Selected consumer rights

Selected consumer rights Introduction The law is complex in any situation whether it is a road traffic offence under the strict liability rules or a serious manslaughter charge under the criminal law. The area of consumer protection law is no different and is complex with legislation coming from many different sources, statute, common law and EU Directives to name just three sources. For example, Silberstein, 2007, argues that every consumer transaction is based on law of contract, therefore technically every consumer should understand the basics of contract law before moving on to understand the special rules and statutes regarding consumer law. This is a complex area for any undergraduate to understand and therefore an area that some consumers, e.g. the elderly, would find extremely difficult to understand. A consequence of complex consumer protection legislation is commented on by Marsh in his 2008 book Consumer Law. Many people do not know their rights when encountering problems at the point of sale or after (p.7) Hypothesis Initial research has led to the conclusion that consumer law is complex and because of this few consumers and businesses actually understand it fully and therefore sometimes customers and indeed businesses are applying the law wrongly. This project aims to look at this in detail and to prove if the hypothesis is founded or not. The main purpose of this report is to first identify the main consumer legislation and then to investigate if Silberstein is correct in her view that consumer law is complex and through primary research if Marsh is correct when he says that many people do not know there consumer rights. Rationale This project forms part of the third and final year BA (Hons) Business Management (Legal Studies) degree at MMU Cheshire and is therefore a substantial reason for completion of this project. However over the course of the legal studies program many topics have been studied and through this project the opportunity has arisen to explore and research a particular area of interest. Having studied this topic in Advanced Managerial Law and having experenice of retail and selling consumer law was a topic that captured my imagination, it is unlikely that anybody will have not come into contact with it, knowingly or unknowingly, for example a contract is made for the simple purchase of a loaf of bread and is therefore has an impact on every bodies life. Research Methodology Having laid down some aims and objectives, a number of secondary sources i.e. statutes, textbooks and journals will be looked at to try and establish what are regarded as the main consumer laws in the UK. Having done this and using the same research a more in depth explanation of these laws will be written, providing practical examples, possibly through primary research to aid their understanding. Primary research will be used in the form of a questionnaire to attempt to ascertain what knowledge general consumers and businesses have of the law using case studies and a Likert Scale answering system. The data will be collected from 20 consumers and 10 businesses. Primary data will be exclusive and original for this task because the questions can be tailored to my specific needs and will also ensure direction over the integrity of the data ensuring a fair cross section and sample of society is used. Secondary data would be unsuitable as it is unlikely someone has already conducted the exact research that is needed and as already mentioned no control or reassurance over the integrity of the data sourced would be available. The primary data will be analysed to draw conclusions and any applicable secondary research will be used to back up the findings. Finally using all the primary and secondary data gathered to date an evaluation of the findings will take place to draw a conclusion on if consumers and business are aware of the main consumer laws drawn from earlier research. Aims and Objectives To research which laws are the main laws regarding consumer purchasing and protection. Research to explain and give examples of these laws in action and there effects on both consumers and businesses. To devise a series of questions/situations regarding the main laws identified to test the knowledge of consumers and businesses. To report and critique on the findings. To evaluate the report and findings from previous sections to draw a conclusion and make any recommendations/suggestions to the current main consumer laws. What are the main consumer protection laws in the UK? As mentioned previously the law is complex and there could be many statutes and regulations that could be regarded as main consumer protection laws just a quick search on the internet produces a long list that includes; Sale of Goods Act 1979 Unfair Contract Terms Act 1977 Consumer Protection Act 1987 Consumer Protection (Distance Selling) Regulations 1999 Electronic Commerce Regulations 2002 General Product Safety Regulations 2005 Consumer Credit Act 1974 Package Travel, Package Holidays and Package Tour Regulations 1992 Food Safety Act 1990 Consumer Protection (Unfair Trading) Regulations 2008 As has been established the general law of contract gives some protection. Silberstein states that it is the basis of every consumer transaction. Marsh, 2007 says that the tort of negligence also gives limited protection in circumstances where a consumer has no contractual rights. It had to be decided which Statutes and Regulations were to be investigated in this research project and which gave consumers most protection. The first obvious Statute to use was the Sale of Goods Act 1979 (SGA) as this covers almost every consumer transaction that takes place. Marsh, 2008:9, says, The major area of law which supports and assists consumers is the Sale of Goods Act 1979. This Act governs all transactions where goods are transferred for a price. By way of further note if goods are swopped or exchanged then the goods are covered by the Supply of Goods and Services Act 1982, however if any amount of cash is involved no matter how small then the Sale of Goods Act 1979 will apply. The SGA covers any transaction where goods are transferred for a price but what statutes and regulations protect consumers in relation to how you pay for those goods? Transactions that are becoming increasingly popular such as purchase by credit card or hire purchase agreement? The answer is the Consumer Credit Act 1974. Indeed, Broomfield, 2007:53, states The most important Act dealing with consumers and credit is the Consumer Credit Act 1974. The main aim of the Act was to regulate the formation, terms and enforcement of credit and hire purchase agreements. It was then felt that with Acts from 1974 and 1979 respectively that the next choice should be relevant to todays society. This is not to say that the Acts already mentioned are not relevant but back in the 1970s telephone and TV selling was very uncommon, and the increase in this type of selling is why the Consumer Protection (Distance Selling) Regulations 1999 were introduced. These have been kept up to date and relevant by the separate but intertwining Electronic Commerce Regulations 2002 which specifically apply to internet transactions or contracts concluded by electronic means over distance. These rules regulate regarding orders, cooling off periods, fraud and unsolicited goods. One Act to mention would be the Consumer Protection Act 1987 as this would be an obvious choice for inclusion, however, the Consumer Protection Act deals largely with after the event occurrences; for example it deals with liability for defective products, government powers to regulate consumer safety through delegated legislation and statutory instruments and finally a section on price misleading which is discussed briefly later. It was therefore decided as the first two sections regarded largely situations where it would be difficult or unlikely to propose scenarios that were easily identifiable and answerable by people to answer the question Do consumers and businesses understand and know their rights under selected consumer law? that it would be omitted after the section of this report that looks at the legislation in more detail. Consumer law is ever changing and developing to opinion and the needs of consumers. Take for example the internet, Nowak and Phelps (1992) found that 91 percent of individuals surveyed felt that businesses and governments were not doing enough to protect their privacy online. Bennett (1992) and Smith (1994) commented that regulatory responses were usually triggered in reaction to an increasing level of discontent within the populace, which is transmitted to legislators in some manner. Wirtz et al (2007) found that that robust perceived business policies and governmental regulation had now reduced consumer privacy concern. Consumer Protection Laws in theory and practice The Acts and Regulations that we have identified as the main consumer protection laws in the UK that will be discussed in detail are; Sale of Goods Act 1979 Consumer Protection Act 1987 Consumer Credit Act 1974 Consumer Protection (Distance Selling) Regulations 1999 Electronic Commerce Regulations 2002 Sale of Goods Act 1979 There is a common law Latin maxim of Caveat Emptor or buyer beware, this was meant to warn all buyers about the potential problem of buying products. Before the SGA 1979 a purchaser could not claim goods were defective unless he had obtained express guarantees from the vendor (seller) on the quality, usage and condition of the product. (Law, 2008 Richards, 2009) By way of consumer law with regard to contract most purchases made by consumers or made on the basis of invitation to treat this comes from the Latin phrase invitatio ad offerendum and means an inviting an offer. For example, if you go to a supermarket the items on display are being offered to you as an invitation to treat, the offer and acceptance of the contract does not occur until you have paid for the items. A supermarket is well within its rights to withdraw from sale any item or change the price, and refuse to sell it to you unless you have completed the purchase and therefore the contact of sale and purchase, this if course works vice versa in that you can take items in and out of your trolley before purchase. Advertisements are also regarded as an invitation to treat and not an offer, the person placing the advert is not obliged to sell to every customer. This was decided in the case of Partridge v Crittenden [1968], it was held that where the appellant advertised to sell wi ld birds, he was not offering to sell them. Lord Parker ruled that it did not make sense for all advertisements to be offers, as the person making the advertisement could be obliged by contract to sell more goods than he actually owned. (Westlaw Database, 2010) In the Sale of Goods Act 1979 a seller is required via statute to compile with certain obligations; there are certain times when terms maybe implied into the contract. I.e. it is not directly written into the contract but is made part of the contract due to statute. These are implied terms and impose an offence of strict liability on the seller if breached. Implied terms were added to protect the consumer giving them certain rights and guarantees in every sale, we will now look in detail at the implied terms. Implied Terms under the Sale of Goods Act 1979 This implied term states that a seller must have the right to sell the goods and to transfer the title of them to the buyer. Under the Act a seller can only compile with this in two ways by either having ownership of the title themselves or if they are acting with the real title holders permission, such as in business transactions at the time of sale. A case involving and demonstrating Section 12 is that of; Rowland v Divall [1923] Description (Section 13) There is an implied term that all goods must match and correspond with any description used. Most goods are sold with some type of description whether it be given by word of mouth, for example the shopkeeper saying these boots are waterproof or by written notice, for example a notice saying pure lamb wool jumpers. In the case of some transactions it is necessary to note that the seller is also responsible for labels attached by the manufacturer and notices on boxes even though he did not apply them. Description is important as some goods are sold entirely on description, for example, mail order. Almost all goods are sold on description and the seller is in breach of contract if this is inaccurate (Adams, 2008) Again a case involving and demonstrating Section 13 is Beale v Taylor [1967] Quality (Section 14(2)) Where a seller sells goods in the course of a business there is an implied term that the goods are of satisfactory quality. Satisfactory quality means the standard to which the reasonable man, sometimes referred to as the man on the Clapham omnibus would expect taking into account all relevant circumstances such as price paid, for example the interior of a  £50,000 car would be of substantially better quality than that of a  £5,000 car. An example of a case involving quality is that of Godley v Perry [1960]. In this case there was a breach of Section 14(2) as the item was not of satisfactory quality and Wilson v Rickett Cockerell LTD [1954] where a delivery of coal contained fragments of detonators and caused an explosion and damage to property. The coal was not of satisfactory quality. There are however limits to liability under S14(2) this section only applies where a sale arises in course of business. The seller cannot be held liable of the buyer knows about the defects and this can be achieved in two ways either by notice of the defect being given by the seller for example a tear on sleeve or spare tyre missing. The other way is by inspection by the buyer; buyers are not under any obligation to inspect items but if they do sellers can then not be held accountable for defects that should have been reasonably evident. A seller however is not liable for misuse or damage caused by the ultimate consumer. Two cases that show this point are; Aswan Engineering Establishment Co. LTD v Lupadine LTD [1987] and Heil v Hughes [1951]. Fitness for Purpose (Section 14(3)) Where goods are sold in the course of business they must be reasonably suitable for any purpose in which the goods are normally sold. (Adams, 2008:231) Goods must also comply with any special purpose that the seller claims, also if the buyer makes known to the seller the purpose for which the product is being bought and to be used any recommendation must also comply with this and be reasonably fit for purpose. Fitness for purpose claims rely on the buyer being able to show that he placed reliance on the seller when purchasing the goods; such reliance may be either implicit or explicit. Implicit reliance is when a buyer does not rigorously inspect the goods or ask questions about then but they turn out to be not fit for the usual purpose of those goods. If a buyer does not ask then a seller is not liable if the goods turn out to be required by the buyer to perform above what is normally required. (Adams, 2008) A case to illustrate this point is Griffiths v Peter Conway [1939] Explicit reliance is where the buyer asks questions and the seller recommends a product for that purpose for example, if you visit a boat shop and ask which motor is suitable for your type of boat, take the motor and it is not powerful enough then the motor is clearly not fit for purpose. (Adams, 2008) Sample (Section 15) When a sale takes place by sample there is an implied term that the bulk order will be the same as the sample in quality, for example, same materials, same resilience to damage etc. There is also an implied term that the goods will be free from any defects not noticeable on reasonable examination of the sample. Looking back at Godley v Perry [1960] the catapults had been sold to the shop keeper by a supplier after a sample has been viewed. Godley had tested for quality by pulling back the elastic, when damages were later awarded to Perry for his eye injury the catapult was tested and found to have a manufacturing fault that Godley could not have noted on reasonable inspection and therefore Perry could be repaid the compensation he had to pay Godley by the supplier, as the supplier was in breach of Section 15. Likewise the supplier could claim the compensation from the manufacturer as the manufacturer has a duty under tort and negligence for duty to their neighbours, in this case the ultimate consumer Godley. It is clear that the implied terms in the SGA 1979 are of paramount importance and these are implied which means they are drawn into every contract and can be expected by the consumer and must be obeyed by the seller/manufacturer of such consumer products. Other rights given under the SGA 1979 include S6 and S7 regarding perishable goods, S29 and S30 regarding delivery of goods and Part V of the Act, grants additional rights in consumer cases such as those in S48(b) Repair or Replacement of Goods. Consumer Protection Act 1987 This Act has three main parts as discussed regarding liability for product defects, health and safety delegation and price misleading. Part III of the Act regarding price misleading is the part on which this project will focus as this is the main part concerning all consumers. Law of contract means a shop can withdraw an item for sale or change its price before purchase because of the rules regarding invitation to treat. The shop however cannot mislead as to the price of an item; the Act states in S20(1) a person shall be guilty of an offence if, in the course of any business of his, he gives (by any means whatever) to any consumers an indication which is misleading as to the price at which any goods, services, accommodation or facilities are available (whether generally or from particular persons). So if a shop deliberately prices to mislead, for example giving prices exempt of VAT but not stating this they will have committed the criminal offence of misleading according to price, likewise if a shop was found to have deliberately mispriced an item in a sale saying it was more expensive then it has ever been offered for sale would also be guilty of the offence. This is one reason you will see disclaimers on sale boards such as this product has been offered at the higher price in at least 20 of our stores for the last 28 days. Cases considering incorrect and misleading pricing were Toys R Us v Gloucestershire CC [1994] and MFI Furniture Centres Ltd v Hibbert [1996] A shop would not be guilty if the item pricing was an honest mistake and any further mispriced items were removed immediately from sale. Consumer Credit Act 1974 The Consumer Credit Act 1974 was introduced because according to MacLeod, 2007, In twentieth century, there was explosive growth in the use made of instalment credit by both business and private consumption by 1980 80% of the market was lender credit largely due to the expansion of store cards. Unfortunately whereas the well-off were able to take part in exclusive offers, the less well off were found to be running up debt from pawnbrokers and loan-sharks, some lending modest amounts but using an unregulated industry to make large amounts in return. The CCA 1974 addressed this issue amongst others. Credit for consumers comes largely in two forms, either the borrowing of money and paying it back over a period of time for a specific item, commonly known as a hire-purchase (HP) agreement and borrowing by credit card. These are two main areas regulated by the Consumer Credit Act 1974 and the two areas to be discussed further as they affect shopping consumers the most. Sections 87-93 are some of the sections of the Consumer Credit Act 1974 that deals with HP agreements. Sections 87-89 deal with default (usually non-payment) and state that if there is a breach of the agreement the creditor must serve the debtor with a default notice before taking any action. This notice must explain the nature of the breach, what must be done to remedy it and if it is not what will happen. The debtor must be allowed at least 14 days in order to remedy the breach from the time of issue. If it is remedied then the breach is treated as if it never happened, if it is not then the creditor can take action to recover monies owed. Sections 90-92 deals with the repossession of goods and states that a creditor must obtain a court order before he can enter a premise to repossess goods and that if a third of the amount in the agreement has been paid (not including interest) then the goods are protected and a court order is also needed to repossess the goods without the debtors permission. In Common Law, this has been seen in the case of Capital Finance Co LTD v Bray [1964] The main outcome of this case was failure to obtain a court order for protected goods which are repossessed has the effect of terminating the agreement, releasing the debtor from further liability and allowing recovery of all sums paid by the debtor. Also in regard to HP agreements the SGA 1979 states that a seller must have title of goods before they can sell items, however, in the case of hire purchase, who owns the product whilst it is still under an HP agreement? This was decided by the case of Helby v Matthews [1895]. It was decided that until the last instalment had been paid that the ownership stays with the supplier of the finance and title passes on payment of the final instalment. Helby v Matthews also deals with an issue over selling of goods under a HP agreement, it was again decided that ownership is with the original supplier of finance until the last payment has been made so goods can be recovered. With regard to payments made by credit card, Section 56 of the Consumer Credit Act 1974 states that the supplier, from whom you buy the goods is the creditors agent. (For example, VISA or Mastercard) The creditor is responsible therefore for misrepresentations of supplier. Section 75(1) of the Consumer Credit Act 1974 states; If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c)* has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor. On condition the cash price of the item being supplied is over  £100 but not more than  £30,000 (including any VAT). (www.oft.gov.uk) *Section 12(b) and (c) refer to the type of transaction that must be involved for it to be applicable (and explain in explicit terms what each means) under Section 75(1) debtor -creditor-supplier agreements. Debtor-Creditor-Supplier Agreements occur when there is a link between the creditor and the supplier. For example a credit card transaction. Debtor-Creditor Agreements are not covered by Section 75(1) and this would be things such as a bank overdraft. An example of a situation on which this Act can be valuable is used later in the scenarios for the questionnaire and means in practice that if a valid purchase was made from a shop and that product broke through not being of sufficient quality, if that shop has ceased trading you would be able to claim through your credit card company as they are both equally responsible under the law and there has been a breach of the SGA 14(2). Consumer Protection (Distance Selling) Regulations 2000 ((2005) as amended) The Distance Selling Regulations 2000 replaced large sections of the Unsolicited Goods and Services Act 1971 in response to the growing number of other ways to conclude contracts when buying items, e.g. telephone, mail order etc. The Distance Selling Regulations are a Statutory Instrument (SI2000/2334) that makes EU Directive 97/7/EC law in the United Kingdom. The Distance Selling Regulations specifically cover the practices set out in Schedule 1 of the Regulations these are; unaddressed and addressed printed matter, letter, press advertising with order forms, catalogues, telephone calls with or without human intervention, radio, videophone or videotext, e-mail, fax and teleshopping. There was a now uncommon practice called inertia selling in which a salesman would send to households goods they had not ordered later followed by an invoice hoping that fear of reprisal for non-payment would see them pay the invoice. In fact, broadly speaking it is now that the goods can be treated, in certain circumstances, as an unconditional gift and kept without paying a penny. Although the recipient will have to be careful a court would not rule that he had accepted the goods by conduct as seen in Weatherby v Banham [1832] or with regard to services in Trinder Partners v Haggis [1951]. (Brownsword, 2009) This issue is specifically dealt with in Reg. 24. Another major regulation is regulation 7 this protects consumers giving specific details on what information must be transferred to the buyer by the seller for the contract of sale to be legal, these is to ensure the consumer knows exactly what is happening in a distance selling situation. Regulation 7 states; 7. (1) Subject to paragraph (4), in good time prior to the conclusion of the contract the supplier shall- (a) provide to the consumer the following information- the identity of the supplier and, where the contract requires payment in advance, the suppliers address; a description of the main characteristics of the goods or services; the price of the goods or services including all taxes; delivery costs where appropriate; the arrangements for payment, delivery or performance; the existence of a right of cancellation except in the cases referred to in regulation 13; the cost of using the means of distance communication where it is calculated other than at the basic rate; the period for which the offer or the price remains valid; and where appropriate, the minimum duration of the contract, in the case of contracts for the supply of goods or services to be performed permanently or recurrently; inform the consumer if he proposes, in the event of the goods or services ordered by the consumer being unavailable, to provide substitute goods or services (as the case may be) of equivalent quality and price; and inform the consumer that the cost of returning any such substitute goods to the supplier in the event of cancellation by the consumer would be met by the supplier. Regulation 10 sets out a customers and suppliers rights to cancel an agreement and gives specific examples of how this can be communicated and the timeframe that it needs to be issued within; these methods are; mail, fax and e-mail. Electronic Commerce Regulations 2002 The Electronic Commerce Regulations are a Statutory Instrument (SI2002/2013) that makes EU Directive 2000/31/EC law in the United Kingdom. Electronic commerce was specifically unregulated until the introduction of these Regulations in 2002. The European Union was acting to protect consumers in the still increasing area of internet shopping. There are four main regulations that give powers to and protect consumers. Reg. 6 like Reg. 7 of the Distance Selling Regulations gives specifics to what details must be communicated to the buyer to make a legal contract for sale. Reg. 9(1)(a) provides details of what must be provided specifically when communication and buying is by electronic means it states that; 9. (1) Unless parties who are not consumers have agreed otherwise, where a contract is to be concluded by electronic means a service provider shall, prior to an order being placed by the recipient of a service, provide to that recipient in a clear, comprehensible and unambiguous manner the information set out in (a) to (d) below- the different technical steps to follow to conclude the contract; whether or not the concluded contract will be filed by the service provider and whether it will be accessible; the technical means for identifying and correcting input errors prior to the placing of the order; and the languages offered for the conclusion of the contract. 9(3) states that terms and conditions must be made available to the consumer in a means of easy storage and reproduction. Regulations are different for when the seller and buyer are deemed to have entered into the contract of sale, somewhat surprisingly these do not occur at the same time. Reg. 11(2) states that a buyer is deemed to have entered into the contract of sale when they agree to or arrive at an acknowledgement of order screen Reg. 12 states that the seller has not entered into the contract until they dispatch the item that has been ordered and can cancel the item up until this point or offer to dispatch an alternative as per the Distance Selling Regulations Reg. 7(b) and (c) as previously seen. Items in a shop are an invitation to treat and therefore as long as the price is not deliberately priced wrongly a shop can change the price and refuse to sell it to you for the lower price. 70% of people thought they definitely could insist on buying at the lower price or would certainly argue their case claiming the law was on their side. The most common mistake was people misinterpreting store policy and goodwill as the law, therefore most consumers did not know the law in this area. When posed this question most people were aware that there was some sort of credit card protection in this area so they would not lose their money but nobody actually knew there was legislation regarding this and in a reverse of the first question, people mistook the law thinking it was just a marketing gimmick on behalf of the credit card companies. Nobody was certain they would lose their money with most either positive or mostly positive that the money could be recovered. People knew the law in this area but rather by default. Again a large proportion of people (70%) were insistent that as long as the product was in resaleable condition and had the labels attached there were entitled to an exchange, however there is no legislation surrounding this. Unless a product is faulty under the implied terms of the Sale of Goods Act 1979 there is no duty on the seller to exchange or refund your product not for cash or credit note. Again people had mistaken store policy for the actual consumer protection law, which calls into question whether there is enough distinction between what are your rights in a legal sense and what is store policy or goodwill. Pleasingly in this question 80% of people answered definitely no when asked this question. In speaking to people they knew there was legislation surrounding this and a few commented that they had been sent items in the past on