telephone directory or search online at: Free advice and leaflets for consumers are also available from most Citizens Advice Bureaux. Details are again available from your local telephone directory or contact their main website for online advice and to find your nearest bureau: The Competition and Markets Authority is the main regulatory body and also has free consumer advice for both consumers and retailers on their website. Contact details are: Competition and Markets Authority Victoria House 37 Southampton Row London WC1B 4AD general.enquiries@cma.gsi.gov.uk General enquiries:

12 This fact sheet was prepared by the Information Unit of LHS Solicitors. It is intended only as a guide and is not to be regarded as a substitute for consultation with one of our Legal Advisors, since every case will ultimately turn on its own particular facts and circumstances. Legal Advice For legal advice, please call your legal helpline on If you are driving when using the legal advice service, please make sure it is safe and legal to do so. Employment and Business Law Litigation and Consultancy Support Services LHS team of experienced lawyers will support your legal needs with its litigation, consultancy and prosecution defence services, with particular expertise in HR and employment law, commercial contract, company law and property. Our aim is to quote fees that are competitive, fixed and transparent. legalservices@lhs-solicitors.com LHS Solicitors LLP is regulated by the Solicitors Regulation Authority No and registered in England and Wales. Registered Number OC VAT No Registered office: The Observatory, Chapel Walks, Manchester M2 1HL. Abbey Protection Group Limited is the corporate member of LHS Solicitors LLP. Markel Corporation is the ultimate holding company for Abbey Protection Group Limited. 2015/11 12