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Home > Craft Topics > Regulations > Civil Laws

Consumer contracts / Civil laws

The following information is for guidance only. For further information, please contact your local Trading Standards Service. 

 

Forming a Contract

 

The contract

 

When a consumer purchases goods and/or services from a trader, both consumer and trader are entering into a legally binding contract. The contract consists of various express terms and implied terms. Express terms are those which are specifically agreed between both parties - for example, the price in most contracts, or an agreed delivery date. Implied terms are those which are deemed to exist, even if they have not been specifically agreed, and they cover issues such as quality, description and fitness for purpose.

Failure to comply with the terms of the contract is referred to as a breach of contract, and this normally results in the wrongful party having to remedy the breach in some way. In order for an express term to be binding, it must clearly be part of the contract and be legal. Terms given to a consumer after the contract is made (for example, terms written on the back of a receipt) are not part of the contract and they have no effect.

A contract does not have to be written, but where there are key express terms, it is best to detail these in writing so there can be no dispute later on.

 

How is the contract made?

 

When a trader displays or advertises goods or services, he/she is giving consumers what is referred to as an 'invitation to treat'. The consumer will then make an offer to buy the goods or services, and at this point the trader is under no obligation to accept the offer. A contract is made if and when the trader accepts the offer

Sometimes, the process works the other way round, i.e. the trader makes an offer to the consumer, and a contract is made when the consumer accepts the offer.

Under the contract, the consumer will agree to pay the trader a sum of money, and/or to do something else in return for the goods or services the trader supplies. This commitment is known as the 'consideration' in the contract. If there is no consideration, i.e. if a trader offers to supply goods or services completely free of any charge or other obligation, there is no contract at all.

 

What happens when the consumer changes his/her mind?

 

Normally, a consumer has no automatic right to change his/her mind and to cancel a contract, so, if this happens, he/she is in breach of contract. There is, however, an automatic right to cancel in some special cases, including most consumer contracts made at a distance (e.g. mail order or internet) and some contracts made at a consumer's home.

When the consumer cancels wrongfully, the trader may not be able to recover the lost sale, and the trader would then be entitled to claim loss of profit and any other reasonable costs incurred. However, if the goods and/or service are considered to be unique and the specific item is sold to another consumer, the trader has not lost a sale. This would apply, for example, if a consumer books a table in a restaurant and fails to turn up, but the restaurant still fills every table for that evening. In these cases, the trader can claim for any extra costs reasonably incurred, but not for loss of profit.

If the trader has already accepted a part-payment when the consumer changes his/her mind, the trader will need to consider whether it covers the losses he/she is entitled to claim. If it does not, the trader can claim the extra from the consumer. However, where the part-payment is in excess of the trader's losses, he/she must refund the balance.

 

Implied terms and remedies for breach

 

Sale and supply of goods: the implied terms

 

The law provides that, in every transaction for the sale and supply of goods (including hire purchase, hire, part exchange and contracts for work and materials), certain terms are implied.

The person transferring or selling the goods must have the right to do so, and the goods must:

In assessing quality, all relevant circumstances must be considered, including price and description. In consumer contracts, the manufacturer's advertising can also be taken into account. 

A Consumers remedy for breach of the implied terms

 

A consumer can reject the goods providing that he/she has not accepted them (in the case of a contract of sale), or that he/she has not affirmed the contract (in other contracts where goods are transferred, such as hire, hire purchase or contracts for work and materials). When a consumer rejects goods, he/she can claim compensation for his/her losses. This will amount to a full refund, unless the consumer has already had substantial use from the goods, plus compensation for any foreseeable losses that have been incurred. These losses might include the cost of any property damage caused by the goods, compensation for personal injury and compensation for the additional cost of buying equivalent goods if they are more expensive elsewhere. The consumer is also released from all his/her outstanding obligations under the contract - for example, the outstanding instalments in a contract of hire purchase.

If a consumer is buying goods for business use, he/she cannot reject goods if the breach of contract is very minor, but he/she will still be in a position to claim compensation.

 

What are acceptance and affirmation?

 

When acceptance or affirmation take place, the consumer loses the right to reject goods, although he/she may still retain a right to compensation or some other remedy.

Acceptance applies only in contracts for the sale of goods. Examples of acceptance are as follows:

A consumer is not considered to have accepted the goods just because he/she has let the trader attempt a repair, or where he/she has merely signed an acceptance note. A consumer must have a reasonable opportunity to examine the goods to check that they conform with the contract, before he/she is deemed to have accepted the goods.

Affirmation applies in other contracts for the transfer of goods, including hire, hire purchase and contracts for work and materials. Affirmation takes place when the consumer, knowing that there is a breach of contract, chooses to keep the goods and not to reject them. Affirmation can occur if the consumer becomes aware of a breach, but fails to complain within a reasonable time.

 

Remedies where the consumer cannot reject the goods

 

When there is a breach of contract, but the consumer has lost his/her right to reject goods, he/she will be entitled to claim compensation from the trader. The amount of compensation will be the sum required to put right the breach. Usually, this will be the cost of repair or replacement, or a part refund, plus compensation for any other losses suffered.

If a repair or replacement would put the breach right, and the trader offers this to the consumer, he/she would normally be expected to accept it.

 

Additional remedies for consumer buyers

 

Under EU law, there are additional remedies where the buyer is acting as a consumer in contracts for the sale or supply of goods (but not in contracts of hire and hire purchase). In these circumstances, the consumer may be able to demand any of the following:

If the consumer chooses one of these remedies, and if the defect is discovered within six months of delivery, it is automatically assumed that the fault was there at the time of delivery unless the trader can prove otherwise. If more than six months have passed, the consumer has to prove the defect was there at the time of delivery (even if it was not apparent at that time).

If the consumer chooses the option of a repair or replacement, the trader must do this within a reasonable time and without significant inconvenience to the consumer. The trader must also pay all the relevant costs, e.g. labour, postage, etc.

Where a consumer demands repair or replacement, but that remedy would be disproportionate, then the trader would be entitled to offer him/her one of the other remedies. For example, if a consumer demands a repair, but it would be cheaper to replace the item than to repair it, the trader could offer a replacement. The consumer can only require a price reduction or rescission where the cost of repair or replacement is disproportionate, or where repair/replacement are not provided within a reasonable time.

 

Exceptions: when the consumer cannot make a claim

 

A consumer has no rights in respect of defects that are brought to his/her attention before the sale, or if the consumer examines the goods before purchase and any defects should have been readily noticeable.

A consumer also cannot claim for damage he/she causes to himself/herself, or if they damage the goods or if he/she simply changes his/her mind about wanting the goods.
A consumer cannot claim if he/she chooses the product himself/herself for a purpose which is neither obvious nor made known to the trader, and he/she then finds that the item is simply unsuitable for that purpose.

A consumer has no rights to claim for faults that appear as a result of fair wear and tear.

 

Supply of services: the implied terms

 

Any service you provide must be carried out:

Other legislations affecting consumer contracts

 

Loss or damage in transit

 

If the trader arranges for goods to be delivered to a consumer, the goods remain at the trader's risk until delivery. It is, therefore, the trader's responsibility to ensure that goods are not lost or damaged in transit, and/or to take out appropriate insurance. It follows that optional postal insurance should never be offered to consumers.

 

Misrepresentation

 

A misrepresentation is a false statement of fact made by a party or his/her agent, which is intended to and does induce another party to enter into a contract.

Dependent upon whether the misrepresentation was made fraudulently, negligently or innocently, the party who has relied on the misrepresentation will be entitled to a remedy which may include rescission, refund and/or compensation.

 

The Unfair Contract Terms Act 1977

 

This legislation restricts a trader's ability to use contract terms to limit their legal and contractual liabilities. A trader cannot limit or exclude liability for death or personal injury arising from his/her negligence.

In consumer contracts, traders cannot limit or exclude liability for breaches of the implied terms as to description, quality and fitness for purpose of goods. In addition, any such attempt, by reference to a notice, statement or document (e.g. a notice which says 'No Refunds'), is a criminal offence under the Consumer Transactions (Restrictions on Statements) Order 1976.

In business to business contracts, liability in respect of these implied terms can be limited, but only in so far as is reasonable, considering all of the circumstances under which the contract was made.

 

The Unfair Terms in Consumer Contracts Regulations 1999

 

These Regulations, which only apply to consumer contracts, say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Examples of unfair terms would include the following:

The Regulations do not apply to terms negotiated with individual consumers, nor do they apply to the core subject matter of the contract (such as the description of the goods/services, and the price).

 

The Consumer Protection Act 1987 (Part 1)

 

This legislation allows a person to claim damages where he/she is injured by a defective product. Depending on the circumstances, a claim might be made against anyone in the supply chain from manufacturer/importer to retailer. Damages can also be claimed in respect of damage to personal property (but not damage to business property).

For more information about unsafe goods please visit: http://www.walkaboutcrafts.com/crafttopics/regulations/unsafegoods.htm 

 

The Contracts (Rights of Third Parties) Act 1999

 

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 (as long as it was made clear that the goods were to be given as a gift).

 

The Business Names Act 1985

 

A trader needs to display (when appropriate) business ownership details at his/her place of business, on business letters, written orders for goods or services, and invoices and receipts. Business name information is available at: http://www.walkaboutcrafts.com/crafttopics/regulations/businessnames.htm 

 

Uncollected goods

 

Occasionally consumers fail to collect their goods after having them repaired or forget to pick up dry-cleaning.

Although this is not clearly defined in Scotland, this section sets out what action a trader should take to get the goods collected.

It may be sufficient to have a notice which is easily visible to consumers, stating how long the trader will keep goods after repair and an intention to dispose of them after this date. Any time period would need to be reasonable.

However, even if a notice is displayed, the trader may need to make every effort to contact the consumer (if you know who they are and where they live), specifying that the goods are ready for collection and from where. It also should state the amount owing. Additional notification must also be given if the trader intends to sell or dispose of the goods after a certain date and how additional proceeds from the sale can be collected.

 

COMMON QUESTIONS

 

Q. A consumer doesn't produce a receipt, does the trader have to do anything even if the goods are faulty? 
A.
There is no legal requirement for the consumer to provide or produce a receipt. If the trader does not remember the consumer buying the item, he/she can ask the consumer to provide proof of purchase, but this can be a credit card voucher or cheque stub or anything that indicates when and where the item was bought.

 

Q. A consumer paid for an item using gift vouchers, and he/she has now found that it is faulty. Can the trader insist that the consumer accepts the refund or compensation in gift vouchers? 

A. No. Where a consumer is entitled to claim a refund or compensation, he/she is entitled to cash. A cheque will usually be acceptable (or a Postal Order for consumers who do not have a bank account).

 

Q. The manufacturer offers a guarantee, can the trader refer the consumer straight to that manufacturer? 

A. Remember that the consumer's statutory rights are with the trader. A guarantee offered by the manufacturer is in addition to such rights. A consumer can choose whether he/she pursues the trader or the manufacturer. However, the trader in turn may have rights against his/her supplier.

 

Q. If a trader sells sale goods or seconds, surely the consumer doesn't have the same rights against the trader as he/she would if new or perfect goods had been purchased? 
A.
The same rights apply whether the goods are in the sale or sold as seconds. When assessing the level of quality which is satisfactory, however, considerations such as price, age and easily identifiable defects would be taken into account.

 

Q. A consumer comes back to the trader about faulty goods purchased seven years ago. Does the trader have to do anything? 

A. A consumer cannot make a claim more than five years after the breach of contract (usually the date of delivery, in a contract for sale of goods).

 

Q. Someone asks a trader for a quotation, how is this different to an estimate? 

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

 

Q. Can a trader put a notice in his/her shop stating that refunds are not given in any circumstances? 

A. It is illegal to try to exclude a consumer's statutory rights, so a 'no refunds' notice is not permitted. A trader may wish to go beyond what the law requires, and offer an exchange or refund policy for consumers who change their mind. A trader can display a notice giving details of such a policy, but it is recommended that the trader seeks advice on the wording of the notice from his/her local Trading Standards Service.

 

Q. A consumer rings a trader to say that the TV he/she bought from that trader during the previous week is defective but he/she isn't prepared to return it back to the shop. Can the trader insist that he/she returns it? 

A. If the consumer can prove that it is faulty and he/she hasn't accepted it, it is sufficient for him/her just to give notice of rejection and allow the trader any reasonable opportunity to collect the TV. The consumer may be prepared to return the goods to the trader if the trader offers to cover her travel and parking expenses, but he/she does not have to do so.

 

Q. A trader takes in goods for a service (i.e. dry-cleaning/TV repair) and the consumer fails to collect them. The trader cannot store them forever, what should he/she do? 

A. It is advisable for the trader to have a notice up in the shop which is easily visible to consumers telling them how long he/she is prepared to keep the goods and how he/she intends to dispose of the goods after that time. Failing this, the trader will need to make every effort to contact the consumer (if contact details are available) and give notice to the consumer telling them what action is proposed. As this is not specifically legislated for in Scotland, it would be advisable to seek legal advice before taking action to dispose of the goods.

 

Q. A trader gives a consumer a credit note but he/she cannot find anything that he/she wants? Does the trader have to then offer a refund and for how long should the credit note run? 

A. Once a credit note has been issued, even if it cannot be used, the trader doesn't have to offer a refund. The trader can determine an expiry date if he/she informs the consumer of this time period at the time of issue.

 

Q. A consumer insists on a replacement but the item is no longer manufactured and there is none in stock. 

A. A trader can offer the consumer a repair, a reduction in the price or allow him/her to rescind the contract. A repair will only be acceptable if this does not cause the consumer significant inconvenience.

 

Q. A trader cannot ascertain whether an item is faulty or whether it has failed due to misuse. What should he/she do? 
A.
If a consumer wishes to reject the goods, the onus is on him/her to prove that the item is faulty and that it has not been misused. If a consumer claims a repair or replacement (see 'Additional remedies for consumer buyers' above) within six months of delivery, the onus is on the trader to prove that the consumer is at fault. After six months, the onus falls back onto the consumer.
In any case, if the trader cannot agree on the cause of the fault, the trader may wish to obtain a second opinion - for example, from the manufacturer or an independent expert.

 

Q. A consumer states a specific date for delivery of goods and the trader fails to deliver them on time, does the consumer have the right to cancel the contract? 

A. Yes, if the consumer has made time of the essence and the trader has failed to comply, the consumer can treat this as breach of contract and cancel the contract.

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