Consumer Protection - Essay Example

RUNNING HEAD: LAW: CONSUMER PROTECTION (SALES OF GOOD ACT) Consumer Protection (Sales of Good Act) School LAW: CONSUMER PROTECTION (SALES OF GOOD ACT) Background Information A Contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer of consideration, called price. A contract of sale may be made in writing or by a word of mouth, or partly in writing and partly by word of mouth. It may also be implied from the conduct of the parties. Where under a contract of sale, the property in the goods is transferred from the seller to the buyer, the contract is called a ‘sale’, but where the transfer of the property in the goods is to take place at a future time or subject to some conditions there after to be fulfilled the contract is called and “agreement to sell”. An agreement to sell becomes a sale when the time elapses or the conditions, subject to which the property in the goods is to be transferred, are fulfilled. Transfer of property sold for a price is the linchpin of the definition of contract of sale. “Property” means the general property in goods and not merely a special property. In other words, it means “the right of ownership”, when we say that the property in goods has passed from the seller to the buyer, it means that the seller ceases to be, and the buyer becomes the owner of the goods. ‘Goods’ form the subject-matter of a contract of sale. Goods means every kind of movable property other than actionable claims and money and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of the sale. Trademarks, copyrights, patent rights, goodwill, electricity, water, gas are all considered goods. Actionable claims and money are not goods. Subject to the Transfer of Property Act [1882], an actionable claim means a claim to any debt or any beneficial interest in movable property not in possession. A debt due from one person to another is an actionable claim and cannot be bought or sold as goods. The goods which form the subject-matter of a contract of sale may be either existing or future goods. Existing goods are the goods which are owned and possessed by the seller at the time of the sale. The ‘price’ in a contract of a sale forms an essential part of the contract. It means the consideration for the transfer or agreement to transfer the property in goods from the seller to the buyer. It is not essential that the price should be fixed at the time of sale. It must, however, be payable, though it may not have been fixed. Conditions and Warranties Before a Contract of sale is entered into, a seller frequently makes representations or statements with reference to the goods which influence the buyer to clinch the bargain. Such representations or statements differ in character and importance. It could be a condition or a warranty. In a Contract of Sale of Goods conditions and warranties may be express or implied. A condition is a stipulation which is essential to the main purpose of the Contract. Its non fulfillment upsets the very basis of the Contract. If there is a breach of condition, the aggrieved party can treat the Contract as repudiated. Wallis v. Pratt [1910] 2K.B1012 states that “a condition is an obligation which goes so directly to the substance of the contract, or in other words, is so essential to its very nature, that its non-performance may fairly be considered by the other party as a substantial failure to perform the contract at all”. A warranty is a stipulation which is collateral to the main purpose of the Contract. It is not of such vital importance as a condition is. If there is a breach of condition, the aggrieved party can only claim damages and it has no right to treat the Contract as repudiated. In a contract of sale of goods conditions and warranties may be express or implied. Express conditions and warranties are those which are expressly provided in the contract while implied conditions and warranties are those which the law implies into the contract unless the parties stipulate to the contrary. 1. Condition as the title: In a contract of sale, there is an implied condition that the seller has a right to sell the goods. In case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass. 2. Sale by description: Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description. When the goods do not correspond with the description, the buyer has a right/remedy to treat the contract as repudiated and get back the price he has paid. This point was upheld in Beatle v. Taylor [1967]. Thus, when the buyer relies on the description given to him by the seller and the goods do not correspond to such description, the buyer has a remedy towards the goods which is rejection of goods and receives back the price paid. 3. Condition as to quality or fitness: Normally, in a contract of sale there is no implied condition as to quality or fitness of the goods for a particular purpose the buyer must examine the goods thoroughly before he buys them in order to satisfy himself that the goods will be suitable for the purpose for which he is buying them. But, when the buyer relies on the skill and judgement of a seller and the seller is acting with in the course of his business, the buyer need not examine the goods. It is the seller’s responsibility to supply goods of such quality. This point has been upheld in Baldy v. Marshall [1925]. Sale by Non-Owners The general rule of law is that “no one can give that which one has not got”. This is expressed in Latin maxim “nemo dat qui non habet”. For instance, if “A” steals an article and sell it to “B”, “B” does not become the owner of the article. It is only the owner of the goods or a person authorized by him, who can sell the goods. If the seller has no title to the goods, the buyer does not acquire any although he may have acted honestly and have paid value for the goods. This protects the owner of the goods. Subject to England Sale of Goods Act.1979, where goods are sold by a person who is not their owner and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. Transfer of Property There are three stages in the performance of a contract of sale of goods by a seller, which is: 1. The transfer of property in the goods 2. The transfer of possession of the goods (i.e. delivery) and 3. The passing of the risk. The term “property in goods” must be distinguished from “possession of goods”. Property in goods means the ownership of goods where as “possession of goods” refers to the custody or control of goods. An article may belong to ‘A’ although it may not be in his possession ‘B’ may be in possession of that article although he is not its owner. Unless otherwise agreed, risk follows ownership whether delivery has been made or not and whether price has been paid or not. Thus, the risk of loss as a rule lies on the owner. Thus, “risk” and “property” go together. When the goods are in any way damaged or destroyed by the action of the third parties, it is only then one can take action against them. Rules concerning passing of property 1. Specific goods: The rule relating to transfer of property in specific goods is twofold: (a) Specific goods that can be taken away. In this case ownership transfers immediately, that is, at the time of entering in to a contract. (b) Specific goods that require servicing of some type before they can be taken away by the buyer or transferred to the buyer from the seller eg. Weighing, pre-delivery check etc, in case, the property in goods passes after the goods are put in deliverable state. 2. Unascertained goods: When there is a contract for the sale of un ascertained goods, the property in goods does not pass to the buyer until the goods are ascertained. “Ascertainment” is a process by which the goods answering the description are identified and set apart. 3. Goods sent on approval or “sale or return” when goods are delivered to the buyer on approval basis, the property in goods does not pass to the buyer unless and until he signifies his assent to the seller. Performance of Contract of Sale A Contract of sale involves reciprocal promises, the seller promising to deliver the goods and the buyer promising to accept and pay for them. A Contract of Sale is said to be performed as regards the seller, when the goods are delivered to the buyer and as regards the buyer when he accepts and pays for them. Thus, in a Contract of Sale, delivery of goods and payment of the price are concurrent conditions, i.e. both these must take place at the same time as in, for instance, a cash sale over a shop counter. Delivery means voluntary transfer of possession of goods from one person to another. Delivery of goods may be actual, symbolic or constructive. The place of delivery of goods is the seller’s place of business. Wrong quantity of goods delivered: if the seller delivers less then the quantity agreed, the buyer may a) reject the goods or b) accept the short delivery and pay a proportion of the price. But if the seller delivers more than the agreed quantity, buyer may a) reject the whole quantity b) accept and pay for the whole quantity c) accept and pay for the contracted quantity and reject the rest. Rights of the buyer 1. Right to have delivery as per contract: The first right of the buyer is to have delivery of the goods as per the contract. 2. Right to reject the goods: If the seller sends to the buyer a larger or smaller quantity of goods than he ordered, the buyer may (a) reject the whole (b) accept the whole or (c) accept the quantity he ordered and reject the rest. 3. Right to repudiate: The buyer has a right not to accept delivery by installments. 4. Right to notice of insurance: Unless otherwise agreed when the goods are sent by the seller via sea route the buyer has right to be informed about the insurance of the goods. 5. Right to examine: The buyer has a right to examine the goods with him has not previously examined before he accepts them. The seller is bound to afford a reasonable opportunity to the buyer to examine the goods before he pays for them. 6. Rights against the seller for breach of contract: (a) Damages: When the seller wrong fully neglects or refuses to delivers the goods to the buyer, the buyer may sue the seller for damages for non-delivery. The quantum of damages is the difference between the contract price and the market price. (b) Suit for price: If the buyer has paid the price and the goods are not delivered, he can recover the amount paid. (c) Specific performance: The buyer may sue the seller for specific performance of the contract. (d) Suit for breach of warranty: Where there is a breach of the warranty by the seller the seller is entitled to reject the goods. (e) Repudiation of contract before due date: When the seller repudiates the contract before the date of delivery, the buyer may either treat the contract as subsisting and wait till date of delivery or he may treat the contract as rescinded and sue for damages. (f) Suit for interest: When there is a breach of contract on the part of the seller and as a result the price has to be refunded to the buyer, the buyer has a right to claim the interest on the amount of the price refunded to him from the date on which the payment was made. Having gained a firm knowledge of the basic law governing the sales of goods we will now examine each of the cases identified for discussion. The Super Slammer Tennis Racquet Upon paying cash for the Super Slammer Tennis Racquet (here after racquet) and accepting delivery of such from Old Castle Sports and Leisure (OSL) and OSL’s sale and acceptance of payment from Jim, a sale had indeed occurred. With it came certain rights and warranties afforded under the Sale and Supply of Goods Act, 1994. Jim, being a novice tennis player and seeing the advertisement for the racquet stating that “this is a fantastic new tennis racquet specially designed for beginners, Its unique anti-scratch finish means that however many times you knock it, scratch it, drop it, the scratches will not show. Your racquet will look as good as a new after many years of use.” Accordingly, when Jim purchased the racquet, his decision was made based on the claims made by the manufacturer. However, upon using the racquet in accordance with its expressed use of being a racquet suitable for the beginner, Jim discovered a latent or inherent fault that was not readily identifiable at the time of sale. Obviously as he had dropped the racquet on a few occasions, even being a novice, the notice explicitly stated that the racquet would live up to years of droppage and still maintain its original finish. As expressed in SOGA 1979 amended in 1994, the law affords additional rights to the consumer as follows: “any public statement on the specific characteristics of the goods made about them by the seller, the producer, or his representative, particularly in advertising or on labeling.” The advertisement in Jim’s possession is ample proof that the manufacturer had further defined what constituted ‘quality’ in this case. After using the racquet for a period of two weeks Jim noticed that it had become much scratched, contrary to the claims of the advertisement and the extended warranty from the manufacturer. Dissatisfied with the quality of the racquet Jim returned to OSL where he had made the purchase and the sale had occurred and requested a refund. Per SOGA a full refund may be appropriate when requested by the buyer in a ‘reasonable amount’ of time. However, the law does not define what reasonable is although it is generally considered to be a very brief time period. However, upon requesting the refund the seller OSL they refused stating it was clear the racquet had been dropped. Jim responded that, although he was not denying he had on occasion dropped the racquet, he had in fact purchased it based on the advertisement from the manufacture that the finish of the racquet was anti-scratch. Patrick the store manager at this point informed Jim that he had no knowledge of the advertisement and alluded to the fact that therefore OSL had no responsibility for remedying the situation. Several aspects of SOGA come into play here. Firstly, within the first six months preceding the sale the customer is under no obligation to prove the goods were faulty at the time of sale and therefore was well within his rights to request a refund or replacement. The claim by Patrick that he knew nothing about the advertisement is, in this specific instance, of no consequence as defined by the law. The burden of proof rests with him (OSL) to prove that the goods, in this case the racquet, met the definition of quality and therefore was in conformity with the contract of the sale. The Sale and Supply of Goods to Consumers Regulations 2002, clearly state that if a quality defected is found by the consumer, even if it was latent at the time of the sale, the seller must repair or replace the goods at the expense of the seller unless he can prove that it would inflict an overriding cost or hardship to do so. Clearly, in this case the seller (OSL) being in the sporting good business to sell goods was in the position to replace the racquet, which is what should have occurred as repairing the racquet per 48(b) (2) a would cause “significant inconvenience to the buyer.” This significant inconvenience is defined in that Jim had purchased a set number of tennis lessons and having the tennis racquet at the buyer’s locale for any period of time would cause him to have to forfeit his lessons. This would have been unreasonable as defined by 48 b (5) c which states “Any question as to what is a reasonable time or significant inconvenience is to be determined by reference to - (b) the purpose for which the goods were acquired”, in this case the six week tennis lessons. However, Patrick did not agree to any responsibility as to the quality of the racquet and Jim left dissatisfied. Now three weeks into his six week tennis course Jim continued to use the racquet, once again he dropped the racquet and upon picking it up the handle came off. He went back to OSL and complained once again to Patrick the manager. Again Patrick told Jim ‘that the Super Slammer was the toughest tennis racquet on the market and the handle must have come off as a result of misuse by Jim.’ OSL offered to send the racquet back to the manufacture to see if they would offer a remedy. Clearly Patrick was in the wrong again. Within the initial six month period it was OSL’s responsibility to prove there had not been an inherent fault with the racquet at the time of purchase and making that statement he acknowledged that the durability of the racquet was well known and he was aware of this. Therefore, he could not later claim that he was not. At this point, Jim had the right as OSL was in breach to rescind the contract as neither replacement nor refund was offered. Further Patrick (OSL) is in deed the party with whom Jim had the contract of sale. It is Patrick’s responsibility to seek compensation from the manufacture not Jim. At that point Patrick should have offered Jim a replacement racquet which would have allowed him to finish his tennis lessons and would also have remedied the faulty finish of the racquet he had originally purchased. Patrick’s failure to honour Jim’s rights afforded Jim the right in addition to seeking a replacement racquet to take OSL (Patrick) to small claims court in recoup his losses from the remaining lessons he was no longer able no attend because he had no tennis racquet. Of the six week course he had been only able to complete three lessons so OSL half of the cost for the lessons 60 pounds should be compensated to Jim from OSL in addition to the replace racquet under 11R (6) the court may “The court may make an order under this section unconditionally or on such terms and conditions as to damages, payment of the price and otherwise as it thinks just.” In this case reimbursement for the lessons Jim had to miss is reasonable, although a partial reimbursement for his annual fee at the tennis club may not be reasonable. Additionally under section 15. (6) “If the guarantor fails to comply with the provisions of paragraphs (2) or (5) above, or a person to who paragraph (4) applies [in this case it refers to OSL as person who offers to consumers the goods which are the subject of the guarantee for sale or supply.] fails to comply with paragraph (3) then the enforcement authority may apply for an injunction or (in Scotland) an order of specific implement against that person requiring him to comply” or under (7) “The court on application under this Regulation may grant an injunction or (in Scotland) an order of specific implement on such terms as it thinks fit.” In the demonstrated case where the buyer is not an individual, that is, a person other than an individual buyer, the provisions relating to Sale and Supply of Goods Act 1994 would apply. Accordingly, if the tennis racquet had been bought by Oldcastle Racquet Club for use by its members the following would apply as changes made to SOGA favour the individual purchaser more than they do a business entity. According to it, if the goods that are supplied by the seller are defective or does not fit the purpose for which the buyer requires them, then the buyer is entitled to repudiate the contract and recover the amount paid. This is demonstrated as Jim’s remedies against tennis racquet. The position is slightly different where the buyer is not ‘dealing as a consumer’. If the buyer is not an individual and does not require for consumption, but requires for commercial purposes then it is unreasonable for the buyer to repudiate the contract. But he has a remedy to get compensation for the loss suffered by him. In other words, if ORC buys the tennis racquets for use by its members and the racquets does not fit in the purpose for which the Club needed them, then ORC cannot repudiate the contract of sale. Of course, ORC can be compensated by the seller, by way of damages, which is decided by the court. Thus, a material or non-material breach by the seller will entitle the non-consumer, in this case ORC, to be compensated. TV1 from Valueview Having recently purchased a television from Valueview for the sum of 1000 pounds cash, two days later the police came and confiscated TV1 telling Jim it had been stolen from the manufacturer and the thief had sold a number of them to Valueview who resold one to Jim. Under SOGA Jim acted in good faith in this case not knowing that TV1 had been stolen and that Valueview did not have legal claim to it. In a contract of sale, there is an implied condition that the seller has a right to sell the goods. In this case clearly the seller did not as the TV was stolen. The question becomes what are Jim’s rights under the law. The police in making their statement imply that Jim has not redress but that is not the case. Having paid 1000 pounds for TV1 and only having it in his possession for 2 days constitutes a breach of the contract. However, the general rule of law is that “no one can give that which one has not got”. This is expressed in Latin maxim “nemo dat qui non habet”. For instance, if “A” steals an article and sell it to “B”, “B” does not become the owner of the article. It is only the owner of the goods or a person authorized by him, who can sell the goods. If the seller has no title to the goods, the buyer does not acquire any although he may have acted honestly and have paid value for the goods. This protects the owner of the goods. Subject to England Sale of Goods Act.1979, where goods are sold by a person who is not their owner and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had. However, having acted on good faith and purchasing TV1 from a reputable dealer. The question is did Valueview know that the merchandise was stolen and the time they purchased it from thief. If so there was fraudulent intent on the part of Valueview. The next question to be asked is if there was no contract of sales as Valueview did not have ownership of TV1 would Jim have recourse under the Sales of Good Act 1979 to seek relief from Valueview for the cost of the television, 1000 pounds. If that were the case, it would be as previously discussed up to the judge with his discretionary power to award repayment of full or partial return to Jim. Jim, however, has another option available to him in the form of General Law. Jim under the termination clause of the general law may invoke this if one of three conditions is met: 1) An express right of termination activated by breach, that is, an express termination clause; (2) an implied, that is, common law, right of termination for: (a) Breach of an express or implied term classified as a condition; or (b) The sufficiently serious breach of an intermediate term; and (3) a repudiation of obligation, anticipatory or otherwise A condition in this case can be defined as “where one partys duty to perform is subject to the fulfillment of a contingency which the other has promised will be fulfilled, the term stating the other partys promise is a condition and the breach of such a term gives rise to an immediate right of termination. Where a term is a condition, the other partys breach of the term is accounted a serious matter, even if objectively it is far from serious.” (Carter, 1993) Further Article 25 of the general law states that: A breach of contract committed by one of the parties is fundamental if it results in such detriment to the other party as substantially to deprive him of what he is entitled to expect under the contract, unless the party in breach did not foresee and a reasonable person of the same kind in the same circumstances would not have foreseen such a result. Obviously there is a fundamental breach here as Valueview did not have ownership and Jim in good faith paid 1000 pounds cash with the assumption that he would have ownership of TV1. The question is did the party in breach (Valueview) not foresee and would a reasonable person not foresee the problem with the ownership of TV1. It would be reasonable to assume that a business would when buying a quantity of widescreen TVs from an individual (as the police had told Jim there were others.) should have questioned the legal ownership before entering into an agreement to buy from the thief. Likewise, when Jim purchased TV1 form Valueview it was apparent that he did act in good faith and it was not reasonable for him to suspect the TV was stolen. Therefore Jim would be able to seek relief from the courts in this case and seek return of his 1000 pounds from Valueview. TV2 from Pricecutters Upon confiscation of his television Jim purchased a new TV2 from Pricecutters paying 800 pounds in cash. When TV2 arrived 2 days later he signed a receipt stating that TV2 had been received and it was “delivered in satisfactory condition.” However, Jim never opened the box to actually check the condition. Whilst closing the door Jim fell and hurt his leg and he ended up in the hospital for 3 months. When he returned home he found TV2 was not working. Several aspects of SOGA come into play here. Firstly, within the first six months preceding the sale the customer is under no obligation to prove the goods were faulty at the time of sale and therefore is well within his rights to request a repair or replacement of TV2 from Pricecutters. Further, even though he had signed the receipt stating he had certified the TV was in satisfactory condition this in no way limits his rights. Again, even if he had been at home and watching the TV instead of being in the hospital, he still was well with in the six month period of time where the burden of proof rests with the seller. As far as what the claim should be replacement, repair or reimbursement lies with the seller on the condition it is reasonable. If denied redress from Pricecutter again Jim may seek relief from small claims court at which time the judge will decide reasonableness, which in this case could very well lead to full reimbursement as Jim can prove the TV had not been used during the period he was in the hospital. In this case the judge could very well extend the period of what is considered reasonable. References Baldry v Marshall [1925] 1 K.B. 260. Beale v Taylor [1967] 1 WLR 1193 Carter, J. W. (1993). “Party autonomy and statutory regulation: sales of goods.” Journal of Contract Law, 93-122. Accessed 9 Jan. 2006, from http://www.cisg.law.pace.edu/cisg/biblio/carter2.html England, Sale of Goods Act 1979 Sale and Supply of Goods Act 1994 Sale of Goods to Consumers Regulation 2004 Transfer of Property Act, [1882] Wallis v. Pratt [1910] 2K.B1012 Read More