Contracts between businesses /traders and consumers raise most of the same issues as those between businesses. Most of the provisions of the Sale of Goods Act apply equally to business to business sales and to business to consumer sales.
Over the last 40 years, a significant body of consumer law has developed which profoundly affects both the content of consumer contracts and trading practices. Most of the legislation is derived from European Union Directives.
The key Sale of Goods provisions regarding the implied conditions as to title, description, conformity, the passing of property, acceptance, rejection and damages are broadly similar in consumer and business sale contracts.
The provisions regarding delivery, options on default and the passing of the risk have been amended in favour of the consumer, in consumer contracts. Under the Sale of Goods Act, the risk usually passes at the same time as the property. In a consumer case, it remains with the seller until the goods are actually delivered to the consumer and received by him.
Business to Business Contracts
The key implied conditions regarding title, description merchantability/ quality, fitness for purpose and conformity with the sample are identical for business and consumer contracts. However, in business to consumer contracts, these key protections cannot be excluded or limited at all. They may be excluded or limited in the case of business to business contracts, where it is fair and reasonable in accordance with the criteria in the legislation.
The courts interpret clauses which seek to limit and exclude the liability of the stronger party, usually the trader or business which puts the clause forward, in such a way as to limit their effect. This principle applies both to business to business and business to consumer contracts in favour of the party who has not drafted or proposed the terms concerned. That latter party is presumed to be in a stronger negotiating position.
The Sale of Goods Act provides that a description applicable to goods is a contract condition. Therefore, its breach entitles the other party to terminate the contract and recover damages.
The description identifies the goods as such. Generally, statements in relation to the quality of the goods are covered by the implied statutory conditions as to quality rather than description. However, in particular cases, there may be a fine line between a description of the goods and descriptions of their quality.
The description goes largely to the issue of identity. If the goods correspond in the broad sense to the description, the identification condition is usually met, even if they are defective,
It is possible that terms in relation to quality may be part of the description in the particular circumstances. Statements as to the location, age and use of goods, dimensions and status in transit have been held to be descriptions in particular cases.
Where a statement is a description, it must be strictly complied with. The fact that the goods are useable does not necessarily mean that they conform to their description. Any significant
difference in their quantum, size or other features, such that they are in substance different to what was described, may constitute a breach and non-compliance with the description requirement.
Clauses in written contracts proposed by the seller commonly provide that the description is by way of identification only. The clause may be effective in reducing the seller’s duties in many cases. The clause is not necessarily effective in avoiding the compliance with description obligation.
The statutory conditions cannot be nullified in a consumer contract. They may be modified in non-consumer contracts only is so far as the variation is fair and reasonable.
The Sale of Goods Act implies conditions that goods must conform with any sample, be of merchantable quality and be reasonably fit for purpose. The concept of merchantability is somewhat old-fashioned that has been abandoned in the UK. In the UK the merchantable quality is now “satisfactory” quality, which is likely to have much the same meaning. The nature and age of the goods are relevant. Less is expected of used goods.
EU derived legislation provides that in deciding whether goods meet the requisite standard of conformity and quality, public statements including advertisements about their specific characteristics are taken into account. The buyer must have been aware of them. They must not have been withdrawn, with the withdrawal brought to the buyer’s attention.
The statutory warranties and conditions apply to goods supplied under the contract. They may be the goods subject matter of the contract or other goods supplied with them. This is the case even though the item, for example, packaging or a bottle may not be central to the transaction. The seller may even retain title to the goods concerned.
The requirement of merchantability of goods embraces their fitness for general usual purposes. It may be less than that required for fitness for a specific purpose, which is the subject of a separate statutory condition. The goods may be of merchantable quality notwithstanding that they do not meet statutory requirements.
Where a statement is made about key characteristics which are obvious from inspection, the buyer may be deemed not to have relied on it.
Latent defects at the time of purchase may later manifest themselves. They may be evidence that the goods were not of merchantable quality at the relevant time.
It is relevant whether or not the goods are second hand. It is relevant what price is paid. It is relevant what cost would be involved in remediation and what the purchaser can reasonably expect in these circumstances.
The inclusion of clauses in consumer contracts which purport to exclude the key statutory consumer rights are not only void but may have criminal and administrative enforcement consequences. (Check Act)
The general conditions as to merchantability and quality are not applicable
- where the defect is specifically drawn to the buyer’s attention in advance
- where the buyer has examined the goods, and this has revealed the defect
- where the goods conform with the sample.
Goods must be reasonably fit for purpose. If there is one or a principal or usual purpose, the seller has taken to know it. The burden is on the buyer to prove that the goods are not fit for purpose.
A seller can disclose defects and bring matters to the buyer’s attention in some circumstances so as to negate its obligations under the implied conditions. The seller is not liable on the obligations in respect of fitness for purpose if the buyer did not, in fact, rely on the seller’s skill and judgment, or it would be unreasonable for the buyer to do so. This will rarely be the case in consumer contracts. It may be the case in business to business contract.
Where the defect aberration or breach of the description, quality, fitness for purposes, is slight is such that it is unreasonable for the buyer to reject the goods. The buyer remedy is to sue for damages only. A consumer purchaser has other remedies
It is an implied condition of a sale by sample that the bulk corresponds with the sample in quality and that the goods will be free from any defect rendering the quality unsatisfactory, not apparent form a reasonable examination of the sample.
The question may arise as to what is a sale by sample. In some cases, sellers disclaim that the exhibition of goods represents a sample and it is declared that they are exhibited solely for the buyer to judge himself in relation to the quality of the bulk and not so as to constitute a sample for the purpose of the statute.
Limiting Statutory Rights
Under the Sale of Goods Act, clauses which limit or exclude the supplier’s obligations must be fair and reasonable in accordance with the statutory criteria. The provisions apply to clauses which seek to exclude or limit liability for breach or which allow substantially different performance from that which is reasonably expected or which allow no performance at all.
Clauses which seek to exclude or limit the key Sale of Goods Act title provisions are void. Clauses which seek to exclude or limit the description, quality and conformity conditions are void in a consumer case. The purported exclusion of consumer rights constitutes an offence under consumer protection legislation.
A person deals as a consumer when he neither makes the contract in the course of a business or holds himself out as so doing, the other party deals in the course of business and the goods are of a type ordinarily supplied for private use or consumption.
The Unfair Terms in Consumer Contracts Regulations apply to contracts between businesses and consumers who are natural persons. The regulations sit side by side with the Sale of Goods Act and other consumer protection legislation.
Exclusion and limitation clauses may be held to be void as unfair contract terms under the regulations as well as being void for failing to be fair and reasonable, or entirely void for purporting to exclude key consumer rights.
Unfair Contract Terms I
The European Communities (Unfair Terms in Consumer Contracts) Regulations apply to consumer contracts which have not been individually negotiated. Their provisions are widely applicable. If a term is deemed unfair, it is unenforceable. A term may be deemed unfair and accordingly unenforceable if contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
The courts have held that the duty to negotiate in good faith implies a duty to deal fairly and openly. Openness implies fair and transparent wording and the absence of traps and pitfalls. Prominence should be given to terms which are unusual or unexpected and which operate to the detriment of the consumer. Fair dealing requires that the trader should not deliberately or consciously take advantage of the consumer’s lack of knowledge, need, inexperience, unfamiliarity with the subject matter, weak bargaining position or other similar factors referred to in the legislation.
Unfair Contract Terms II
The legislation provides an indicative list of terms which may be deemed unfair. They include many exclusion clauses, including those which oblige the consumer to pay a disproportionately high sum in compensation, terms which bind them where he has had no real opportunity to become acquainted with them in advance, terms which allow the trader to alter the contract unilaterally without a good reason, in particular as to the description and the matter of what has to be provided under the contract.
The court is to take account of nature of the goods and services, the subject of the contract at the relevant time together with all attendant and surrounding circumstances and the other terms of the contract.
The test of fairness does not apply in relation to the definition of the subject matter and to the adequacy of price. remuneration. These core and essential terms are commercial terms which are not regulated as such. The purpose of the law is to regulate other terms with reference to the standard of unfairness. The principle is that the terms of the bargain are a matter for the parties exclusively.
The Competition and Consumer Protection Commission has extensive powers in relation to the enforcement of the regulations. It may apply to the court for a declaration that particular or commonly used terms and conditions are unfair. They may take administrative action or criminal proceedings.
Guarantees given by manufacturers to consumers are directly enforceable. The EU legislation requires that the guarantees be intelligible and give the requisite details of the guarantee terms.
A guarantee is an undertaking given to a consumer by a person acting in the course of a business, giving without extra charge, the right to reimburse the price paid or to repair or replace defective consumer goods if it does not meet the specifications set out in the guarantee statement or in relevant advertising.
Pre-contract information; Consumer Cases I
In consumer transactions, guarantees must be accompanied by a confirmation that they do not affect statutory the consumers’ rights.
EU regulations provide for distance contracts. See separately the sections on distance contracts and on contracts negotiated away from the trader’s place of business. The terms of the contract must be set out and furnished to the consumer in the distance and off business premises sale, upon the contract being made.
2013 EU derived regulations provide for the mandatory disclosure of certain information in all consumer sales, including those made on the business premises. The legislation applies to the sale and supply of goods and services by businesses /traders to consumers.
Pre-contract information; Consumer Cases II
A wide range of specified information must be given to the consumer in a permanent format before the contract is concluded. This information may become a term of the contract or may constitute a representation, breach of which gives rise to termination and in some cases, compensation by way of damages.
A cooling off period, in which the contract may be cancelled allows the consumer in the case of contracts in a distance contract (any contract entered away from the business place) whether by internet or doorstep sale, to terminate the contract within a period. This cooling off period is usually 14 days. The details of the right to cancel together with other information must be given. If the information is not furnished, the period for cancellation is extended, potentially, indefinitely.
The issue of data protection is of is of enormous significance. The data protection rules will be enhanced significantly as of May 2018 pursuant to a common EU-wide regulation, the GDPR.
There are restrictions on sending marketing communications without the customer’s prior consent. Unsolicited electronic communications cannot generally be sent to an individual without his prior return consent. There are a number of limited exceptions.
Generally, an entity may not hold another person’s personal data or use it without explicit consent to such holding and use. See generally the sections on data protection.
- Consumer Contracts
- Business to Business Contracts
- Description I
- Description II
- Conformity Requirements
- Known Defects
- Limiting Statutory Rights
- Unfair contracts
- Unfair Contract Terms I
- Unfair Contract Terms II
- Pre-contract information; Consumer Cases I
- Pre-contract information; Consumer Cases II
- Data Protection