Competition Law And Consumer Protection - Case Study Example

Statutes On Commercial And Consumer Law It is the considered opinion of some authorities that the terms consumer and citizen are equivalent. Therefore, consumer rights are in effect citizen's rights. According to the Unfair Terms Act 1977, additional safeguards have to be provided to consumers in respect of the exclusion clauses1. A minimum set of common consumer rights in respect of faulty goods is provided for under the Sale of Consumer Goods.   The existing UK law has been retained with some amendments, mainly to give effect to specific remedies which, although they have been in use for many years, have not previously been part of the law. These amendments are contained in the new regulations which became effective from the 31st of March 20032. Consumers are now defined as people who buy for purposes unrelated to their trade, business or profession. As per the statute, consumers have to be sold goods of satisfactory quality, after taking into account description, price and other relevant circumstances. If an item is defective at the time of sale, which is referred to as a latent or inherent fault, then the consumer lodge a complaint on discovery of such a defect. Consumers will not be entitled to legal remedy in respect of: 1. Fair wear and tear misuse. 2. Accidental damage if they decide they no longer want the item. 3. The goods have faults that they knew about before the sale or that should have been evident on reasonable inspection. The condition as set out in The Sale of Goods Act 1979, in respect of merchantable quality of the goods, specifies that the implied terms, “where the seller sells goods in the course of a business, there is an implied term that the goods supplied under the contract are of merchantable quality except that there is no such condition.” a. As regards defects specifically brought to the notice of the buyer before the contract is completed. b. In case the buyer examines the goods before the completion of the contract as regards defects, which the examination should reveal3. In Thornett & Fehr v Beer & Son, the buyer bought some barrels of vegetable glue from the seller without properly inspecting the contents, though every opportunity for doing so was offered by the seller. The court decided that if there has been some examination then the buyer cannot complain about defects which a full examination would have revealed4. The Sale of Goods Act 1979 defines implied terms with regard to reasonable fitness of purpose as the sale of goods by a seller in the course of a business and the buyer, expressly or by implication, makes it known to the seller or where the purchase price or part of it is payable by installments and the goods were previously sold by a credit broker to the seller to that credit broker5. In Griffiths v Peter Conway ltd, it was held by the court that special purpose must be communicated expressly or by implication6. This was also reiterated in Slater v Finning7. If there is only one purpose for which something is bought then the fitness of its purpose is implied. This aspect was upheld in Frost v The Aylesbury Dairy Co8 and in Preist v Last9 this purpose was not served as the hot water bottle that was purchased burst when the buyer tried to use it. In the case of Henry Kendal v William Lillico Ashington Piggeries it was decided by the Court that the seller’s responsibility is very wide if the goods sold have a range of purposes10. The consumer is legally entitled to receive a full refund from the retailer, on returning a product that was defective at the time of. The reasonable time for doing so is not defined in law but is often quite short. A reasonable amount of compensation or damages for up to six years from the date of sale is now permitted. This represents the limitation period for making a claim in respect of a fault that was present at the time of sale; however this does not constitute a guarantee. These long-established rights have been retained in the Regulations which became enforceable from the 31st of March 2003. Under these Regulations, consumers can opt to have the goods repaired or replaced. The retailer can refuse to either repair or replace sold goods if it can be proved such courses of action entail a cost which is disproportionate in comparison to the alternative. However, any remedy must be completed without causing any significant inconvenience to the consumer. If neither repair nor replacement is possible, then consumers can request instead a partial or full refund, depending on what is reasonable under the circumstances. A full refund may sometimes be unfair to the retailer because the consumer would have enjoyed used the goods before the trouble emerged. Consumers are empowered to change the remedy in certain situations if they find they are not getting compensated. However, consumers cannot attempt to obtain two remedies at the same time. In general, the consumer has to prove that the goods were faulty at the time of sale. This is applicable to cases where the consumer requests an immediate refund or compensation, this is also applicable to the case where any product is returned after six months from the date of purchase. The exception to this rule is when a consumer returns goods in the first six months from the date of the sale, and requests a repair or replacement or, thereafter, a partial or full refund. In such cases, it is assumed that the goods were defective at the time of the sale and the consumer does not have to prove this. The onus of proving the satisfactoriness of the goods rests on the retailer.   Faulty goods are defined in legal terms as goods that do not conform to contract. Goods do not conform to contract if they fail to work immediately from the time of sale. Further, goods might not conform to contract if they fail to work later, even after a number of years, due to an inherent fault. Goods that do not comply with the description given by the retailer prior to the sale also do not conform to contract. The Sale of Goods Act requires that, goods should match the description given to them, should be of satisfactory quality, should be correctly priced and satisfy all other relevant circumstances. The quality of goods includes their state and condition. The following are some of the important qualities of goods: a. Fitness for all the purposes for which these goods will be utilized. b. Appearance and finish. c. Freedom from minor defects. d. Safety. e. Durability. These provisions in the act gives rise to difficulties as was graphically illustrated in R&B Customs Brokers Co Ltd v United Dominions Trust Ltd. In this case it was held that a one-off or irregular transaction by a company was not made in the course of business but that the company was dealing as a consumer. The rule therefore emerged that when the subject-matter of the contract is not an integral part of a buyer’s business, businesses too can deal as consumers within the definition of the Act11. On the other hand, business transactions, which are in the nature of the trade of the buyer and are carried on with a view to profit, are not regulated by the Act even if that transaction is a one-off. Similarly, transactions which are not part of the buyer’s business, but are undertaken regularly, do not fall under the purview of the Act12. The R&B interpretation of dealing as a consumer was tested in Stevenson v Rogers, where the seller of a fishing vessel sought to avoid certain duties imposed upon sellers acting in the course of the business13. Applying the R&B test, the seller argued that since he was neither in the business of selling fishing vessels nor engaged in selling vessels with any regularity, he was not acting in the course of his business. The Court of Appeal rejected this argument and held that any sale by a business was done in the course of business. The rationale for this decision was that the protection of consumer buyers would be compromised if the R&B test were to apply to business sellers14. In a recent case, namely, Feldaroll Foundry plc v Hermes Leasing (London) Ltd, a dispute arose over the validity of a clause seeking to exclude liability for unsatisfactory quality. Such a clause would be ineffective if the company was dealing as a consumer as per the provisions of this Act. After considering the decision in the Stevenson case, which was distinguished by its facts, the Court of Appeal found that the decision in R&B was binding in this case and that the company was dealing as a consumer. The exclusion of liability clause was therefore ineffective in respect of the purchasing company15. In a recent report on unfair contract terms to Parliament, the Law Commission considered the applicability of the Act in business contracts as well as the feasibility of a single, unified regime to replace the Act and the Regulations16. These proposals are: • Businesses, i.e., companies, partnerships, etc, making contracts to obtain goods or services that are related to their business will not be treated as consumers even if the contract is not made in the course of business. • The principle that a business seller cannot escape the obligations imposed on it by virtue of the Sale of Goods Act 1979 and other statutory provisions by arguing that the sale was not made in the course of business has been confirmed. • The protection provided by the Regulations, which is currently limited to contracts where the buyer is a natural person, will be extended to cover contracts with small businesses, which are those with no more than nine employees. However, transactions with a value in excess of £500,000 are to be excluded from these provisions, irrespective of the size of the business entering into the transaction. This constitutes a deviation from the proposals of the Law Commission’s consultation paper, which recommended that the protection afforded by these Regulations should be applicable to all businesses. Until, such time as legislation is passed by the Parliament, in respect of the Law Commission’s recommendations or until the House of Lords reconsiders the decision in the Feldaroll case17, the decision in R&B will hold good18. The Sale of Goods Act 1979 applies to contracts of sale and defines such agreements as ., defines such an agreement “as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a consideration called the price.”19 At present there is analogous legislation, which now implies similar terms to the transfer and supply of goods. Contracts for the transfer of goods are covered by the Supply of Goods and Services Act 1982. In respect of hire purchase agreements, the relevant statute is The Supply of Goods (Implied Terms) Act 1973. In the case Esso Petroleum Ltd v Commissioners of Customs and Excise In 1970, the taxpayers Esso, devised a petrol sales promotion scheme, involving a gift of a coin bearing the visage of one of the members of the English soccer team which went to Mexico in 1970 to play in the World Cup competition. The object of the scheme was to increase sales of petrol. This scheme was extensively advertised by Esso in the press and on television. The Customs and Excise Commissioners contended that the coins were chargeable to purchase tax.20 The House of Lords did not agree with this contention of the Customs and Excise Commissioners and held that the coins were not chargeable. Furthermore, they decided that under the circumstances, and in view of the fact that the coins were of little intrinsic value to customers, it could not be inferred that either Esso or the petrol station proprietors on the one hand, or the customers on the other, intended that there should be a legally binding contract. It therefore could be inferred that the coins had been produced for distribution by way of gift and not by way of sale21. From the above discussed cases sales transactions can be differentiated from gifts. The rare situation where the seller has the power to pass good title but does not have the right to sell the goods is rare and occurred in Niblett Ltd v Confectioner’s Materials Co. In this case the goods, condensed milk, were impounded by the customs authorities due to copyright infringement. The property had passed because of the possession of the bill of lading despite non - possession of the goods. The court held that Nestle had a right to injunction to prevent the sale of the defendants’ goods, s. 16(a) and 16(b) (warranty of quiet possession) were both breached where goods may not be sold without infringing third party’s trademark rights22. The Sale of Goods Act does not define reasonable time but it goes without saying that consumers have to be given a reasonable time to examine the goods purchased to confirm that they are satisfactory. In the normal course this would be a matter of days and not weeks. The Courts, however will decide this on a case to case basis as it takes into account all the relevant factors in this regard. If a consumer is entitled to reject the goods, he must inform the retailer immediately about such intent. He need not send them back but he must make them available for collection. The purpose of compensation by way of award of damages is to compensate for actual losses and is usually restricted to the cost of repairs or replacements. Any direct and predictable expenses resulting from the purchase faulty goods can also be claimed by the customer. In some instances the customer could get the defect remedied by someone else and claim the cost from the retailer as compensation for breach of contract. It has been the practice from many years for retailers to voluntarily offer to either repair or replace faulty goods. These remedies have been incorporated into the Regulations23. In other words the consumer can cite the Regulations, in force from 31 March 2003, in specifically requesting a repair or a replacement for purchases that do not conform to contract. Section 11(4) of the Sale of Goods Act 1979 limits the buyers right to a refund, it states that : ­“Where a contract of sale is not severable and the buyer has accepted the goods or part of them ... the breach of any 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 contract as repudiated, unless there is an express or implied term of the contract to that effect. So the right to reject depends on “ACCEPTANCE”. Acceptance occurs in three ways, first, by intimation of acceptance. Secondly, an act which proves inconsistent with the ownership of the seller. Thirdly, when the goods are retained by the buyer even when a reasonable amount of time has elapsed. In Bernstein v Pamson Motors Ltd, the buyer lost the right to reject a new car, after just three weeks. This case has illustrated that reasonable time has no connection with coming to know of defects24. This time may seem to be inadequate, but it has to be borne in mind that the goods are sophisticated and expensive. In common law the doctrine of affirmation determines the rules of rejection. In other words discoverability is very important because affirmation can take place only after notice of the defect. In Farnsworth Finance Facilities v Attryd, Lord Denning stated that “Affirmation is a matter of Election. A man only affirms a contract when he knows of the defects and by his conduct elects to go on with the contract despite them.”25 From the above it is clear that the time provided for rejecting or intimating defects in the goods bought is insufficient, because a proper assessment of the quality and performance of the goods cannot be done in such short time. The policy of the government is to protect the interests of consumers by implementing consumer rights. Previously, the statute was not so stringent in protecting the interests of the consumer because at that time the law operated on the maxim caveat emptor or let the buyer beware. In the process of evolution of the law in the 19th century, the judges pressed the need for protecting the consumer from being deceived by the manufacturers. The Sale of Goods Act 1979 formed the basis for the rights and remedies of consumers. This Act depicted the subtle principle which dictates the responsibilities of sellers and manufacturers regarding the clear description of their products and the expected performance in relation to quality, fitness and durability as depicted in the expression fidem habeat emptor or let the buyer have confidence. The consumer must be protected from fraudulent and deceitful practices of trading. The Sale of Goods Act provides certain remedies to the consumer who suffers loss. Some of these provisions are rejection of the goods, damages for breach of warranty, non-delivery or delayed delivery and specific performance of contract. He may annul the sales contract and recover any payments made on account of the purchase price or sue for damages. Bibliography. i. Peter Cartwright. Consumer Protection and the Criminal Law: Law, Theory, and Policy in the UK. Cambridge University Press. 4th October 2001. ISBN:0521590809. ii. Katalin J. Cseres. Competition Law And Consumer Protection (European Monographs). Kluwer Law International. 20th July 2005. ISBN: 9041123806. iii. Geraint G. Howells and Stephen Weatherill. Consumer Protection Law (Markets and the Law). Ashgate Publishing; 2nd edition. 30th July 2005. ISBN: 0754623386. iv. Mark Furse. Competition Law of the EC and UK. Oxford University Press, USA; 4th edition. 2nd December 2004. ISBN: 0911258805. v. F.D. Rose. Statutes on Commercial and Consumer Law, 2003/2004 (Blackstone’s Statute Book Series). Blackstone Press; 12th edition. 1st December 2003. ISBN: 0199259550. Read More