The Protection Given to Consumers by the Consumer Credit Act 1974 - Essay Example

Pat A A Explain and illustrate the protection given to consumers by sections 75 and 56(2) of the Consumer Credit Act 1974. Introduction: Consumer Credit Act 1974 is the law regulating the credit agreements between the debtor and creditor. These credit agreements shall be abided by the two principal conditions such as (a) the debtor is neither a company nor a body corporate which means and (b) the ceiling of credit advanced by the debtor shall be between 50 and 15 000. The credit agreements are categorized as consumer hire agreements and consumer credit agreements. In a sale of goods or services where the consumer makes the payment for such goods or services there exists four party relationships the transaction creates the contract between four parties such as the card holder who is known as the debtor, the supplier/retailer, the bank which issues the credit card and the bank which acts on behalf of the supplier/retailer in collecting the payment from the creditor of the consumer such as the credit card issuing bank. If the credit card provider and the bank, which is acting on behalf of the supplier/ Retailer are the same then only the transaction will have effect on only three parties. As per the rulings of the High Court the Section 75(1) of CCA protects only the domestic credit transactions whose value is more than 100 less than 30,000 but not the credit transactions of overseas. Consumer Credit agreements: In Consumer Credit Agreement the creditor provides finance to the debtor for purchase of goods and services and such finance shall be within the specified amount. The credit provided by the creditor to the debtor includes Credit sale and conditional sale such the agreements of bank overdraft and credit card, which are also termed as revolving credit or running account. Under these agreements the debtor purchases the goods and or services from the supplier or wholesaler or retailer etc and the creditor makes the payment for the debtor and such credit the creditor shall fix limit, from time to time. The further classification of these agreements are unrestricted credit agreements and restricted use credit agreements. Bank loans fall in the category of unrestricted credit agreements. Check trading, shop budget accounts and the use of credit cards fall within the category of restricted use credit agreements1. Dealer is an Agent of Creditor: In accordance with Section 56 of the Consumer Credit Agreement a person who makes negotiations of a regulated agreements between the creditor and the debtor is called the agent of creditor, such person includes a dealer in hire-purchase and a retailer who allows the customer to pay through credit card for the goods supplied. This section gives the protection to the consumer by making creditor liable for any breach of contract of sale either due to misrepresentation or due to any reason, and giving liberty to the consumer to sue the creditor for the breach of contract of sale2. Liability of Creditors in Consumer Credit Agreement: Section 75 of the Consumer Credit Act 1974 provides that the creditor is liable for the default of the supplier and the debtor has a claim against the creditor similar to that of his claim against the supplier in the Consumer Credit Agreements such as hire-purchase, credit sale and conditional sales. The creditor is jointly and severally liable to the debtor. The consumer who purchases the goods from supplier or wholesaler or a retailer using the credit card has right to claim against credit card issuing company, which provides the credit card to the consumer3. Therefore the Section 75(1) and Section 56 of the Consumer Credit Act gives the protection to the consumers against the creditor such as the credit card issuing bank for any breach of contract of sale including implied conditions such as fitness and satisfactory quality as explained in the sale of goods act. This section provides to the consumer who makes the payment of the price of goods through the credit card, to claim against the supplier and also the credit card provider who is called the creditor. This provision is made to protect the consumer from any loss due to breach by the supplier or wholesaler or the retailer when such supplier or wholesaler or the retailer are not within the reach of the consumer or it is not feasible or not possible for the consumer to make a claim against them either due to the fact that they are far away or they are not traceable then the consumer can make such claim against the his creditor who provide him the credit card services. The spirit of this provision is that the consumer should not suffer even though the person who sold the goods to him is not available and could not be sued4. Part B Linda visits Loos Department store with a view to buying a new suite of furniture. The salesman describes one particular type of settee as "the best available with genuine leather upholstery" and Linda is persuaded to buy. The price of the settee is 999 and Linda pays with her Visa credit card. Linda later discovers that the settee has an inferior simulated leather covering. When Linda complains to Loos and demands a refund, Loos refuses to help. Advise Linda. What difference, if any, would it make if Linda, instead of visiting the store, had ordered and paid for the settee over the Internet after viewing Loos website, assuming the website described the settee as 'made from the finest simulated leather'. Linda has entered into contract of sale with Loos by paying the price and taking delivery of the settee. This contract of sale is governed by the sale of goods act 1974. Therefore it is relevant to discuss the provisions connected with this contract of sale for rending a suitable advice to Linda. Contract of Sale: Section 2(1) of the Sale of Goods Act, 1979 defines the contract of sale as 'a contract where the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration called the price'. According to the definition, the property in the goods is transferred to the buyer for an agreed consideration in the form of price, this is called sale. Where the property in the goods is transferred at future date, on fulfillment of certain conditions mutually agreed by both buyer and seller, then it is called an agreement to sell. When the price is paid at the time of sale then it is called the cash sales. And when it is paid at future date it is called credit sale. The essential features of contract of sale includes capacity to contract and price; consideration and formalities; conditions and warranties; dangerous goods and Negligence and implied terms such as time for payment and delivery; title conditions and warranties; sale by sample and fitness and satisfactory quality. Smith & Keenan (2000)5 Fitness and satisfactory quality: Fitness and satisfactory quality are two distinct factors. Section 14(3) of Sale of Goods Act deals with the fitness of the goods for a particular purpose for which the buyer intends to purchase. Section 14(2) of the act deals with the satisfactory quality of the goods both are the implied conditions of contract of sale which are binding on the seller and breach of which fixes liability on the seller and gives right to remedy to the buyer. The buyer under Section 11(2) either can waive the breach of condition altogether or may treat it as breach of warranty. In case the buyer opts for he later he cannot reject the goods but can only claim for damages. The fitness condition is illustrated in Baldry v Marshall(1925) where the buyer wanted to purchase car for the purpose of tour and the same is made known to the seller and on the advise of the seller he purchased the car and paid 1,000. Later the buyer found that the car is not suitable for tour therefore he returned the car and claimed for refund of the amount paid. It was held that the defendant is in breach of section 14(3)6. The satisfactory quality/Merchantable quality: Section 14(2) is the amendment of Sale and Supply of Goods Act, 1994. The amendment is the consumer welfare oriented which strengthened the implied condition of satisfactory quality under the contract of sale by bringing the minor defects in goods such as small scratches and dents etc in a new car in to the ambit of this provision. The section also provides a limited exception that the defect is made known to the consumer before buying and the consumer inspect the goods and the defect in the goods reveals in the inspection and still the consumer buys it in which case the seller is relieved from the liability. As per this provision the consumer relieved from the burden of proof that the goods are purchased relaying on the sellers judgment and skills. It is an implied condition of the contract of sale that the goods sold are of satisfactory quality and the either retailer or wholesaler are liable for the defect and the consumer need not sue the manufacturer who is at distant from the consumer. The retailer or the wholesaler may be indemnified by their manufacturer of the goods against the loss due to such defect. .[Smith & Keenan(2000)]7 In Mash and Murrell v Joseph I Emmanuel (1961) where the perishable goods were delivered in a rotten conditions in spite of the fact that there was no undue delay in transport. It was held that the seller is liable for breach of implied condition of satisfaction quality and also for the inherent defect in the goods when they are sold, it was also held that seller cannot take plea that the defect was not apparent at the time of sale and detected only at later stage. This was also illustrated in Crowther v Shannon Co (1975)8. In Rogers v Parish (Scarborough) Ltd (1987) the court of appeal further extended the concept of the merchantable quality to the expectation of the most of the customer. In this case the court held that mere fulfillment of the condition of fitness and the rectifying of the defect in the goods is not sufficient the other factors such as 'The appropriate degree of comfort, ease of handling and reliability and, one may add, a pride in the vehicle's outward and interior appearance. The buyer was entitled to value for his money'9. In Millars of Falkirk Ltd v Turpie (1976) it was settled that slight leak of oil in the power-assisted steering and a scratch on a new car's dashboard is defect of merchantable quality10. Conclusion: In view of the legal provision and the decided cases discussed above it can be concluded that Linda's contract of sale is effected by the breach of implied condition of satisfactory/merchantable quality under section 14(2), since Linda finds that the settee delivered by Loos is of inferior quality provided the fact is proved. Linda gets the right to sue Loos under this provision. Linda can also sue the creditor which provided the credit card as per section 75(1) of the Consumer Credit Act 1974 which says the creditor is severally liable for the breach of contract by the seller. What difference, if any, would it make if Linda, instead of visiting the store, had ordered and paid for the settee over the Internet after viewing Loos website, assuming the website described the settee as 'made from the finest simulated leather'. Buying over internet is an example of the Sale by description which is provided in the Sale of Goods Act 1979 therefore it is needed to be discussed in this topic for better understanding of the position of Linda if the settee is ordered and payment is made over the internet instead after visiting the stores and after viewing the Loos website, assuming the website described the settee as 'made from the finest simulated leather'. Sale by description: Section 13(1) of the Sale of Goods Act, 1979 states that a sale is by description where the goods are purchased by the buyer only on the description of the goods and the goods not at all seen by him. The classic example given under this provision is the e-mail order transaction. This section provides an implied condition that the goods sold by description shall match with the description otherwise it is a breach of condition of sale, every statement forming part of the description is treated as condition of the sale and the purchaser gets the right to reject the goods and claim for refund of the price paid. [Smith & Keenan(2000)]11 It was held in Moore & Co v Landauer & Co(1921) the goods were packed in a manner other than the described manner, the buyer has refused to accept. It was held that though the packing will not have any effect on the quality of the goods, the sale was by description attracting the S.13 of the act therefore the buyer is entitled to reject the goods12. Rights of the consumer when the shopping is done from home or distance selling13: The shopping from home or the distance selling is regulated by the Distance Selling Regulations. These regulations provide additional rights such as a) Right of information about the description of the goods including the price, place of sale, full address of the seller and taxes if any, where the goods are received in damaged condition and the goods are faulty or the goods received are not in accordance with the description of the goods. b) Right to cancel the order within a reasonable period of seven working days and claim the refund of entire cost and also the cost of transport if any. c) Right to retain the unsolicited goods received and even need not be paid for such goods, which are received without ordering. d) Right of protection from frauds in payment through credit or debit or the store card. However these rights are not cover the financial services such as insurance or banking; accommodation, leisure services and catering services; drinks or food from delivery services. Remedies when goods received are faulty: When the goods received are faulty or not according to the description of sale of the goods the regulations provides the remedies to the consumers such as a) Refunds, b)Replacement or Repair and c) Compensation. a) Refunds: The consumer can claim a full refund including the postage and packing provided that the goods are rejected promptly within the reasonable time when the goods received are faulty. b) Replacement or Repair: Where the goods received are faulty and they are not rejected promptly but they are used for some time and then they found that the goods are faulty, in such circumstances the consumer looses the right to reject and claim for refund but he gets the right to Repair or replace of the faulty goods at free of cost. c) Compensation: The consumer is entitled for compensation where (i) there is a breach of contract for instance the goods are not matching with the description or the they are not of the satisfactory quality or not fit for their purpose for which they are purchases. These are the implied conditions of the contract of sale. (ii) The consumer incurs additional expenditure or placed in inconvenience, for instance the consumer has purchased a freezer through mail order the freezers turns out to be faulty and the consumer incurs expenditure on replacing the frozen food when the faulty freezer broke. (iii) Personal injury due to the fault in the goods. (iv) the consumer is persuaded with the fault statements of the seller. The consumer may make a complaint on the mail order companies in the above-mentioned circumstances to the organization such as Mail Order Traders' Association(MOTA), Direct Marketing Association (DMA) and Advertising Standards Authority(ASA). False Trade Descriptions Section 1(1) of Trade Description Act 1986 fixes the liability on a person on two things that (a) applying false trade description to any goods (b) supplying or offering to supply any goods with a false trade description. This provision prevents misleading of the consumers with the undue inducements by he supplier to purchase the goods, which are not to choice and their desired quality of the consumers14. Conclusion: Based on the provision and the case laws discussed above, if Linda purchases settee over internet it would be sale by description and the remedy is only claiming damages as discussed under item (i) "there is a breach of contract for instance the goods are not matching with the description or the they are not of the satisfactory quality or not fit for their purpose for which they are purchases. These are the implied conditions of the contract of sale". Here the settee supplied by Loos is alleged to be of inferior quality that means it is not satisfactory quality. Linda can claim damage either from the seller or from the creditor i.e. the provider of the credit facility through the credit card. Foot Notes: 1.Judge, Stephen. Business Law (2nd ed.p.490) 2. Judge, Stephen. Business Law (2nd ed p.494) 3. Judge, Stephen. Business Law (2nd ed. p 494). 4. http://www.warwick.ac.uk/fac/soc/law/elj/jilt/2003_2/bamodu/ 5. Smith & Keenan(2000 p.250,251) 6. (1925) 1 KB 260 7. [Smith & Keenan(2000 p.269,270) 8. (1961) 1 All ER 485 9. (1987) 2 All ER 232 10. (1976) SLT 66 11.Smith & Keenan(2000 p.264) 12. [1921] 2KB 519 13. www.euroconsumer.org.uk/index/your_rights/ shopping_home/mail_order_and_internet.htm 14. Judge, Stephen. Business Law (2nd ed.). Bibliography: 1. Judge, Stephen. Business Law (2nd ed) New York, NY USA: Palgrave Publishers, 1999. http://site.ebrary.com/lib/britishcouncilonline/Docid=2003005&ppg=490 2. Judge, Stephen. Business Law (2nd ed p.494) New York, NY USA: Palgrave Publishers, 1999 http://site.ebrary.com/lib/britishcouncilonline/Docid=2003005&ppg=494 3. Judge, Stephen. Business Law (2nd ed. p 494). New York, NY USA: Palgrave Publishers, 1999. and 495. http://site.ebrary.com/lib/britishcouncilonline/Docid=2003005&ppg=495 4. http://www.warwick.ac.uk/fac/soc/law/elj/jilt/2003_2/bamodu/ 5. Smith & Keenan(2000 p.250,251) 6. Baldry v Marshall (1925) 1 KB 260 7. Smith & Keenan(2000 p.269,270) 8. Mash and Murrell v Joseph I Emmanuel (1961) 1 All ER 485 9. Rogers v Parish (Scarborough) Ltd (1987) (1987) 2 All ER 232 10. Millars of Falkirk Ltd v Turpie (1976) SLT 66 11. Smith & Keenan(2000 ) 12. Moore & Co v Landauer & Co(1921) .[1921] 2KB 519 13. http://www.euroconsumer.org.uk/index/your_rights/ shopping_home/mail_order_and_internet.htm 14. Judge, Stephen. Business Law (2nd ed.). New York, NY USA: Palgrave Publishers, 1999. p 533. http://site.ebrary.com/lib/britishcouncilonline/Docid=2003005&ppg=533 Read More