Consumer returns: a basic overview of the legal background

Citation

Maiden, A. (2010), "Consumer returns: a basic overview of the legal background", Strategic Direction, Vol. 26 No. 3. https://doi.org/10.1108/sd.2010.05626cab.002

Consumer returns: a basic overview of the legal background

Article Type: Corporate law outlook From: Strategic Direction, Volume 26, Issue 3

Alistair MaidenSolicitor at Bradford and Leeds-based law firm Gordons LPP.

This article is intended to provide a basic overview of the legal background to consumer returns from a supplier’s perspective. A supplier’s obligation to accept returns is likely to be a key issue in any supply relationship, but many suppliers have a limited understanding of their legal obligations in this respect. This article distinguishes between suppliers (who typically manufacture or import goods) and resellers who buy goods from suppliers and resell them to consumers.

The legal background

Legislation implies certain terms into any contract for the sale of goods. In particular:

• •

  Goods must conform to their description. For example, a dish that is described as “ovenproof”, but shatters when used under the normal conditions for making a casserole, has been misdescribed and would not conform to the contract.

• •

  Goods must be of satisfactory quality. “Quality” includes: safety, durability, freedom from minor defects, state, condition, fitness for all purposes for which goods of that kind are commonly supplied and appearance and finish.

When considering whether or not something is of satisfactory quality a number of factors are taken into account. These include:

• •

  Age and price. The age and price of the goods are key factors. For example, it would be unreasonable to expect a ten-year-old kettle to perform as well as a brand new kettle, just as it would be unreasonable to expect a £100 television to perform as well as a £1,000 television.

• •

  Use. Use is a further consideration. For example, a person who does a lot of driving because he has to travel long distances for work, could not expect a car to last as long as if it were being used by the average buyer.

Public statements

Public statements about the characteristics of goods (especially in advertising or on labelling) are also relevant to whether goods are of satisfactory quality. For example, if a supplier claims that a games console can connect to the internet to allow online gaming, when in fact it cannot, the games console will be found to be of unsatisfactory quality.

Consumer remedies

Four legal remedies are available to consumers when a supplier/reseller is in breach of these implied terms or any other terms of the contract for sale:

1. 1.

   Rejection. Consumers can reject goods and obtain a refund provided that they complain about them within a reasonable time. A “reasonable time” will be determined by the circumstances but a consumer is under an implied obligation to check the goods on purchase.

2. 2.

   Damages. Consumers can claim damages for the cost of repair or replacement of the goods, and they may also be able to claim compensation for damage caused by faulty goods.

3. 3.

   Repair or replacement. A consumer can request a repair or a replacement.

4. 4.

   Refund. A consumer may request a full or partial refund.

EU regulations and the limitation period

Recent press coverage suggested that under certain EU regulations suppliers/resellers are obliged to replace faulty goods sold to consumers for two years from the date of their sale. This press coverage is inaccurate. The relevant regulations merely provide that consumers are entitled to bring claims relating to faulty goods for at least two years. This is not an extension of consumers’ rights under existing English law, which allows such claims for up to six years (five years in Scotland).

Supplier to reseller sales

As businesses are generally free to contract as they see fit, a supplier and a reseller may choose to contract out of the implied terms and this is common practise. Frequently a supplier’s terms and conditions of sale will include the following wording (or a variant of the same):

All warranties, conditions and other terms implied by statute or common law (save for the conditions implied by section 12 of the Sale of Goods Act 1979) are, to the fullest extent permitted by law, excluded from the Contract.

Where such exclusion applies, a supplier’s returns obligations will be determined by the other relevant terms of the supply contract. Thus the extent of the supplier’s returns obligations will often be determined by its commercial relationship with the reseller and this is examined in more detail below.

Consumer sales

In contrast where a supplier or a reseller supplies to a consumer, the implied terms cannot be excluded from the supply contract. As a consequence of this and the desire to generate consumer goodwill, suppliers and resellers offer various guarantees as standard. Typically these guarantees come in two forms:

1. 1.

   supplier guarantees which are packaged with the goods; and

2. 2.

   reseller “no quibbles” guarantees which allow the goods to be returned within a certain limited period even if there is nothing wrong with them.

Supplier guarantees

A supplier guarantee creates a contractual obligation on the part of the supplier to honour the terms of the guarantee. Suppliers are often happy to provide this form of guarantee as it can promote sales and generate goodwill.

Reseller guarantees

Reseller guarantees are more contentious as they generate goodwill for the reseller but are often effectively funded by the supplier by way of express provisions in the supply contract, which oblige the supplier to meet the resellers’ costs of providing them.

Guarantees supplement rather than replace a consumer’s legal rights

It is important to recognise that such guarantees supplement rather than replace a consumer’s legal rights. Thus if a consumer buys an expensive kettle from a reseller with a one-year supplier guarantee, returns the kettle to the supplier after 18 months and the supplier rejects the claim on the basis that the kettle is outside of guarantee, the consumer may still be entitled to claim against the reseller that the kettle was not of satisfactory quality.

Conclusion

Suppliers should recognise that where they sell to resellers they are under no legal obligation to offer a supplier guarantee and review their supplier guarantees accordingly. Suppliers should also consider their related contractual obligations to resellers and examine the possibility of restricting the extent to which they are required to effectively fund “no quibbles” returns policies which have the potential to generate goodwill for resellers and significant expense for suppliers.

If you wish to discuss the issues outlined in this article, or any issues around commercial contracts, please contact Alistair Maiden on 0113 227 0100 or e-mail: alistair.maiden@gordonsllp.com

Acknowledgements

Issued on behalf of Gordons LLP by fuse8. For further information please contact Rob Smith. Tel: 0113 284 0672; Mobile: 07840 677 534; E-mail: rob.smith@fuse8.com