The Civil Law relating to the Sale and Supply of Goods and Services

Before a contract is made

By displaying goods in a shop window, on a shop floor, or on a website you are inviting customers to make you an offer for such goods (called an invitation to treat). You can either accept or refuse any offer - no one can force you to sell anything you don't want to. When payment is exchanged a contract is made.

For Internet sales, the customer placing the order is making an offer. You can accept the offer by generating a confirmation of sale page, sending a confirmation email or by delivering the product or service. Before the contract is made it is important that the customer is given the opportunity to review the terms and conditions that apply; if you don't give them this opportunity it is likely that the terms and conditions will not be legally binding. The best way of making the terms and conditions known to the customer is to have a means by which the customer expressly "accepts" the terms of the agreement which includes confirmation from the customer that they have read the Terms and Conditions. You could also email a second copy of the Terms and Conditions with any confirmation of sale or site membership.

The Terms and Conditions should be in plain English and be "fair" to both parties (see the Unfair Contract Terms Act below). It is best to include information about your privacy policies and how you handle data, copyright notices and any disclaimers. This information should also be available elsewhere on your site.

The contract

When a customer purchases goods or services from you, you are both entering into a legally binding contract, which cannot be cancelled without both parties' agreement. (A few exceptions may exist, e.g. a when a credit agreement is signed off trade premises or a contract signed at home as a result of an unsolicited visit). When contracts are made legal obligations are placed on both parties. Some are as a result of express terms e.g. terms negotiated by the parties. Some are as a result of implied terms from legislation like the Sale of Goods Act 1979 (as amended). Contracts can be both verbal and in writing. However, it is easier to prove what agreement has been reached when the contract is written.

The law

Several pieces of legislation apply to contracts for the sale of goods and services:

The Sale of Goods Act 1979 (as amended)

States that:

• The person transferring or selling the goods must have the right to do so
• The goods must:
  
  • Correspond with the description. The goods must be 'as described'. (If the description is false then a criminal offence may also have been committed).
  • Be of satisfactory quality. Goods must be of a standard that a reasonable person would consider as satisfactory (having regard to any description applied to them, the price and all other relevant circumstances). Aspects of quality that may be relevant depending on the circumstances could include fitness for all purposes for which the goods of the kind in question are commonly supplied; appearance and finish; freedom from minor defects, safety and durability. Other characteristics may also be relevant.
  • Be fit for the purpose. When a customer indicates (expressly) or when it is obvious (implied) e.g. (the purchase of ski boots), that the goods are wanted for a particular purpose (even if that is a purpose for which such goods are not usually supplied) if a trader supplies them to meet that requirement, then the goods should be fit for that specified purpose.

If the above terms are not met a consumer has certain rights:

• Rejection. Provided they have not accepted the goods they can reject them and receive a full refund. They may also be entitled to compensation for any losses that have been incurred.
• Compensation. When goods have been accepted the customer loses the right to reject them but may still have a claim for monetary compensation. A trader can offer to repair the item or replace it or offer a credit note but the customer doesn't have to accept these alternatives.
  
  Examples of acceptance are:
• Telling you he has accepted them
• Altering the goods in some way
• Keeping the goods for a reasonable time. (This time period may vary depending on the nature of the goods).
  
  A customer is not considered to have accepted the goods if they allow you to repair them when they are first found to be faulty or if the customer signs an acceptance note without having had a reasonable opportunity to examine the goods fully - a customer must have a reasonable opportunity to examine the goods to check that they conform with the contract before they are deemed to have accepted them.

There are certain situations where a consumer has no rights:

• When defects are brought to their attention before the sale or where the customer examines the goods before purchase and any defects would have been readily noticeable.
• When they damage the goods themselves or simply change their mind about wanting the goods.
• When a customer specifies the product he wants and doesn't rely on the trader's expertise or ignores the advice of the trader he will not have a claim if the item is not fit for the purpose.

The Sale and Supply of Goods to Consumers Regulations 2002

The regulations will come into force on the 31 March 2003.

The regulations apply to the sale of goods, hire and hire-purchase where the sale is by a business to a consumer.

• Consumers still retain their rights under the Sale of Goods Act 1979 to rejection or compensation if the goods prove to be faulty, not fit for their purpose, or not as described. Under the regulations, consumers can choose to request instead:
  • a repair or replacement.
    The retailer can refuse either of these if he can show that they are disproportionately costly in comparison with the cost of a refund or compensation. If neither repair nor replacement is realistically possible, consumers can request instead:
    
  • a full or partial refund.
    As in instances of rejection under the Sale of Goods Act, the level of any refund will take into account the amount of usage the consumer has had out of the goods.

• Within the first six months after purchase, if the goods are faulty it is assumed that they were faulty at the time of sale and the consumer does not have to prove that they were. If the retailer believes that the goods are not faulty then it is up to him to prove it. This only applies where the consumer is pursuing a claim under the new regulations for a repair or replacement (in the first instance). If the consumer chooses instead to pursue a claim for rejection under the Sale of Goods Act the consumer will still have to prove that the goods are faulty.
  
  After the first six months the consumer will have the burden of proving that items were faulty at the time of sale.

• The remedies of repair, replacement, partial refund and full refund are also available to consumers:
  • where installation by the retailer is not satisfactory; where installation instructions have serious shortcomings;
  • where a specially commissioned product has relevant failings.
  • where an item not match the public statements made about it by the retailer, manufacturer, importer or producer. Such statements are deemed to form part of the contract between the retailer and the consumer.
    
    The retailer would not be held responsible for statements made by manufacturers, importers or producers if he could show:
    
    • that for good reasons he was not aware of the statement;
    • that it had been corrected in public before the conclusion of the sale; or
    • that the consumer could not have been influenced by the statement.
      
    In these circumstances the consumer would not be entitled to any redress.

• If guarantees or warranties are offered free of charge with the product they:
  
  • will be legally binding on the person offering the guarantee;
  • will have to be written in English and in plain intelligible words;
  • must be available for viewing by consumers before purchase, e.g. by advising where they may be seen such as on the Internet for those with access; and
  • state that they do not affect the consumer's legal rights.

For more guidance on the regulations visit www.dti.gov.uk/ccp/topics1/guide/saleslong.pdf

The Supply of Goods and Services Act 1982 (as amended)

Any goods supplied under contracts governed by the above legislation must conform to the implied terms mentioned under the Sale of Goods Act. The service element of the contract must be carried out:

• With reasonable care and skill
• For a reasonable price (unless a price has been agreed)
• Within a reasonable time (unless time is made of the essence i.e. when a date has been agreed at the time the contract was made.)

Consumer Transactions (Restrictions on Statements) Order 1976

Makes it a criminal offence to restrict consumer's statutory rights (those laid down in statutes such as The Sale of Goods Act and The Supply of Goods and Services Act) by means of a notice, statement or documents e.g. a notice that states 'No Refunds'. See the section entitled 'Restrictive Statements' for further information.

Misrepresentation Act 1967

A misrepresentation is a false statement of fact made by a party or their agent, which is intended to and does induce the other party to enter into a contract. If you say factual things (representations) about a product or service you provide before a contract is made which prove to be untrue, and if the customer has based their decision to buy the product or service on these representations then they may a have claim against you for misrepresentation.

The party who has relied on the misrepresentation will have the remedy of rescinding the contract or in accordance with the Misrepresentation Act 1967 may be entitled to damages for non-fraudulent misrepresentation unless the representor can show he reasonably believed the representation to have been true.

If the description is false then a criminal offence under the Trade Descriptions Act may also have been committed.

The Unfair Contract Terms Act 1977

This legislation restricts a trader's ability to limit his liability.

A trader cannot limit or exclude liability for death or personal injury arising from his negligence.

Attempts to exclude or restrict liability for other loss /damage resulting from negligence (i.e. any breach of a contractual duty) must meet the test of reasonableness:

• Whether the clause can be shown to be fair and reasonable considering the circumstances known to the parties when the contract was made.
• The strength of the bargaining power of the parties at the time and other relevant circumstances.

The trader seeking to rely on the exclusion clause is required to prove that such a clause is reasonable.

A trader cannot exclude a consumer's statutory rights but when dealing with another business a trader may be permitted to use such an exclusion clause provided it satisfies the test of reasonableness.

The Unfair Terms in Consumer Contracts Regulations 1999

These regulations say that a consumer is not bound by a standard term in a contract (i.e. a term devised by a trader in advance, not a term negotiated with individual consumers) if that term is unfair. However, the main subject matter of the contract and the price agreed are excluded from these regulations, as are certain mandatory terms.

The Consumer Protection Act (Part 1 Product Liability) 1987

People injured by defective products may have the right to sue for damages (monetary compensation). Product Liability is the term given to the law affecting such rights. Manufacturers/importers can also be liable under these regulations.

The Contracts (Rights of Third Parties) Act 1999

Before this law was passed and came fully into force on 11 May 2000 only the buyer and the seller had rights in contract under 'privity of contract'. This legislation gives rights to anyone who was intended to benefit from the transaction.

For example, if someone buys a gift for a friend and the gift proves to be faulty the recipient or the buyer of the gift can take action for breach of contract (however it must be obvious that the goods are to be for the benefit of a 3rd party).

The Business Names Act 1985

You need to display (when appropriate) your business name in accordance with the Act with the relevant information shown at your place of business, on business letters and invoices and receipts.

Torts (Interference with Goods) Act 1977 Section 12

Covers situations where consumers fail to collect their goods after having them repaired or forget to pick up dry-cleaning etc. and what the trader can do to dispose of the goods:

You can either:

Display a notice that is easily visible to customers stating how long you will keep goods after repair and an intention to dispose of them after this date. (Any time period would need to be reasonable).

Or,

Send a registered letter to the customer specifying the goods are ready for collection and from where and stating the amount owing. Additional notification must also be given if you intend to sell or dispose of the goods after a certain date and how additional proceeds from the sale can be collected.

Please Note

This leaflet is not an authoritative interpretation of the law and is intended only for guidance. For further information please contact your local Consumer Protection or Trading Standards office.

Further information about your liabilities when you sell goods or services can be found at www.dti.gov.uk/ccp/topics1/guide/tradersguide.htm

COMMON QUESTIONS

A customer doesn't produce a receipt; do I have to do anything even if the goods are faulty?

There is no legal requirement to provide or produce a receipt, a customer needs to be able to provide proof of purchase but this can be a credit card voucher or cheque stub or any thing that indicates when and where the item was bought.

The manufacturer offers a guarantee; can I refer the customer straight to them?

Remember your customer's statutory rights are with you, the trader. A guarantee offered by the manufacturer is in addition to such rights. A customer can choose whether they pursue you or the manufacture. However you in turn may have rights against your supplier.

I sell sale goods or seconds; surely the customer doesn't have the same rights against me as they would have if they had bought new or perfect goods?

The same rights apply whether the goods are in the sale or seconds though such considerations as price and age would be taken into consideration.

A customer comes back to me about faulty goods purchased from me 7 years ago; do I have to do anything?

A customer has up to 6 years to make a claim against a trader for breach of contract.

I accept a deposit for goods but then the customer changes their mind. Do I have to return the deposit?

In most circumstances deposits are non-refundable because the customer is in breach of contract by wishing to withdraw from it. However there are a few exceptions relating to credit agreements signed off trade premises and contracts as a result of an unsolicited visit to a customer's home.

Someone asks me for a quotation, how is this different to an estimate?

A quotation is normally a fixed price whilst an estimate is generally a rough guess of what the work would cost.

Can I put a notice in my shop stating I don't give refunds in any circumstances?

It is illegal to try to exclude a customers statutory rights, however you can make it clear that you don't offer a policy relating to the return of goods where the customer has changed their mind about wanting the goods.

A customer rings me to say that the TV she bought from me last week is defective but she isn't prepared to return it back to my shop?

If the customer can prove that it is faulty and she hasn't accepted it, then it is sufficient for her just to give notice of rejection and allow you any reasonable opportunity to collect the TV.

I take in goods for a service (i.e. dry-cleaning /TV repair) and the customer fails to collect them, I cannot store them forever, what should I do?

It is advisable to have a notice up in the shop which is easily visible to your customers telling them how long you are prepared to keep the goods and how you intend to dispose of the goods after that time. (Failing this you will need to give notice to your customer in accordance with the Torts (Interference of Goods Act).

I give a customer a credit note and they cannot find anything they want .Do I have to then offer a refund and how long should the credit note run for?

Once a credit note has been issued even if it cannot be used you don't have to offer a refund. You can determine how long you wish it to run for but you should make it clear to the customer at the time of issue what that time period is.

I cannot ascertain whether an item is faulty or whether it has failed due to misuse?

The onus is on the customer to prove the fault though it may be considered reasonable to return it to the manufacturer for a second opinion.

A customer states a specific date for delivery of goods and I fail to deliver them on time does the customer have the right to cancel the contract?

Yes, if the customer has made time of the essence and you have failed to comply they can treat this as breach of contract and cancel the contract.

Trading Standards Division, 3rd Floor, Wallasey Town Hall, Brighton Street, Wallasey, Wirral CH44 8ED
Telephone: (0151) 691 8020    Fax: (0151) 691 8098
Internet World Wide Web http://www.tradingstandards.gov.uk/wirral/
Electronic Mail: tradingstandards@wirral.gov.uk