Podcast: the Good
Historically, the concept of ‘deemed acceptance’ in s 11(4) and s 35 of the Sale of Goods Act 1979 operated quite harshly as far as consumer buyers were concerned, but the amendment of s 35 by the Sale and Supply of Goods Act 1994 and the introduction of new consumer remedies in s 48A of the Sale of Goods Act 1979 has satisfactorily remedied the situation.
Podcast: the Good
In a contract of sale it is the duty of the seller to deliver goods that are in conformity with the contract (s 27 of the Sale of Goods Act 1979 (SGA). If the goods are not in conformity, the buyer may be able to reject them, and this is particularly so if there has been a breach of the implied terms in ss 12–15 SGA 1979, which are implied conditions of the contract. This will be the case if the seller does not have title in the goods (s 12 SGA), or the goods do not correspond with description (s 13 SGA), or if the goods are not of satisfactory quality (s 14(2)), or if they are not reasonably fit for their purpose (s 14(3)) or, if sold by sample, the bulk does not correspond with the sample. These implied terms are conditions, which permits the innocent party the consumer buyer, at their election, either to affirm the contract or to reject the goods and recover their price, if paid and damages for breach of contract. In business to consumer contracts (B2C contracts) this right can be exercised even if the breach of the implied terms is of a relatively minor character, such as a minor defect of problems with the appearance of the product. However, there is an important qualification to this right, which is set out in s 11(4) SGA, stating that where the contract is not severable and the buyer has accepted the goods or part of them, the breach of a condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is an express or implied term of the contract to that effect – this is called ‘deemed acceptance’.(1) The answer sets out clearly the context of whether the consumer’s right to reject for breach of condition – mainly of importance in relation to the implied terms – can be lost and how.
Historically, this rule worked very harshly as far as consumers were concerned. It assumed a decisive and clear break with the contract with a decision being taken in a relatively short time by the consumer to reject the goods; it was all or nothing – the consumer either had to accept all the goods or reject them all. The provisions were a legal snare for consumers, most of whom did not know the law. In reality many consumers were looking for repair or replacement of the product, or a reduction in price. The law historically gave them a stark choice between rapid rejection of the goods and monetary remedies, or, often, being deemed to have accepted the goods and being confined to a claim for damages for breach of warranty. A further problem was the uncertain relationship between the acceptance provisions and the requirement that the buyer be given a reasonable opportunity to examine the goods to see if they complied with the contract (s 34 SGA 1979).
There were three ways in which goods could be accepted by the buyer set out in s 35(1) and (4):
Each of these grounds had pitfalls for the consumer.(3) The pitfalls in the traditional regime are clearly set out. If the goods consisted of a number of items in unitary non-severable contract, all the goods had to be accepted or all the goods rejected. Often when some large item like a suite of furniture was delivered to the consumer, they would be asked to sign what they thought might merely be a delivery note, but this might contain a clause stating that the buyer accepted the goods as in compliance with the contract – so called ‘deemed acceptance’ notes – and these might be treated as an express acceptance within the first ground before they had had any chance to actually examine the goods. If the consumer altered the goods in any way, the second ground might prevent rejection because they could not return the goods to the seller in the same condition as they got them. However, the most difficult ground was lapse of a reasonable time. The time ran from the date of the contract, not the discovery of the defect. (See Leaf v International Galleries (1950), where both seller and buyer innocently thought a painting of Salisbury Cathedral was by John Constable. Five years later when examined prior to being put up for auction the attribution was held to be wrong but it was held to be far too late to reject the painting.) The courts assumed a very rapid decision to reject often holding after a matter of days or even a couple of weeks that a reasonable time had elapsed, a typical case being Bernstein v Pamson Motors (1987), where the consumer had only had the car for some three weeks and for much of that time it was not in use as he was ill and he had not even used up the complimentary tank of petrol given on sale. The court was probably influenced by the fact that the defect was relatively minor and had been repaired, but the buyer had lost confidence in the car. In some older cases a reasonable time has been interpreted even more strictly, coming down to a matter of three days in a case involving a defective dynamo in a purchased second hand lorry – the lorry was only on its second journey, but the court held that a reasonable time had elapsed (Long v Lloyd (1958)).
Uncertainty surrounded the issue of a request for repair – did this amount to acceptance or did it stop the clock running in relation to a reasonable time.(4) The key areas of ‘deemed acceptance notes’ and lapse of a reasonable time are explored. Even when the consumer was legally advised delays in negotiating a settlement of the dispute might mean that the consumer was held to have accepted the goods (Lee v York Coach and Marine (1977)).(5) The writer is aware of the key precedents in relation to the interpretation of the provisions.
Consumer groups such as the National Consumer Council (now part of Consumer Focus), in their report ‘Buying Problems’, demanded reforms, including fixed periods of, say, three months for smaller goods and six months for larger goods, in which the consumer might reject goods.
The notion of fixed periods was rejected by the Law Commission in their report, which led ultimately to the Sale and Supply of Goods Act 1994.(6) The question is chronologically organized looking at the stages of reform – the historical position under the 1979 Sale of Goods Act and, indeed, earlier, and the two stages of reforms introduced by the Sale and Supply of Goods Act 1994 and the reforms required by the EU Directive.
A number of significant reforms were introduced:
Lapse of a reasonable time remains, fixed periods of rejection having been rejected, but in subsequent case law the courts have shown a greater flexibility and a willingness to allow longer periods to elapse without the consumer being deemed to have accepted the goods and the Court of Appeal in Clegg v Anderssen (2003) held that Bernstein v Pamson Motors was no longer good law. The case itself illustrates a greater sympathy for the consumer. The case involved the purchase of an expensive yacht; the problem was an overweight keel, which meant the yacht could not attain the racing speeds expected. The yacht was delivered in July 2000 and there were protracted discussions and correspondence about it, but it was not until February 2001 that an authoritative explanation was provided with proposals for remedy. Within three weeks of this, the consumer purchaser rejected the yacht and the Court of Appeal held, given the time taken to try and illicit information about what was to be done, this was not unreasonable and a reasonable time was held not to have elapsed. It must, however, be emphasized that even now the time is not open ended and a delay of nearly 18 months in relation to a fitted kitchen was held to be too long in Jones v Callagher (2005).
A further strengthening of the consumer’s position is the House of Lords decision in J H Ritchie v Lloyd Ltd (2007), which held that where goods had been sent back to the manufacturer and apparently successfully repaired the buyer was entitled to know what the problem was and what had been done and when this was not revealed, it was held he was entitled not to accept the goods back. (While this was a business to business (B2B) contract, this might be a valuable right in relation to sophisticated consumer products, such as cars, where it can be very unclear what exactly the problem was and what has actually been done to address it.)(7)
The need to explain the nature of the problem and what has been done to repair, as discussed in the House of Lords decision in J H Ritchie Ltd v Lloyd (2007), is discussed.
Nevertheless, the reforms of 1994 did not address the more fundamental issue that in many cases all the consumer wanted was either a replacement of the defective product or repair of the defects.
The consumer’s position in this respect was further strengthened when s 48A–F was introduced by the Sale and Supply of Consumer Goods Regulations, which implemented the EU Directive on Consumer Sales and Associated Guarantees, Directive 99/44.(8) The writer is aware of the co-existence of the ‘old’, outright rejection remedy in s 35 and the newer, tiered remedies of repair and replacement in s 48A–F. The scope and operation of s 48A–F is usefully discussed and the clear point that the demand for repair or replacement must be reasonable in the context.
Instead of the single option of rejection and monetary compensation, s 48A provides for a series of graded remedies for consumer buyers only – the so-called ‘new remedies’ do not apply to B2B sales. Further, the hand of the consumer buyer is strengthened by s 48E, which allows court ordered specific performance of the obligations. The buyer can require the seller, within a reasonable time, to repair or replace the goods, but without being significantly inconvenient to the buyer. However, repair or replacement cannot be demanded if it is impossible (end of range product, no more available) or disproportionate in comparison to the other remedies (e.g. to repair a £30 kettle would cost at least £100 – this would not be reasonable) or disproportionate in relation to either a price reduction or rescission of the contract. However, if the contract is rescinded, the buyer must give the seller an allowance for any use that has been made of the product (s 48E(5) SGA). If the consumer had to go to court then the court can impose such conditions on any court order as they think just.
A further advantage to the consumer in relation to these new remedies is that if, subject to the nature of the goods, the goods do not conform to the contract of sale at any time within a period of six months, starting with the date on which the goods were delivered to the buyer, they are taken not to have conformed to the contract, in effect transferring the burden of proof to the seller to show that they did comply.
The net result of these legislative changes, and the more sympathetic approach of the courts to the consumer’s predicament in an often uncertain situation, is that the consumer is in much stronger position than they were historically. One could envisage on the horizon that the traditional right of outright rejection may be lost by virtue of the new Consumer Rights Directive, or limited to a relatively short period such as 30 days, in a consolidation of EU consumer law directives. In the Law Commission Report ‘Consumer Remedies for Faulty Goods’ (November 2009, Law Com 317), it is recommended that the right to reject should be retained in the UK as a short-term remedy of first instance. It was argued that this is a simple, easy to use remedy, which inspires consumer confidence. The Law Commission recommended that in normal circumstances, a consumer should have 30 days to return faulty goods and receive a refund, with limited flexibility for special circumstances, such as perishable goods, or goods which both parties know will not be used for some time.(9) The question is well structured with an introduction, development and conclusion. A useful awareness of potential future developments, which might affect the situation and the potential withdrawal of the unilateral right of withdrawal by the proposed EU Consumer Rights Directive shows candidate well on top of issue
The good essay has placed the issue in context, particularly emphasizing why acceptance is a key issue in contracts of sale and the fact that if you have accepted the goods they cannot be rejected for breach of condition. Importantly the candidate has got a good sense of chronology, tracking the position from the original version of the Sale of Goods Act 1979 through the changes introduced in 1994 and 2002. Key cases are quoted and changes in judicial attitude noted. Again there is some reference to context (e.g. the National Consumer Council Report on Buying Problems). Usefully the question has ended with reference to the possible further changes which might in fact have a negative impact on the consumer’s right of withdrawal if the EU Draft Consumer Rights Directive goes through in its current form. Extra marks can always be obtained by showing that the candidate is on top of current issues. Overall this is a solid answer and should obtain a good mark.