Guarantees

Contractual Rights Regarding the Goods

A sale of goods contract incorporates implied terms and conditions relating to the quality of the goods supplied. In the case of goods, liability on the various warranties is unconditional.  It is not enough that the seller or manufacturer has used best technology or have taken all due care. The same principles apply to both consumer and business to business sales. In non-consumer cases, the implied obligations may be varied, provided that they are fair and reasonable

The implied or express terms regarding quality are subject to the limitations arising from contract law.  A buyer may only recover for loss which directly arises from the breach. Only a party to the contract may recover. Therefore, the buyer only may sue for loss. His contract is with the retailer, so that the retailer only, may be sued for breach of contract.

Where relatively low-value consumer goods are involved, the retailer may accept his liability and replace them.  In high-value claims, the retailer may not have the necessary resources to satisfy a claim.  If the immediate retailer is insolvent, the buyer has no effective recourse under the contract.


Retailer and Others in the Distribution Chain

The buyer’s contract is with the immediate retailer.  The retailer may in turn contract with the manufacturer, wholesaler or distributor.  There may be a chain of contracts in place, back to the manufacturer.  The liability and obligations under each contract will depend on the express or implied terms between them.

In legal proceedings by the buyer or consumer against the retailer, the latter is usually entitled to join his immediate supplier who may, in turn, join others up the chain.  Each will not necessarily have the same level of liability.

Where the distributor or manufacturer is in another country, questions arise as to the proper jurisdiction and proper law for the claim.  EU law assists consumers in this regard and generally require that action may or must be taken in the consumer’s home state.  The practical issues of expense and difficulty of proof also arise.


Rights of Buyer against Manufacturer

A buyer of a defective product may have direct rights against the manufacturer and other intermediaries.  These rights may be more effective, than his Sale of Goods Act rights against the retailer. There are three principal bases of liability;

  • civil liability on general tort principles;
  • guarantees by manufacturers;
  • the defective products legislation.

Under the law of civil wrongs, the manufacturer may be liable to a purchaser (and other users) if the product is inherently dangerous or if the manufacturer is guilty of fraud.  The famous Donoghue v Stevenson case demonstrated that a manufacturer may have a duty of care to an end-user, irrespective of whether there is any contractual relationship between them.

Third parties who suffer damage to property or damage to their person on account of defects in the goods may be in a position to hold the manufacturer liable in tort.  The question of privity of contract does not arise.  The measure of damages is wider in a tort claim than in the case of a breach of contract.  However, the manufacturer’s negligence must be shown.


Liability of Manufacturer in Negligence

A manufacturer may be liable to the ultimate customer in negligence, where defective goods are purchased without the possibility of intermediate examination and personal injury or other direct loss is caused by them.  Because it does not depend on contract, any person injured or affected may make a claim.

The requirement to prove negligence may be onerous.  Although certain presumptions may be of assistance, it may be difficult and uneconomic for a buyer to take a case against a well-resourced manufacturer to prove that it has been negligent in the manufacturer of the product concerned.

In the famous Donoghue v Stevenson case, a manufacturer was held to have a duty of care to the ultimate consumer in circumstances where a packaged defective product was sold, without the possibility of intermediate examination.  See the articles on civil wrongs.


Guarantees

A manufacturer’s guarantee is a contractual undertaking, commonly offered, given or sold with the goods.  It may incorporate an undertaking to replace or repair the goods, on certain conditions and within certain time limits if they are defective.

A product guarantee undertaking is usually included in a standard form with the goods.  The buyer may be obliged to complete the details of the purchase and return them to the manufacturer.  The guarantee may be offered as an enhancement, mark of confidence and/or an inducement to the customer.

A product guarantee may be provided with the goods free of charge, subject to conditions or subject to purchase. There may be a free guarantee for a period, with the possibility of the purchase of an additional period.  The guarantees may be referred to as warranties or extended warranties. Sometimes the manufacturer offers insurance cover, with a regulated insurer to cover the risks of defects.

Unless the guarantee falls within the below statutory provisions, it is subject to common law requirements for civil liability.  A contract is required, but may not necessarily be in place between the buyer and manufacturer. A manufacturer’s warranty or guarantee may be upheld as a collateral contract entered in consideration of the formation of the main purchase contract.  There may be a unilateral offer by the manufacturer, which is accepted by the purchase of the goods.

Where the guarantee is purchased, issues of enforcement are less problematical. There is consideration by reason of the payment for the guarantee.


Statutory Enhancement of Guarantees I

The Sale of Goods and Supply of Services Act provides statutory support for the enforcement of manufacturers’ guarantees and warranties.  The legislation applies to written guarantees only. A guarantee is defined to include any document, notice or written statement howsoever described, supplied by a manufacturer or other supplier (but not the retailer) in connection with the supply of goods which promise that the manufacturer or supplier will service, repair or deal with the goods, following purchase.  Dealing includes replacement and refund of the price.  It does not matter whether the guarantee is purchased or not.

The legislation makes requirements in relation to the form of guarantees. They must state clearly what the supplier undertakes to do and what charges apply if any. They must be clearly legible, state the name and address of the supplier, the duration and the procedures for making a claim.  The procedure should not be unduly complex.

Under the legislation, the seller and manufacturer may each be liable under the guarantee.  The seller is responsible for the terms of the guarantee, howsoever it is delivered.  This may be the case even though it is not visible or available to the buyer in advance.  It may be included in the packaging, which will only become apparent after purchase.

The seller may avoid liability by excluding it, at the time of delivery.  Where a seller gives his own undertaking, or guarantee as to the service, replacement or repair of the goods, it is presumed to displace liability under the supplier’s guarantee.


Statutory Enhancement of Guarantees II

In addition to recourse against the seller, the buyer may maintain an action directly against the manufacturer or supplier, if it does not honour the guarantee.  The legislation deems there to be a contract between the manufacturer and the buyer as if it had sold the goods.  The manufacturer may be ordered to take such action as may be necessary to comply with the terms of the guarantee.  The guarantee is a warranty, so that breach gives rise to a claim in damage.

There is no legal obligation to provide a guarantee as such. The statutory provision applies only when a guarantee is in fact provided.  They do not dictate the terms of the guarantee itself. The guarantee covers all persons who acquire title to the goods during the term of the guarantee.  This includes persons who receive the goods as gifts. The guarantee is not to affect the other rights of the buyer either under the terms of the contract or by statute.


Civil Liability of Manufacturers

Under the law of civil wrongs (tort), the manufacturer may be liable to a purchaser (and other users) if the product is inherently dangerous.  The famous Donoghue v Stevenson case demonstrated that a manufacturer may have a duty of care to an end-user, irrespective of whether there are any contractual relationships.

Third persons who suffer damage to property or damage to their person on account of defects in the goods may be in a position to hold the manufacturer liable.  The question of privity of contract does not arise.  The measure of damages is wider than in the case of a breach of contract.  However, manufacturer’s negligence must be shown.

Civil liability will generally arise  where products are supplied with no opportunity for inspection between the manufacturer and buyer.  Because it does not depend on contract, any person injured or affected may make a claim. However, the requirement to prove negligence is onerous.  Although certain presumptions may be of assistance, may be difficult and uneconomic for a buyer to take a case against a resourced manufacturer to prove that it has been negligent in the manufacturer of the product concerned.


EU Guarantee Provisions

EU Regulations have provided supplementary rights for buyers in respect of guarantees.  A guarantee, in this context, is an undertaking by a seller or producer to a consumer, given without charge, to reimburse the price paid or to replace repair or otherwise rectify the goods, if they do not meet the specifications set out in the guarantee, documents or advertising.

The guarantee is binding on the person who offers it, under and in accordance with the conditions contained in the guarantee statement and advertising.  On request by the consumer, the guarantee is to be made available in writing or in another durable form, accessible to the consumer.

The guarantee shall state that the consumer has legal rights under the EU Regulations and other enactments relating to the supply of consumer goods.  It must make clear that the statutory rights are not affected by the guarantee.

The guarantee must set out in plain, intelligible language its terms and conditions and the procedure for making claims. It must set out the duration and territorial scope of the guarantee, as well as the name and address of the guarantor. On request by the consumer, the guarantee shall be made available in writing or another durable medium.  The fact that the guarantee does not comply with the above requirements does not affect its validity.


After Sales Service

The Sale of Goods Act provides that there is an implied warranty that spare parts and adequate after sales service will be made available by the seller in such circumstances as are stated in the offer, description, an advertisement by the seller on the manufacturer’s behalf. The obligation lasts for such period as is stated, or if none, for a reasonable period.

There is no obligation to offer an after-sales service.  The seller may offer to make such service available, in which event, the service must be made available in accordance with the terms of the offer in the contract and the above statutory provisions.

Because of the practical difficulties, risk and expense in proving negligence against a manufacturer and others, EU wide defective products legislation imposes strict liabilities on manufacturers and producers as well as other parties for damage and personal injury caused by defective products.  There is no need to prove negligence.


Defective Products Legislation

The EU Liability for Defective Products legislation implemented in Ireland by the Defective Products Act 1991 and extended by regulations covers almost all goods and products.  The later regulations extend to include primary agricultural products.

An injured person may recover damages for personal injury and loss caused by a defective product from the producers and/or certain other parties.  The injured party need only prove that the damage, loss and the defect and prove that the defect caused the loss.

The injured party is any person who has suffered damage by reason of a defect in the product.  This is not restricted to the buyer.

A “producer” is widely defined.  It includes

  • the manufacturer or producer of a finished product or of any raw material or component part of the product;
  • any person who by putting his name, trademark or other distinguishing feature on the product has held himself out to be a producer.
  • an importer of the product into the European Union in the course of business for the purpose of supply.

Where several parties are producers, each can be sued jointly and severally for the same loss or damage.


Type of Loss or Damage

Damage for the purpose of the legislation and the rights thereby granted is limited to death or personal-injury and damage or destruction of any items of property other than the defective product itself.

The legislation is not aimed at the replacement of the defective product but rather at the damage and personal injury loss caused by it. Such a claim may be founded on the contract statutorily implied terms or on a guarantee.

Products include all movable property. This includes primary agricultural products that have not undergone initial processing.


Required Proof

A product is defective if it fails to provide the safety which a person is entitled to expect taking account of all circumstances including the presentation, the use to which it could reasonably be expected that the product will be put -and the time when the product was put in circulation.

Proof of negligence on the part of the producer is not required. Although the liability is strict, the producer has certain defences including that

  • it did not put the product into circulation;
  • having regard to the circumstances it is probable the defect did not exist when the product was put into circulation;
  • it came into existence afterwards;
  • the product was neither manufactured by it for sale or for any form of distribution for an economic purpose nor manufactured or distributed in the course of business;
  • the defect is due to compliance with any legislative requirement of EU law;
  • the state of scientific and technical knowledge at the time when it put the product into circulation was not such as to enable the existence of the defect to be discovered;
  • in the case of a manufacturer of a component or producer of raw material, the defect is entirely attributable to the design of the product in which the component has been fitted or the raw material has been incorporated or the instructions given by the manufacturer of the product

There is three year time limit for taking action from the date of damage or injury.  Where it is not immediately apparent, the period runs from the date in which the injured party became aware or reasonably have become aware of the damage, defect, and identity of the producer.  No claim can be bought more than 10 years after the product was put into circulation.


References and Sources

Irish Texts

Brian Doolan, A Casebook on Irish Business Law (1989)

Henry Ellis, Modern Irish Commercial and Consumer Law (2004)

Michael Forde, Commercial Law, 3rd Edition (2005)

Linehan, Irish Business and Commercial Law (1995)

McCormack, Reservation of Title 1990 (1994)

Patrick O’Reilly (ed.), Commercial and Consumer Law  (Statutes) (2000)

Sean Quinn (ed.), Statutes Revised on Commercial Law, 1695-1913 (1994)

Fidelma White, Commercial Law (2003) (2nd Ed 2012)

Fidelma White, Commercial and Economic Law In Ireland (2011)

Vincent Grogan, Thelma King and Edward J. Donelan, Sale of Goods and Supply of Services: A Guide to the Legislation (Law Society of Ireland, 1983)

Paul Anthony McDermott, Contract Law (Butterworths, Dublin, 2001)

2011 Report of the Sales Law Review Group,

UK texts

Atiyah and Adam’s Sale of Goods 13th Ed (2016)

Bridge, Benjamin’s Sale of Goods 9th Ed (2015);

Bridge, The Sale of Goods 3rd Ed (2014)

Blackstones’ Statutes Commercial and Consumer Law 2017

Goode on Commercial Law 5th Ed 2017

Legislation

Sale of Goods Act 1893

Sale of Goods and Supply of Services Act 1980

Liability for Defective Products Act, 1991

Electronic Commerce Act 2000

Criminal Justice (Theft and Fraud Offences) Act 2001 (50/2001)

International Carriage of Goods by Road Act 1990 (13/1990)

European Union (Consumer Information, Cancellation and Other Rights) Regulations 2013 (S.I. No. 484 of 2013)

European Communities (Certain Aspects of the Sale of Consumer Goods and Associated Guarantees) Regulations 2003 (S.I. No. 11 of 2003)