Consumer Remedies For Faulty Goods (Report) [2009] EWLC 317 (15 November 2009)

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The Law Commission
and
The Scottish Law Commission
(LAW COM No 317)
(SCOT LAW COM No 216)

CONSUMER REMEDIES FOR FAULTY GOODS

Presented to the Parliament of the United Kingdom by the Lord Chancellor
and Secretary of State for Justice
by Command of Her Majesty
Laid before the Scottish Parliament by the Scottish Ministers
November 2009

Cm 7725 Â£xx.xx
SG/2009/Page 218

The Law Commission and the Scottish Law Commission were set up by the Law
Commissions Act 1965 for the purpose of promoting the reform of the law.

The Law Commissioners are:

The Right Honourable Lord Justice Munby, Chairman
Professor Elizabeth Cooke
Mr David Hertzell
Professor Jeremy Horder
Mr Kenneth Parker QC¹

The Chief Executive of the Law Commission is Mr Mark Ormerod CB.

The Law Commission is located at Steel House, 11 Tothill Street, London SW1H 9LJ.

The Scottish Law Commissioners are:

The Honourable Lord Drummond Young, Chairman
Professor George L Gretton
Mr Patrick Layden QC, TD
Professor Hector L MacQueen
Mr Colin J Tyre QC²

The Chief Executive of the Scottish Law Commission is Mr Malcolm McMillan.

The Scottish Law Commission is located at 140 Causewayside, Edinburgh, EH9 1PR.

The terms of this report were agreed on 28 September 2009.

The text of this report is available on the Internet at:
http://www.lawcom.gov.uk/consumer_remedies.htm
http://www.scotlawcom.gov.uk

¹ Mr Kenneth Parker QC's term of appointment as Law Commissioner came to an end on
30 September 2009.
² Mr Colin J Tyre QC's term of appointment as Scottish Law Commissioner came to an end on
30 September 2009.

THE LAW COMMISSION
THE SCOTTISH LAW COMMISSION

CONSUMER REMEDIES FOR FAULTY GOODS
CONTENTS

LIST OF ABBREVIATIONS USED IN THIS REPORT vi

PART 1: INTRODUCTION 1

The European Commission's proposal 1.6 2
The need to review our law 1.13 4
This Report 1.28 6

PART 2: THE CURRENT LAW 8

Introduction 2.1 8
Sales Contracts 2.7 9
The Consumer Sales Directive remedies 2.28 14
Contracts for the supply of goods, other than sales 2.38 15
Flowchart of remedies for faulty goods 2.50 19

PART 3: SIMPLIFYING THE RIGHT TO REJECT IN SALES 21
CONTRACTS

Retaining the right to reject 3.1 21
A problem with the right to reject 3.36 28
A normal period of 30 days 3.47 30
The 30-day normal period: reasons for a shorter or longer period 3.66 34
The reverse burden of proof for the right to reject 3.96 38
The right to reject for "minor" defects 3.98 38
Integration of CSD remedies with the right to reject 3.111 41
Wrong quantity 3.126 44

Paragraph Page
PART 4: DAMAGES 45

The domestic remedy of damages 4.1 45
Retention of the domestic remedy of damages 4.4 45
Guidance on damages 4.6 46

PART 5: THE RIGHT TO REJECT IN OTHER SUPPLY OF GOODS 50
CONTRACTS

The problem with the current law 5.2 50
The Consultation Paper 5.7 51
Conclusion 5.17 53

PART 6: REFORMING THE CONSUMER SALES DIRECTIVE 57

Introduction 6.1 57
Clarifying when consumers may move to a second tier remedy 6.17 61
Best practice guidance 6.27 62
Other reasons to proceed to second tier remedies 6.33 63
Rescission and the deduction for use 6.40 65
The six-month reverse burden of proof 6.51 66
The time limit for bringing a claim 6.60 67

PART 7: CONSUMER EDUCATION 70

Introduction 7.1 70
Current consumer education initiatives 7.6 71
The UK Government's recent White Paper - the Consumer 7.15 73
Advocate
Our Consultation Paper 7.20 74
Our recommendations 7.23 75

PART 8: LIST OF RECOMMENDATIONS 79

APPENDIX A: LIST OF RESPONDENTS 82

LIST OF ABBREVIATIONS USED IN THIS REPORT

BERR Department for Business, Enterprise and Regulatory
Reform

BIS Department for Business, Innovation and Skills

CSD Directive 1999/44/EC of 25 May 1999 on Certain Aspects
of the Sale of Consumer Goods and Associated
Guarantees, 1999 OJL 171 12-16

DTI Department of Trade and Industry

FDS FDS International Limited

OFT Office of Fair Trading

SoGA Sale of Goods Act 1979

THE LAW COMMISSION
AND
THE SCOTTISH LAW COMMISSION

CONSUMER REMEDIES FOR FAULTY GOODS

1.1 This Report looks at the remedies available to consumers when they buy goods
which do not to conform to contract. The central question is: when should a
consumer be entitled to reject goods and receive a refund of the purchase price,
as opposed to other remedies such as repair and replacement?

1.2 The most common examples of non-conforming goods are faulty goods (that is,
goods which are not of satisfactory quality), such as domestic appliances which
do not work. We therefore use the term "faulty goods" as a short hand for "non-
conforming goods". However, goods may fail to conform when they breach one of
the terms implied by statute or an express term of the contract.¹ The terms
implied by statute are that goods must, for example, be of satisfactory quality, fit
for purpose, and correspond to their description.²

1.3 Whilst buying faulty goods is a problem that millions of consumers face every
year without legal advice, the law is complicated. There are effectively two legal
regimes which co-exist: the traditional UK remedies; and the European remedies,
based on the 1999 Consumer Sales Directive (CSD). Our aim is to clarify and
simplify these remedies.

1.4 In December 2007, the Department for Business, Enterprise and Regulatory
Reform³ asked us to review this area, and we issued a joint Consultation Paper in
November 2008.

1.5 In October 2008, the European Commission published a proposal for a new
consumer rights directive which would (among other things) reform the law on
consumer remedies. The proposed directive has been drafted as a measure of
"maximum harmonisation", which would mean that member states could not
maintain or adopt provisions diverging from those it lays down.

1.6 Our Report makes recommendations on our system of remedies, in the light of
the proposed directive. We put our recommendations forward as part of the
current debate within the EU about the proposed directive, and with the aim of
improving the remedies in it.

¹ Sale of Goods Act 1979 (SoGA), s 48F.
² The implied terms are set out in this Report at para 2.6.
³ The Department for Business, Enterprise and Regulatory Reform is now the Department
for Business, Innovation and Skills (BIS).

1.7 As well as forming part of the European debate, it may be possible to implement
some of our recommended reforms in the UK only, provided that the proposed
directive (or relevant parts) is adopted as a measure of "minimum harmonisation".
Minimum harmonisation means that member states may maintain or adopt
measures which give greater rights.

1.8 Below, we briefly summarise the current law. We then summarise our main
recommendations, setting out the relevant paragraphs of the Report in brackets
for those who wish to read more.

1.9 We are publishing, alongside this Report, an Impact Assessment which is
available on our websites at www.lawcom.gov.uk and www.scotlawcom.gov.uk. It
discusses the costs and benefits of some of the proposals that we have
considered.

THE CURRENT LAW (Part 2)

The traditional UK remedies

1.10 Put simply, the consumer is entitled to reject faulty goods and terminate the
contract.⁴ The consumer may then refuse to pay for the goods, or (if they have
paid already) claim a full refund. We refer to this as "the right to reject". However,
the right to reject is lost once the consumer is deemed to have accepted the
goods, which may happen "after the lapse of a reasonable time".5 Thereafter, the
consumer is entitled only to damages.

1.11 The case law on what amounts to a reasonable time provides little guidance on
how long it lasts. In one case a consumer was said to have accepted a new car in
less than four weeks;6 in another, the buyer was entitled to reject a car after
seven months.⁷

The European remedies - the 1999 Consumer Sales Directive

1.12 In 2002, the Sale of Goods Act 1979 was amended to implement the CSD. There
are four new remedies, organised into two tiers. The first tier consists of repair or
replacement. The second tier consists of rescission and reduction in price.

1.13 Under the CSD regime, the consumer must begin by asking for a first tier
remedy, but the trader may provide an alternative, if one is impossible or
disproportionate. If the retailer fails to carry out the repair or replacement within a
reasonable time or without significant inconvenience to the consumer, the
consumer may move to the second tier.

⁴ The traditional UK remedies can be found in the Sale of Goods Act 1979.
⁵ SoGA, s 35(4). There are three methods of acceptance, described in Part 2 of this Report.
⁶ Bernstein v Pamson Motors (Golders Green) Ltd [1987] 2 All ER 220, see para 2.12 of this
Report.
⁷ Bowes v Richardson & Son Ltd, 28 January 2004 (unreported), see para 2.15 of this
Report.

1.14 In the second tier, where the consumer opts to rescind the contract, the contract
comes to an end in a similar way to the right to reject. However, in the case of
rescission, the consumer may be required to give some value for the use they
have had from the goods.⁸ Alternatively, the consumer may opt for a reduction in
price: they may keep the goods and receive a discount for their reduced value.

1.15 The Sale of Goods Act 1979 now contains both regimes with little integration of
the two. The Davidson Review criticised this as an example of "double-banking",
where EU directives are superimposed on domestic legislation, causing
complexity and confusion.⁹

RETAINING THE RIGHT TO REJECT AS A SHORT-TERM PRIMARY
REMEDY (paras 3.1 - 3.35 and 6.9 - 6.12)

1.16 If the European Commission's proposed directive were adopted as published, on
the face of it, the UK would have to repeal the right to reject. This would mean
that, if goods proved faulty, the consumer would not initially be entitled to a
refund. The retailer could choose to provide either a repair or a replacement.¹⁰

1.17 In our Report, we recommend that the right to reject should be retained in the UK
as a short-term remedy of first instance. It is a simple, easy-to-use remedy which
inspires consumer confidence. Consumers know that they can get their money
back if the product is not as promised, provided they act quickly. This makes
them more prepared to try unknown brands and new retailers.

What consultees said

1.18 We consulted retailers, manufacturers, consumer groups, and academics. In
addition, we commissioned two phases of market research among consumers.¹¹

(1) Generally, retailers and manufacturers accepted the current right to reject
as part of the established legal framework in which they operated.

(2) Consumer groups argued strongly for retaining the right to reject. They
thought it encouraged consumer confidence and higher standards in the
quality of goods. It also strengthened the consumer's bargaining position
and stopped them from being trapped in a cycle of failed repairs.

⁸ SoGA, s 48C(3). Recital 15 CSD.
⁹ Davidson Review, Final Report (November 2006), at www.berr.gov.uk/files/file444583.pdf.
¹⁰ The consumer would only be entitled to a refund if the retailer: implicitly or explicitly
refused to remedy the fault; failed to remedy the fault within a reasonable time or without
significant inconvenience; or if the same fault reappeared more than once within a short
period. See proposal for a directive on consumer rights, COM (2008) 614 final, art 26,
available at http://ec.europa.eu/consumers/rights/cons_acquis_en.htm.
¹¹ FDS's report of April 2008 is attached to the Consultation Paper at Appendix A. The results
of FDS's quantitative market research of February to March 2009 are summarised in
Consumer Remedies for Faulty Goods: A Summary of Responses to Consultation (13 May
2009) Part 9 at http://www.lawcom.gov.uk/consumer_remedies.htm.

(3) Although consumers are generally unaware of their precise legal rights,
most are aware that they have a legal right to a refund for faulty goods,
and seek it in about 20% of cases where goods are faulty. In research,
94% of consumers said the right to a refund was important to them, and
89% thought it should be retained even though other remedies (repair
and replacement) are available.

The European debate

1.19 In the context of the proposed directive, the retention of the right to reject in UK
law could be achieved in at least three ways. First, the UK would be permitted to
retain the right to reject if the proposed directive were adopted as a measure of
minimum harmonisation. Alternatively, the proposed directive could be adopted
as a measure of maximum harmonisation incorporating the right to reject. A third
alternative, which has recently been debated by stakeholders, is "differentiated
harmonisation".12 This would mean that harmonisation would be targeted at areas
of consensus and, for example, the right to reject might fall outside of the scope
of maximum harmonisation.

CLARIFYING THE RIGHT TO REJECT: A NORMAL PERIOD OF 30 DAYS
(paras 3.36 - 3.95)

1.20 Consultees told us that the problem with the right to reject is uncertainty over how
long it lasts. This uncertainty brings complexity to what is intended to be a simple
and certain tool. We recommend that in normal circumstances, a consumer
should exercise the right to reject within 30 days from the date of purchase,
delivery or completion of contract, whichever is later. This would give a
reasonable opportunity to inspect the goods and to test them for a short period in
actual use.

1.21 We think that the introduction of a normal 30-day period for the right to reject will
benefit the average consumer by simplifying the law. It is rare for consumers to
obtain legal advice for consumer disputes, so the law should be capable of being
understood, remembered and asserted by consumers.

1.22 At present, consumer advisers are often concerned about advising consumers
that they can exercise the right to reject after two weeks. If consumer advisers
were able to tell consumers that the standard period was 30 days, it would give
consumers greater confidence and reduce the need to rely on ambiguous case
law. We also think that our recommendation will assist retailers by providing a
simple standard for their staff.

1.23 Most consultees agreed that the 30-day normal period should apply with limited
exceptions, in order to strike an acceptable balance between flexibility and
certainty. We recommend that the 30-day period should have some flexibility in
limited circumstances. A shorter period would be appropriate where goods are of
a type expected to perish within 30 days. A longer period would be appropriate
where it was reasonably foreseeable at the time of the sale that the consumer
would not be able to test the goods within 30 days (for example, where a
consumer buys a Christmas present in October, or a lawnmower in November).
¹² For example, see EU Consumer Rights Directive: getting it right, Volume I: Report of the
House of Lords European Union Committee (2008-09) p 19, paras 58-60.

"MINOR" DEFECTS (paras 3.98 - 3.110)

1.24 We recommend that legal protection for consumers who purchase goods with
"minor" defects should not be reduced with regard to the right to reject and also to
the proposed directive.

1.25 Under the current law, once a consumer has shown that one of the implied terms
has been breached, they may exercise the right to reject, provided they have not
accepted the goods. There is no exclusion for minor defects, such as
imperfections in appearance, finish or small malfunctions.

1.26 Under the European Commission's proposed directive, this would change. Not
only would the right to reject be abolished, but in addition under the European
remedies consumers would not be entitled to rescind a contract for minor
defects.¹³ If the retailer were unable to repair the defect or replace the goods, the
consumer would be required to accept a reduction in price.

1.27 Consumers generally care a great deal about the appearance of new goods,
such as cars, furniture and white goods. They often spend a long time selecting
goods for their appearance, and pay extra for a specific appearance. In these
cases, if a repair or replacement is not practical or possible, the consumer will
only have the remedy of price reduction. Furthermore, the trader will not be
bound by clear rules about how price reduction should be calculated.

1.28 Another risk is that traders might argue that any fault is minor, so that rescission
will no longer be offered in practice. Consultees felt strongly that removing the
right to a refund for minor defects would be a retrograde step, leading to
unnecessary disputes over whether a fault was minor.

THE RIGHT TO REJECT IN OTHER SUPPLY OF GOODS CONTRACTS (paras
5.1 - 5.33)

1.29 The law makes distinctions between sales and other contracts to supply goods
(such as hire, hire purchase, exchange and work and materials contracts). For
other supply of goods contracts, consumers do not lose the right to reject after
the lapse of a reasonable time. Instead they may reject goods even for latent
defects, provided they have not acted to "affirm" the contract or (in Scotland) to
"waive" their rights.

1.30 We recommend that the normal period of 30 days should apply to other supply
contracts involving the transfer of property, such as work and materials and
exchange contracts. We also recommend that it should apply to hire purchase
contracts. The argument for a uniform regime is that it would simplify the law,
removing a complexity that few consumers or retailers understand.

¹³ Proposal for a directive on consumer rights, COM (2008) 614 final, art 26(3).

1.31 Some consultees were concerned that the 30-day normal period might operate
harshly in work and materials contracts (such as double-glazing or
conservatories). However, the period will not start to run until the date of
purchase, delivery or completion of contract, whichever is later. So, where the
goods are under the control and in the possession of the trader for a prolonged
period, or where the trader takes some time to finish the job, so that the
consumer is unable to examine the goods, the 30-day period will not begin to run
until work is complete.

1.32 In addition, the 30-day period is a standard period and not an absolute fixed
period, so that account can be taken of circumstances rendering it reasonably
foreseeable that the consumer will need longer than 30 days to test the goods in
use. A typical example would be double-glazing fitted in summer. The consumer
would need longer than 30 days to check that it was watertight in storm
conditions.

1.33 Where a fault arises in a hire contract, the law allows the consumer to terminate
the contract, paying for past hire but not future hire. We recommend this should
be preserved.

REFORMING THE CONSUMER SALES DIRECTIVE - MOVING TO A SECOND
TIER REMEDY (paras 6.17 - 6.39)

1.34 Under the scheme of remedies set out in the CSD, it is often difficult to know
when a consumer can move from a first to a second tier remedy. When can they
give up on a series of failed repairs or replacements, and rescind instead?

1.35 This proves to be a problem in practice, as consumers suffer detriment as a
result of failed repairs and replacements. They fear becoming locked in a cycle of
failed repairs.

1.36 The European Commission has attempted to address the problem by proposing a
new provision, allowing a second tier remedy where "the same defect has
reappeared more than once within a short period of time".14 We are concerned,
however, that this provides scope for disputes over whether a fault is the same as
a previous fault and what constitutes a short period of time.

1.37 We recommend that a consumer should be able to proceed to a second tier
remedy after one failed repair or replacement. We think it would be beneficial if
the proposed directive provided this level of clarity, which would be easy for
consumers and traders to understand.

THE PROPOSED TWO-YEAR CUT-OFF PERIOD (paras 6.60 - 6.70)

1.38 The European Commission has proposed that consumers should not be entitled
to pursue a retailer for any fault which becomes apparent more than two years
after delivery.¹⁵ Currently, in the UK, the limits which apply are those set in
general contract law. In England and Wales, there is a limitation period of six
years, and in Scotland a prescriptive period of five years.

¹⁴ Proposal for a directive on consumer rights, COM (2008) 614 final, art 26(4)(d).
¹⁵ Proposal for a directive on consumer rights, COM (2008) 614 final, art 28(1).

1.39 Our concern is that the European Commission's proposed two-year cut-off might
not be suitable for some goods which are intended to be long-lasting and where
faults take time to come to light: for example, a boiler which breaks down after 26
months, or water pipes which burst during the first hard frost. Similarly, where a
consumer buys a fake antique, it may take time for the problem to be discovered.

1.40 Consultees felt strongly that introducing this proposed time limit to claims would
add complexity to the law, and would lead to an undesirable reduction of
consumer rights. We recommend that the time limits for bringing claims should
continue to be those applying to general contractual claims in England, Wales
and Scotland.

THE SIX-MONTH REVERSE BURDEN OF PROOF (paras 3.96 - 3.97 and 6.51
- 6.59)

1.41 A consumer seeking one of the CSD remedies currently benefits from a six-
month reverse burden of proof. This means that where a fault arises within six
months of delivery, it is presumed to have existed at the time of delivery. It is up
to the retailer to show either that the fault arose later, or that this is inconsistent
with the nature of the goods.

1.42 We recommend that in the interests of simplicity the same presumption should
apply where a consumer seeks to rely on a traditional remedy, such as the right
to reject.

1.43 In terms of reforming the CSD, we recommend that the six-month reverse burden
should be suspended while repairs are being carried out and should resume after
goods are redelivered following repair. We also recommend that a further six-
month reverse burden should start after goods are redelivered following
replacement.

DAMAGES (paras 4.1 - 4.25)

1.44 We recommend that the domestic remedy of damages should be retained.
Damages are an essential element of our remedial system, providing
compensation in circumstances not covered by the other legal remedies. For
example, damages may be needed where the consumer pays for a repair
themselves, which is not uncommon,16 or to allow recovery for consequential
loss.

1.45 We also recommend that guidance should be drafted and issued on the
circumstances in which consumers can claim damages to compensate them
when they purchase goods which do not conform to contract.

¹⁶ See Office of Fair Trading Consumer Detriment (April 2008). Available at
http://www.oft.gov.uk/shared_oft/reports/consumer_protection/oft992.pdf.

INTEGRATING THE EUROPEAN REMEDIES WITH THE RIGHT TO REJECT
(paras 3.111 - 3.125)

Rejection with three possible options

1.46 We think that a short-term right to reject should be retained in the UK system of
remedies, as a UK addition to a directive adopted on a minimum harmonised
basis, or as part of a fully harmonised European regime.

1.47 However, the right to reject needs to be better integrated with the European
remedies. This could be done by joining the three primary remedies under the
umbrella of the concept of "rejection". We recommend that a new provision in the
Sale of Goods Act 1979 should provide that a consumer can reject non-
conforming goods, with three remedies available at first instance:

(1) termination of the contract plus a full refund (if the remedy is exercised
within a normal period of 30 days, subject to limited exceptions);

(3) replacement.¹⁷

1.48 Our proposed scheme is illustrated in the following diagram.¹⁸

CONSUMER EDUCATION (paras 7.1 - 7.38)

1.49 Consumers are often unaware of their legal rights. The phrase "This does not
affect your statutory rights" is familiar, but widely misunderstood. We recommend
that the Department for Business, Innovation and Skills should consider replacing
it with the phrase "This does not reduce your consumer rights" together with an
indication of how the consumer can obtain further information, for example by
contacting Consumer Direct.

¹⁷ If the consumer opts for repair or replacement but the attempt at repair or replacement
fails, then the consumer should be able to proceed to a second tier remedy of rescission or
price reduction.
¹⁸ The diagram is for the purpose of illustration only and does not show all of the issues. For
example, the trader can decline the consumer's request for repair or replacement and offer
the alternative first tier remedy if the request is impossible or disproportionate when
compared with the other first tier remedy.

1.50 We recommend that there should be a summary of consumer legal rights for
faulty goods available at point of sale or in another similarly prominent position in
shops. We also recommend that the Consumer Advocate¹⁹ should consider
whether the most effective current consumer education initiatives should be
promoted and rolled out on a wider scale.

¹⁹ In its White Paper, A Better Deal for Consumers, published in July 2009, the UK
Government announced its intention to appoint a Consumer Advocate to take the lead on
consumer education and information.

THE LAW COMMISSION
AND
THE SCOTTISH LAW COMMISSION

CONSUMER REMEDIES FOR FAULTY GOODS
To the Right Honourable Jack Straw MP, Lord Chancellor and Secretary of State for Justice,
and the Scottish Ministers

PART 1
INTRODUCTION

1.1 In December 2007, the Department for Business, Enterprise and Regulatory
Reform¹ asked us to review the legal remedies available to consumers when they
buy goods that do not conform to contract. Our review commenced that month,
and we published a Consultation Paper in November 2008.2

1.2 There is general awareness that goods must, for example, be of satisfactory
quality. However, there is less understanding about the remedies available to
consumers if goods do not meet these terms. There are effectively two legal
regimes: the traditional UK remedies have been overlain by the scheme set out in
the EU Consumer Sales Directive (CSD).3 This makes the law difficult for
consumers and retailers to understand, and can generate unnecessary disputes.

1.3 Goods do not conform to contract when they breach one of the terms implied by
statute or an express term of the contract.⁴ The implied terms are that goods
must be of satisfactory quality, correspond to their description, be fit for purpose,
and must correspond with the sample where there is a sale by sample.⁵ This
review does not look at the implied terms themselves, or what standards goods
should meet. Instead, it considers the remedies available to consumers when an
implied term or an express term is breached.

1.4 In this Report, when we refer to non-conforming goods, we often write about
"faulty goods", as these are the most common examples. Typical examples are
electrical goods that do not work, or shoes that fall apart. However, other
examples of non-conforming goods are those which are not as described, or not
fit for their purpose. We also look briefly at what remedies are available when the
trader delivers the wrong quantity of goods.

¹ The Department for Business, Enterprise and Regulatory Reform is now the Department
for Business, Innovation and Skills (BIS).
² Consultation Paper on Consumer Remedies for Faulty Goods (Law Com CP 188; Scot
Law Com DP 139).
³ Directive 1999/44/EC, Official Journal L 171 of 07.07.1999.
⁴ Sale of Goods Act 1979 (SoGA), s 48F. The definition of non-conformity that we use in this
Report is that in Part 5A of SoGA, which implemented the CSD remedies.
⁵ SoGA, ss 13, 14 and 15.

1.5 Our terms of reference are:

(1) to examine the existing consumer remedies under the Sale of Goods Act
1979, the Supply of Goods (Implied Terms) Act 1973 and the Supply of
Goods and Services Act 1982 for goods which do not conform to
contract, together with related issues; and to consider the case for
simplification and rationalisation, so far as possible, to make the law
easier for all users to understand and use, and to reduce burdens on
business;

(2) following full consultation with relevant stakeholders, to make appropriate
recommendations within the current framework of EU law; and

(3) to advise BIS on issues raised in the course of the European
Commission's review of the consumer directives relating to the reform of
the CSD and/or remedies for breach of a consumer contract.

THE EUROPEAN COMMISSION's PROPOSAL

1.6 Although this review was sparked by UK concerns, it is being conducted against
the backdrop of the European Commission's review of the consumer directives,
which began in 2004. In 2007, the European Commission published a Green
Paper.⁶ The most recent development was in October 2008 when the European
Commission published a proposal for a new directive on consumer rights to
harmonise consumer rights across member states.⁷ It is intended to replace the
four Directives on: doorstep selling,8 distance selling,9 unfair terms¹⁰ and
consumer sales.¹¹

1.7 Among other things, the proposed directive recommends major changes to the
law on consumer remedies for goods which do not conform to contract. The
European Commission proposes that the directive should be a "measure of
maximum harmonisation". This means that member states would not be able to
provide lesser or greater rights in any area that falls within the scope of the
proposed directive.

1.8 With regard to consumer sales, the proposed directive raises the issue of
whether the UK "right to reject" should be abolished. The right to reject is the right
to return non-conforming goods for a refund, and is discussed in more detail
below in paragraphs 2.7 to 2.20. A literal interpretation of the proposed directive
suggests that the right to reject would no longer be compatible with EU law and
that the right to reject would be lost.

⁶ European Commission Green Paper on the Review of the Consumer Acquis COM (2006)
744 final.
⁷ Proposal for a directive on consumer rights, COM (2008) 614 final, see
http://ec.europa.eu/consumers/rights/cons_acquis_en.htm.
⁸ Directive 85/577/EEC, Official Journal L 372 of 31.12.1985 p 31.
⁹ Directive 97/7/EC, Official Journal L 144 of 04.06.1997 p 19.
¹⁰ Directive 93/13/EEC, Official Journal L 095 of 21.04.1993 p 29.
¹¹ Directive 1999/44/EC, Official Journal L 171 of 07.07.1999 p 12.

1.9 For example, if a consumer buys a microwave in a shop, takes it home and finds
that it does not work, the consumer would no longer be entitled to return it and
receive a refund. Instead, the trader would be entitled to attempt a repair or
replacement. The consumer would only be entitled to rescind the contract if the
repair or replacement could not be performed within a reasonable time or without
significant inconvenience, as set out in the proposed directive.

1.10 The European Commission has given some indication that it is not its intention to
abolish the right to reject.¹² However, at the time of writing this Report,
negotiations on the proposed directive are continuing, and the future of the right
to reject is one of the issues which will need further clarification. At this stage, we
do not know what the end result of the European Commission's negotiations will
be, and how UK law will be affected.

1.11 Apart from the right to reject, other areas which fall within the scope of the
European Commission's proposed directive and therefore could lead to changes
in the current law include:

(1) If the lack of conformity does not become apparent within two years, the
consumer would have no remedy.¹³

(2) Rescission would not be allowed for "minor defects".14

(3) The trader would have the initial choice between repair and
replacement.¹⁵

(4) Whether consumers should give value for use of goods upon
rescission.¹⁶

(5) Whether the specific provisions in UK law on delivering the wrong
quantity should be repealed. Under the proposed directive, the consumer
would not be entitled to reject the goods.¹⁷

1.12 These issues are discussed in more detail in Parts 3 and 6 of this Report.

¹² Commissioner Kuneva at the IMCO Committee hearing on the Consumer Rights Directive
2 March 2009 and at the 10th Anniversary European Consumer Day on 13 March 2009.
¹³ Art 28.
¹⁴ Art 26(3).
¹⁵ Art 26(2).
¹⁶ Recital 41.
¹⁷ The proposed directive provides relatively generous remedies for late delivery (a full
refund) but much less generous remedies for a wrong delivery (where the goods are not as
described, the trader may attempt a repair or replacement). There must come a point when
the goods delivered are so different from the goods described that a wrong delivery should
be regarded as no delivery (where, for example, the consumer ordered apples and
receives oranges). The proposed directive gives little guidance on this issue.

THE NEED TO REVIEW OUR LAW

1.13 Whilst the proposed directive affects the issues in this review, our Consultation
Paper was not a direct response to it. Instead, we took stock of the current
system of remedies, and looked in more depth at the principles on which an
appropriate scheme of remedies might be based. In particular, we considered the
circumstances in which consumers should be entitled to a full refund of the price,
rather than a repair or a replacement. We hope that this Report will inform the
current debates on this subject, at a European and national level.

1.14 The domestic law relating to the sale of goods is set out in the Sale of Goods Act
1979 (SoGA). Essentially, it allows the consumer to reject faulty goods and claim
a full refund (the "right to reject"). However, the right is lost once the consumer is
deemed to have accepted the goods, which may happen "after the lapse of a
reasonable time".18 Thereafter, the consumer has the right to damages only.

1.15 In 2002, the UK implemented the CSD, which sets out a separate regime of
remedies. Implementation was effected by means of amendments to SoGA and
the Supply of Goods and Services Act 1982.19 Under this regime, consumers
may ask for a repair or replacement. If this is impossible or disproportionate, or if
a repair or replacement cannot be provided without "unreasonable delay" or
"significant inconvenience", the consumer may move to a second tier of
remedies. These are rescission or reduction in price.²⁰

1.16 In November 2006, the Davidson Review recommended that the DTI (now BIS)
should ask the two Law Commissions to produce a joint report "on the reform and
simplification of remedies available to consumers relating to the sale and supply
of goods".21

1.17 The Davidson Review found that following the implementation of the CSD, the
remedies available to consumers for faulty goods were too complicated, making it
unclear how the choice should be made between the various remedies available.
This followed representations by retailers about difficulties in training sales staff
to know when consumers could return faulty goods. It was argued that this led to
a lack of shared understanding between consumers and retailers, and increased
amounts of litigation.²²

¹⁸ SoGA, s 35(4).
¹⁹ The Sale and Supply of Goods to Consumer Regulations 2002 (SI 2002 No 3045) amend
SoGA and the Supply of Goods and Services Act 1982. They implement Directive
1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees,
Official Journal L171 of 07.07.1999 p 12.
²⁰ See paras 2.31 to 2.33 below for an explanation of rescission and reduction in price.
²¹ Davidson Review, Final Report (November 2006), at www.berr.gov.uk/files/file444583.pdf.
The Davidson Review was set up in 2005 by Gordon Brown (then Chancellor of the
Exchequer) under the aegis of the Better Regulation Executive. It looked at the way EU
Directives were implemented.
²² Davidson Review, Final Report (November 2006) para 3.20.

1.18 The domestic law has been criticised for its uncertainty: in particular, for its
conflicting case law over what constitutes "a reasonable time" to reject goods.²³
In addition, the EU remedies have their own uncertainties, for example, over what
amounts to "significant inconvenience". These problems are compounded by the
fact that the two separate regimes co-exist, using different language and
concepts and imposing different burdens of proof. As a result, SoGA has been
described as "a disjointed, often incoherent, amalgam".24

The Consultation Paper

1.19 In the Consultation Paper, we provisionally concluded that although most
stakeholders now accept and understand the basic structure of the existing law,
there are significant and often unnecessary complexities. These are not just
theoretical complexities, but affect standard day-to-day examples of faulty goods.
As a result, consumers may be put at a disadvantage in asserting their rights. On
the other hand, consumers may over-estimate their rights, causing unnecessary
disputes with businesses.

1.20 This review has been welcomed by those involved in this area of law. It is
regarded as a particularly problematic area requiring prompt reform. Consultees
told us that there is a need for clarification and simplification for the benefit of
retailers and consumers alike.

1.21 This area of law covers all consumer sales, and accordingly applies to a vast
range of different goods and of defects in those goods. Consequently, it is not
always possible to make the law simple and clear cut if it is to cover the full range
of possible cases. However, we identified four major areas where simplification or
clarification would be desirable:

(1) The length of the reasonable time to reject goods in the context of the
right to reject is uncertain.

(2) There are different burdens of proof depending on whether a consumer is
asking for a refund or a repair or replacement.

(3) Different remedies apply to supply of goods contracts, as opposed to
pure sale of goods contracts.

(4) Progression from a first tier to a second tier remedy in the CSD regime.

²³ For example, see Bernstein v Pamson Motors (Golders Green) Limited [1987] 2 All ER 220
and Clegg v Andersson T/A Nordic Marine [2003] EWCA Civ 320; [2003] 1 All ER (Comm)
721.
²⁴ L Miller, "The Common Frame of Reference and the feasibility of a common contract law in
Europe" [2007] Journal of Business Law 378.

1.22 We received responses to the Consultation Paper from 53 consultees, and we
met with a wide range of consumer representatives, retailers, manufacturers,
academics and lawyers. We are very grateful to all those who met with us and
commented on our Paper. We published a summary of responses to our
consultation on 13 May 2009.²⁵

Retaining the right to reject

1.23 We mention above that the European Commission's proposal for a directive is a
measure of maximum harmonisation, which would mean that member states
would not be able to provide greater or lesser rights in any field falling within its
scope. On the face of it, this appears to mean that the UK right to reject would be
lost.

1.24 The responses to our Consultation Paper indicate that there is widespread
support for retaining the right to reject in the UK. This has been confirmed by
what consumers say. In January 2008, we commissioned FDS International Ltd
(FDS) to carry out market research into consumers" views, which indicated that
most consumers were aware that they had a right to a refund for faulty goods,
and valued it highly.²⁶

1.25 Then, in February and March 2009, FDS carried out a second phase of market
research which showed that 94% of consumers believed that the right to a refund
was important to them. 89% thought the right to reject should be retained, even
though other remedies (repair and replacement) are available.

1.26 The majority of consultees who expressed a view on the scope of the proposed
directive opposed maximum harmonisation of the provisions relating to consumer
remedies, for shop sales at least.

Clarifying the right to reject

1.27 Whilst consultees felt that the right to reject should be retained, they said that it
requires clarification as to how long it lasts. This is a problem that presents
difficulties in practice. In the Consultation Paper, we illustrated this with a faulty
washing machine scenario.²⁷ The complexities involved in assessing a
reasonable time are revisited in more detail in Part 3 of this Report.

1.28 In this Report we consider the issues concerning our traditional domestic
remedies and the CSD remedies in the light of the responses to consultation, and
set out the Law Commissions" recommendations.

²⁵ Consumer Remedies for Faulty Goods: A Summary of Responses to Consultation (13 May
2009), at http://www.lawcom.gov.uk/consumer_remedies.htm. A list of respondents is
provided at Appendix A to this Report.
²⁶ FDS's report of April 2008 is attached to the Consultation Paper at Appendix A.
²⁷ Consultation Paper on Consumer Remedies for Faulty Goods (Law Com CP 188; Scot
Law Com DP 139) p 67.

1.29 This Report has been written with reference to the European Commission's
proposed directive as published in October 2008. In this Report, we recommend
that the Sale of Goods Act 1979 should be amended. Where the Law
Commissions recommend that legislation should be changed, it is usual for us to
include draft legislation within our Report. We have decided, however, not to do
so in this Report due to the uncertainty of the proposed directive, in particular the
question of whether relevant provisions will be implemented on a maximum
harmonised basis. However, we will set out the substance of the provisions which
we recommend should be included in a revised Sale of Goods Act and CSD.

PART 2
THE CURRENT LAW

2.1 This Part is intended as an overview of the current legal regime. A more detailed
discussion is available in Parts 2 and 3 of our Consultation Paper.¹ Historically, in
England and Wales, the buyer of faulty goods had two options. If done quickly
enough, the buyer could reject the goods, terminate the contract, and demand a
refund ("the right to reject"). Alternatively, or if too much time had passed, the
buyer could seek compensation for the seller's breach of contract.² These two
remedies emerged from English case law and were included in the Sale of Goods
Act 1893. The 1893 Act also amended Scots law to provide similar remedies in
Scotland. These remedies are still applicable today, with a few changes, through
the Sale of Goods Act 1979 (SoGA).

2.2 For consumers, the historical right to reject and damages are now joined by
remedies that have their origin in EU legislation. Since 2003 the consumer buyer
of faulty goods has been able to demand that the seller repair or replace the
goods or, failing that, to rescind the contract or receive a reduction in the
purchase price.³

2.3 The law makes a distinction between sales of goods, and other contracts to
supply goods. Section 2 of SoGA sets out the definition of a "sale":

A contract of sale of goods is a contract by which the seller transfers
or agrees to transfer the property in goods to the buyer for a money
consideration, called the price.⁴

2.4 This definition does not include:

(1) contracts for hire or hire purchase (which do not necessarily transfer
property in goods); or

(2) contracts for barter or exchange (which do not involve money); or

(3) contracts for work and materials, where the contract is mainly for work or
services, and the supply of materials is incidental to its main purpose.⁵

¹ Consultation Paper on Consumer Remedies for Faulty Goods (Law Com CP 188; Scot
Law Com DP 139).
² The buyer, as well as being entitled to reject goods and obtain a refund if the price had
already been paid, might also be entitled to compensatory damages. See Part 4 below.
³ Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated
guarantees, Official Journal L171 of 07.07.1999 p 12, implemented by the Sale and Supply
of Goods to Consumers Regulations 2002. These Regulations came into force on 31
March 2003.
⁴ SoGA, s 2(1).
⁵ See Benjamin's Sale of Goods (7th ed 2006) para 1-041.

2.5 There are important differences between the remedies available when goods are
sold and when they are supplied under other contracts. We start by looking at
sales. The remedies available for other supply contracts are set out below at
paragraphs 2.38 to 2.49.

2.6 This review is concerned with the remedies available to a consumer where goods
do not conform to contract, which means:6

(1) goods are sold by description, and they do not correspond with the
description;7

(2) goods are sold by sample, and they do not correspond with the sample;8

(3) goods are not of satisfactory quality;9

(4) goods are not fit for the buyer's purpose, where the buyer has made that
purpose known to the seller;10

(5) the wrong quantity is provided;11 or

(6) goods do not conform to another express term of the contract.¹²

SALES CONTRACTS

The "right to reject"

2.7 SoGA gives the buyer a right to examine the goods following delivery.¹³ A
consumer who examines the goods and discovers that they are faulty is entitled
to reject the goods and terminate the contract, provided that they have not
accepted the goods. This entitles the consumer to refuse to pay for the goods, or
to receive a refund of any money paid to the seller.

⁶ This definition of non-conformity that we use in this Report is based upon that in Part 5A of
SoGA, which implemented the CSD remedies.
⁷ For sales contracts, see SoGA, s 13. For other supply contracts, see Supply of Goods and
Services Act 1982, ss 3, 8, 11C and 11I; and for hire purchase contracts, see Supply of
Goods (Implied Terms) Act 1973, s 9.
⁸ SoGA, s 15. See also Supply of Goods and Services Act 1982, ss 5, 10, 11E and 11K; and
Supply of Goods (Implied Terms) Act 1973, s 11.
⁹ SoGA, s 14. Factors relevant to the quality of the goods include fitness for the purposes
normally required of such goods and fitness for any particular purposes for which the
goods were bought, and of which the seller knew. See also Supply of Goods and Services
Act 1982, ss 4, 9, 11D and 11J; and Supply of Goods (Implied Terms) Act 1973, s 10.
¹⁰ SoGA, s 14(3).
¹¹ Above, s 30.
¹² Above, s 48F.
¹³ This is done in two ways. SoGA, s 34 requires the seller "on request to afford the buyer a
reasonable opportunity of examining the goods". Even without a request, however, the
buyer effectively is given a reasonable time to examine the goods because he will not be
deemed to have accepted the goods until that time has passed: SoGA, s 35.

2.8 The rejection of the goods and the termination of the contract are separate
concepts.¹⁴ There are circumstances where the rejection of goods will not be
followed by the termination of the contract.¹⁵ In this Report, we use the term "the
right to reject" as a short-hand term to include both the rejection of faulty goods
and the refund to the consumer of any money paid.

2.9 SoGA states that the consumer cannot exercise the right to reject if they have
accepted the goods. Goods can be accepted in three ways:16

(1) where the buyer intimates to the seller that the goods have been
accepted;

(2) where the buyer does something with the goods that is inconsistent with
the seller's ownership of the goods; or

(3) where, after the lapse of a reasonable time, the buyer retains the goods
without telling the seller that the goods have been rejected.

2.10 The first two listed methods of deemed acceptance are discussed in more detail
in the Consultation Paper.¹⁷ The most common form of acceptance is method 3,
where the consumer is deemed to have accepted the goods because the
reasonable time for rejecting them has lapsed. A consumer wishing to exercise
the right to reject goods must do so quickly. The exact length of the reasonable
time depends on the facts of the case, and there is relatively little authoritative
case law on how this principle should be applied to consumer sales. Few cases
are litigated, and even fewer are reported.

A reasonable time for rejection: the case law

2.11 Early cases tended to require the buyer to inspect the goods immediately, at the
place of delivery.¹⁸ However, over the years, as goods have become more
complex, courts have allowed buyers more time to inspect goods. For example,
in Manifatture Tessile the Court of Appeal held that the reasonable time had not
elapsed three and a half months after delivery.¹⁹

¹⁴ See s 11(3) of SoGA, and s 48D(2)(a) and s 48D(2)(b) which refer respectively to rejection
and termination of the contract in England, Wales and Northern Ireland and rejection and
treating the contract as repudiated in Scotland.
¹⁵ See R Bradgate and F White, "Rejection and Termination in Contracts for the Sale of
Goods" in J Birds, R Bradgate and C Villers (eds), Termination of Contracts (1995) pp 169
and 170.
¹⁶ SoGA, s 35.
¹⁷ See paras 3.7 to 3.16, Consultation Paper on Consumer Remedies for Faulty Goods (Law
Com CP 188; Scot Law Com DP 139).
¹⁸ For example, Perkins v Bell [1893] 1 QB 193. This case preceded the 1893 Sale of Goods
Act.
¹⁹ Manifatture Tessile Laniera Wooltex v J B Ashley Limited [1979] 2 Lloyd's Rep 28. This
case was a commercial case concerning the purchase of textiles.

2.12 In the well known case of Bernstein v Pamson Motors (Golders Green) Limited it
was held that a reasonable time for rejection of a new car had lapsed after three
weeks and 142 miles.²⁰ There are two major problems with this case. First of all,
the interpretation of a reasonable time in Bernstein was generally considered by
commentators to be too strict. In the event, the case was settled out of court,
prior to appeal, with the consumer receiving full payment. Secondly, it is doubtful
whether it is still good law.²¹ In Clegg v Andersson T/A Nordic Marine, speaking
of Bernstein, Sir Andrew Morritt VC said: "In my view it does not represent the
law now".22 It is unlikely that Bernstein would be decided in the same way
following the 1994 amendments to SoGA.²³ These amendments made the time
for examination only one issue relevant to the reasonable time for rejection.

2.13 The buyer in Clegg was held to be entitled to reject a yacht six months after
delivery. In particular, the court was influenced by the fact that Mr Clegg had not
received information he had sought in relation to the problems for around six
months.

2.14 In Truk (UK) Limited v Tokmakidis GmbH it was held that a commercial buyer
was entitled to reject goods over a year after the sale.²⁴ An important factor in the
court's decision was that the vehicle had been sold with the intention it should be
resold. The reasonable period was said to take into account the amount of time it
was likely to take to find a sub-buyer and then a period for the sub-buyer to test
the goods. Another important factor was that there was a prolonged period of
negotiation as to the proper course of action once the fault was discovered.

2.15 The buyer in Bowes v Richardson & Son Ltd was held to be entitled to reject a
new car seven months after delivery.²⁵ There were several problems with the car,
some of which had occurred immediately after delivery, others months later. The
seller had carried out repairs, but had never properly completed them. As such,
the court held that the buyer had never had the opportunity to fully assess the
repairs and so could not be held to have accepted the goods.

2.16 Fiat Auto Financial Services v Connelly concerned a buyer who rejected a car
after nine months and more than 40,000 miles.²⁶ This was held to be a
reasonable time. The sellers had attempted but failed to rectify several faults.
Sheriff Deutsch said the right to reject is not lost during any period where the
purchaser is waiting for information to make an informed judgement as to
whether to accept or reject the goods and the actions of a seller in dealing with
defects and attempts to cure defects may postpone deemed acceptance.

²⁰ [1987] 2 All ER 220.
²¹ See R Goode, Commercial Law (3rd ed 2004) p 355.
²² [2003] EWCA Civ 320; [2003] 1 All ER (Comm) 721 at [63].
²³ The Sale and Supply of Goods Act 1994 inserted ss 35(5) and (6) into SoGA.
²⁴ [2000] 2 All ER (Comm) 594.
²⁵ Rugby County Court, District Judge Sanghera, 28 January 2004, unreported.
²⁶ 2007 SLT (Sh Ct) 111.

2.17 In Hurst v Grange Motors, the buyer rejected a second-hand Rolls Royce after
three months.²⁷ This was held to be a valid rejection, since in the three months
between purchase and learning of the seriousness of the defect the buyer had
not had an opportunity to ascertain whether the car had conformed to the
contract, and so had not accepted it.

2.18 J & H Ritchie Limited v Lloyd Limited concerned a combination seed drill and
harrow, purchased as a single item.²⁸ The harrow had vibrated when used and
the seller repaired it to "factory gate standard" but refused to tell the buyer what
had been wrong with it. The buyer discovered, through informal means, what the
fault had been. Due to the nature of the fault, the buyer was concerned that it
could have caused other problems in the harrow and so decided to reject it
eleven weeks after purchase.

2.19 The House of Lords held that the buyer had been entitled to reject the harrow,
based on two different strands of reasoning. Lord Hope said that, given the facts
of the case, a term should be implied into the contract of sale to the effect that the
seller was required to inform the buyer as to the nature of the repairs carried out.
Lord Rodger reasoned that there was a separate contract for repair between the
two parties and that the term should be implied as part of the latter contract.

2.20 The length of the reasonable period is not easy to predict. It depends on the facts
of the individual case, including the nature of the goods. In addition, the period
may be extended by repairs and any negotiations as to repairs.²⁹

2.21 Where goods are faulty, the buyer might be entitled to damages. The measure of
damages is the contractual one of seeking to put the consumer into the position
they would have occupied had the contract been properly performed. Damages
may be payable both where the buyer has rejected the goods,30 and where the
buyer has not rejected them.³¹

2.22 Generally, there are two types of loss for which a consumer buyer might seek
compensation:

²⁷ M & T Hurst Consultants Ltd v Grange Motors (Brentwood) Ltd, Manchester High Court,
Judge Russell, October 1981, unreported.
²⁸ 2007 SC (HL) 89; [2007] 1 WLR 670; [2007] 2 All ER 353.
²⁹ Section 35(6) of SoGA provides that if a buyer asks for, or agrees to, repairs being carried
out by a seller, they are not deemed to have accepted the goods and therefore retain the
right to reject.
³⁰ Above, s 51 allows the buyer to receive the difference between the contract price and the
current market price in cases of non-delivery. Where the buyer is entitled to and does
reject goods on the ground of breach of condition as to quality or description, damages
may be assessed on the basis of non-delivery. See Benjamin's Sale of Goods (7th ed
2006) para 17-047.
³¹ Above, ss 53 (for England) and 53A (for Scotland). The buyer, as well as being entitled to
reject goods and obtain a refund if the price has already been paid, might also be entitled
to compensatory damages. See Part 4 below.

(1) The difference in value. Where the buyer keeps the goods, this is the
difference between the value of the goods contracted for and the value of
the goods actually received. Where the buyer has rejected the goods, it
is the difference between the contract price and the current market price.

(2) Any consequential losses, including any injuries or damage to other
property caused by the faulty goods.

2.23 SoGA caters for both of these. The general contractual limits on foreseeable
losses apply, so that consequential losses will only be recoverable if they were
within the contemplation of the parties at the time of the sale.³²

Delivering the wrong quantity

2.24 SoGA contains specific provisions to deal with cases where the seller delivers the
wrong quantity of goods.

2.25 Section 30(1) applies where too few goods are delivered, and gives the buyer two
options:

(1) to reject the goods, recover the price paid and sue for any further loss; or

(2) to accept the goods that have been delivered and pay for them pro rata
(although it is still possible to claim damages for breach).

2.26 Sub-sections 30(2) and (3) apply where an excess of goods is delivered. They
give the buyer three options:

(1) to reject all the goods;

(2) to accept the correct amount and reject the rest; or

(3) to accept all the goods, paying for the extra goods at the contract rate.

2.27 These rights are subject to two qualifications. First, in English law, consumers
may not reject the goods if the shortfall or excess is "microscopic" and not
capable of influencing the mind of the buyer.³³ Secondly, if the buyer rejects the
goods for a shortfall or excess, the seller may subsequently make delivery of the
correct quantity within the delivery period.³⁴ In Scots law, there is further statutory
provision to the effect that the buyer is not entitled to reject the goods under
section 30(1) or to reject the whole under section 30(2) unless the shortfall or
excess, as appropriate, is material.³⁵

³² The general rule is derived from Hadley v Baxendale (1854) 9 Exch 341. See also SoGA, s
53 (for England) and s 53A (for Scotland).
³³ See Lord Atkin in Arcos Ltd v E A Ronaasen & Son [1933] AC 470 at 479, and Shipton
Anderson & Co v Weil Brothers & Co [1912] 1 KB 574. See also Benjamin's Sale of Goods
(7th ed 2006) para 8-050.
³⁴ See Benjamin's Sale of Goods (7th ed 2006) para 8-052. Note that the seller could not
agree to deliver the balance at a later time, as this would be an instalment delivery and,
unless otherwise agreed, the buyer is entitled to receive all of the goods at the same time.
³⁵ SoGA, ss 30(2D) and (2E).

THE CONSUMER SALES DIRECTIVE REMEDIES

2.28 In 2002, SoGA was amended to include new remedies for consumers.³⁶ The new
Part 5A of SoGA gives consumers four new remedies, based on the 1999
Consumer Sales Directive (CSD).37 These are split into two tiers. The first tier
remedies allow for the repair or replacement of faulty goods. These are designed
to be a consumer's primary remedy. If they fail, the consumer is allowed to rely
on the second tier of rights: rescission or a reduction in price.

The first tier of rights: repair and replacement

2.29 In theory, the choice between repair and replacement is for the consumer, and
the seller should honour that selection. In practice, however, the choice is often
the seller's. The seller can refuse to carry out the chosen cure on the ground that
it is impossible, or because it is disproportionate compared with the other
remedies in the CSD.³⁸ If both repair and replacement are disproportionate
compared with the second tier remedies, then the consumer must accept a
second tier remedy.³⁹

2.30 Once the consumer has requested repair or replacement, and providing it is
neither impossible nor disproportionate, the seller must carry out that remedy
within a reasonable time and without significant inconvenience to the buyer. The
seller must also bear any costs incurred in carrying out the remedy.⁴⁰

The second tier of rights: rescission and reduction in price

2.31 Where repair and replacement are disproportionate, or where the seller has failed
to carry out a cure within a reasonable time or without significant inconvenience,
the consumer can rely on the secondary remedies of rescission or a reduction in
the purchase price.⁴¹

2.32 Where the consumer opts to rescind the contract, the contract comes to an end in
a similar way to the right to reject.⁴² However, in the case of rescission, the buyer
may be required to give some value for their use of the goods.⁴³ SoGA and the
CSD do not define how this should be calculated.

³⁶ SoGA was amended by the Sale and Supply of Goods to Consumers Regulations 2002.
³⁷ Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated
guarantees, Official Journal L171 of 07.07.1999 p 12.
³⁸ SoGA, s 48B(3).
³⁹ It has been argued that this is out of line with the Directive, and too unfavourable to
consumers.
⁴⁰ SoGA, s 48B(2).
⁴¹ Above, s 48C.
⁴² There is no statutory definition of "rescission" as used in SoGA, s 48C, and there is very
little guidance as to how it should be used. It is, however, a term which is used in the Scots
law of contract where the meaning is reasonably clear.
⁴³ SoGA, s 48C(3). Recital 15 CSD.

2.33 A reduction in the purchase price leaves the goods with the consumer but with a
discount for their reduced value. The reduction in price is not defined, but should
be "an appropriate amount".44 It seems that the proper approach is to ask how
much a consumer would have paid for the goods in their defective state.

Burden of proof

2.34 A consumer seeking one of the CSD remedies receives the benefit of a six-month
reverse burden of proof. This means that where a fault arises within the first six
months after delivery there is a presumption that it existed at the time of
delivery.⁴⁵ There are two ways to rebut the presumption. The seller may produce
evidence that the fault did not exist at the time of delivery. Alternatively, the
presumption may be incompatible with the nature of the goods or the nature of
the fault.⁴⁶

2.35 Following the expiration of the six-month period, the normal burden of proof
applies, and it is up to the consumer to show that the goods were faulty at the
time of delivery.

The interaction between the traditional remedies and the CSD remedies

2.36 Generally speaking, the CSD remedies were inserted into SoGA as an additional
layer of consumer protection, and there is little indication as to how the remedies
are to interact. The consumer appears able to choose any of the remedies,
provided that the relevant requirements are met.

2.37 There is only one section of SoGA that attempts to tie the two regimes together.
Section 48D states that the buyer who requires a repair or replacement must give
the seller a reasonable time to carry out the remedy before rejecting the goods
and terminating the contract or, in Scotland, rejecting the goods and treating the
contract as repudiated.

CONTRACTS FOR THE SUPPLY OF GOODS, OTHER THAN SALES

2.38 As we have seen, UK law has long maintained a distinction between pure "sales"
and other contracts for the supply of goods. SoGA only applies to sales, as
narrowly interpreted.⁴⁷ Hire purchase contracts are covered by the Supply of
Goods (Implied Terms) Act 1973, and other supply contracts by the Supply of
Goods and Services Act 1982. Those Acts imply the same terms as to quality as
SoGA implies into sales.

2.39 However, the remedies are different. The main difference is that a buyer/hirer is
not deemed to have accepted goods after the lapse of a reasonable time.
Instead, the buyer can only lose their right by a positive act, or by inaction, once
they are aware of the breach.

⁴⁴ SoGA, s 48C(1)(a).
⁴⁵ Above, s 48A(3).
⁴⁶ Above, s 48A(4).
⁴⁷ See paras 2.3 and 2.4, above.

2.40 For hire and hire purchase contracts, case law suggests that following a breach
the hirer is not generally entitled to a full refund of their payments. Instead, the
hirer must pay for the use they have had from the goods and may only terminate
for the future. A further complication is the way that the CSD applies to supply
contracts other than sales, which we describe below.

Affirmation and waiver

2.41 The right to reject in sales contracts is a short-term right which ceases after the
buyer is deemed to have accepted the goods. By contrast, in other supply
contracts, the right to terminate the contract is only lost through the consumer's
conduct once aware of the fault. In England and Wales, the right is lost only if the
consumer "affirms" the contract, by recognising its continuing validity. The Law
Commissions" 1987 Report set out the following principles of the law on
affirmation:48

(1) On discovering the breach, an innocent party must elect between his
available remedies.

(2) As a general rule, an innocent party cannot be held to have affirmed the
contract, unless he had knowledge of the breach.⁴⁹

(3) Affirmation may be express if the innocent party expressly refuses to
accept the other party's repudiation of the contract.

(4) Affirmation may be implied if the innocent party does some act (for
example, pressing for performance), from which it may be inferred that
he recognises the continued existence of the contract.

(5) Mere inactivity by the innocent party after discovering the breach will not
of itself constitute affirmation unless (a) the other party would be
prejudiced by the delay in treating the contract as repudiated, or (b) the
delay is of such length as to constitute evidence of a decision to affirm
the contract.

(6) If the contract is held to be affirmed, the innocent party can no longer
terminate the contract for breach.

⁴⁸ Sale and Supply of Goods (1987) Law Com No 160; Scot Law Com No 104, para 2.51. For
a more detailed discussion of various cases on the application of the affirmation doctrine to
hire purchase contracts see K Mullan, "Satisfaction guaranteed or no deal" [1990] Journal
of Business Law 231. The doctrine of affirmation has also been applied in a hire case:
Guarantee Trust of Jersey Ltd v Gardner (1973) 117 SJ 564.
⁴⁹ See Yukong Line Ltd of Korea v Rendsburg Investments Company of Liberia [1996] 2
Lloyd's Rep 604 at 607.

2.42 In Scotland, in contracts for the supply of goods other than sales, the right to
return the goods is lost where, through the consumer's conduct, the consumer is
personally barred from insisting on the return of the goods. A buyer would be
taken to have waived the breach if he has accepted the performance either
expressly or by inference from the facts and circumstances of the case.⁵⁰

2.43 The practical effect of the law in both jurisdictions is that a consumer may reject
goods if a latent defect comes to light long after purchase. The consumer does
not have to reject within the "reasonable period" set out in SoGA. The only time
limit which applies is the limitation period under English law (six years), and the
prescriptive period under Scots law (five years). Of course, the consumer would
still have to prove that the fault existed at the time of delivery, which becomes
more difficult as time passes.

Hire and hire purchase contracts

2.44 For hire and hire purchase contracts the breach of an implied condition only gives
the innocent party a right to reject the goods and terminate⁵¹ the contract for the
future. Therefore, the hirer may not have an automatic right to recover all the
money paid under the contract. The basic principle is set out in Yeoman Credit.⁵²
Here the defendant entered into an agreement for the hire purchase of a second-
hand car which was so seriously defective that he was held to be entitled to reject
it, terminate the contract and claim damages. However, because there had been
no total failure of consideration he could not recover his deposit and the
instalments he had paid.

2.45 In two subsequent hire purchase cases, however, the hirer was held to be
entitled to reject goods and recover money paid under the contract despite
obtaining some enjoyment from the goods. In Charterhouse Credit v Tolly the
hirer's use of a car was substantial and the parties conceded that there had not
been a total failure of consideration.⁵³ In this case, however, the hirer's damages
consisted of the money he had paid under the contract less only a small
deduction for use of the car. In Farnworth Finance Facilities v Attryde a defective
motorcycle had been driven for 4,000 miles.⁵⁴ Despite such substantial use, the
hirer recovered all the money he had paid under the contact. The Court of Appeal
made no deduction for use because of the inconvenience he had suffered. There
is therefore a degree of uncertainty about how to calculate damages when a
consumer rejects goods under a hire purchase contract.

⁵⁰ See Armia Ltd v Daejan Developments Ltd 1979 SC (HL) 56; Sale and Supply of Goods
(1987) Law Com No 160; Scot Law Com No 104, para 2.53; and E Reid, Personal Bar
(2006) paras 3-08 (and following) and 3-42 (and following).
⁵¹ Or, in Scots law, treat the contract as repudiated.
⁵² Yeoman Credit Ltd v Apps [1962] 2 QB 508.
⁵³ [1963] 2 QB 683.
⁵⁴ [1970] 1 WLR 1053.

2.46 In Scotland, the Supply of Goods (Implied Terms) Act 1973 states that a breach
by the creditor of any term of the hire purchase agreement entitles the hirer to
claim damages and, if the breach is material, to reject the goods and repudiate
the contract.⁵⁵ Scottish courts would probably reach similar results to the English
courts by applying principles of unjustified enrichment. For example, if a
consumer repudiated the contract after enjoying three months effective use of the
product, the courts would be unlikely to allow a full refund but would make a
deduction for the consumer's use and enjoyment of the goods. On the other
hand, if a product had caused trouble from the beginning, the consumer would
probably obtain a full refund.

The application of CSD remedies

2.47 Member states are required to apply CSD remedies for work and materials
contracts.⁵⁶ The UK has therefore implemented CSD remedies by amending the
Supply of Goods and Services Act 1982 in such a way as to extend CSD rights to
work and materials contracts.⁵⁷

2.48 The CSD does not apply to hire or hire purchase contracts, or to barter or
exchange contracts.⁵⁸ In the case of hire or hire purchase contracts, the position
is straightforward. The relevant legislation has not been amended, and CSD
rights do not apply either to hire⁵⁹ or to hire purchase.⁶⁰

2.49 For barter and exchange contracts, the position is more complex. The
amendments to the Supply of Goods and Services Act 1982 applying to work and
materials contracts also cover barter and exchange, suggesting that the CSD
rights do apply.

⁵⁵ S 12A.
⁵⁶ In particular, art 1(4) specifically includes "contracts for the supply of consumer goods to
be manufactured or produced" while art 2(5) applies the Directive where "installation forms
part of the contract of sale-¦ and the goods were installed by the seller or under his
responsibility". For discussion of this point, see R Bradgate and C Twigg-Flesner,
Blackstone's Guide to Consumer Sales and Associated Guarantees (2003) pp 22 to 26.
⁵⁷ Supply of Goods and Services Act 1982, ss 11M to 11S. It has been argued that these
sections do not cover all the contracts within the CSD. It is possible that a contract (for
example) to paint a portrait would be regarded as a service under UK law, but a sale under
the CSD: see R Bradgate and C Twigg-Flesner, Blackstone's Guide to Consumer Sales
and Associated Guarantees (2003), p 32.
⁵⁸ The CSD does not specifically define sales contracts, but we think that it must be
interpreted in the light of the Draft Common Frame of Reference. This states, at p 341, that
a sales contract is one in which the seller undertakes to transfer ownership of the goods to
the buyer, for a price. R Bradgate and C Twigg-Flesner note that proposed amendments to
include hire purchase, exchange or barter were specifically rejected by the Council: see
Blackstone's Guide to Consumer Sales and Associated Guarantees (2003) pp 22 to 26.
⁵⁹ Note that s 11S of the Supply of Goods and Services Act 1982 does not apply to the
implied terms relating to hire.
⁶⁰ See Supply of Goods (Implied Terms) Act 1973.

FLOWCHART OF REMEDIES FOR FAULTY GOODS

2.50 The flowchart on the next page lays out the scheme of remedies where a
consumer has bought goods which turn out to be faulty. It only applies to "sales"
under SoGA. We have tried to keep the chart as simple as possible, and it does
not include all the complications which can arise. For example, there is no
reference to the fact that the right to reject can be revived after failed attempts to
repair goods.

2.51 Even so, it can be seen that the remedies are quite complex for everyday
transactions. It is no surprise, therefore, that our research into consumer
knowledge of legal rights showed a general lack of awareness of consumer
remedies for faulty goods.⁶¹

⁶¹ See Appendix A to the Consultation Paper on Consumer Remedies for Faulty Goods (Law
Com CP 188; Scot Law Com DP 139).

PART 3
SIMPLIFYING THE RIGHT TO REJECT IN SALES
CONTRACTS

RETAINING THE RIGHT TO REJECT

The Consultation Paper

3.1 In the Consultation Paper, the first question we considered was whether the UK
should retain the initial right to return goods and obtain a refund.

3.2 The European Commission's proposal for a directive has been drafted as a
measure of maximum harmonisation.¹ If adopted, this would mean that member
states would not be able to provide greater or lesser rights in any field falling
within its scope. Upon literal interpretation, this appears to require the right to
reject to be removed, so that the consumer's first recourse would be to the
European remedies of repair or replacement.

3.3 We provisionally proposed that the right to reject should be retained as a short-
term remedy of first instance for consumers for several reasons, including the
following:

(1) It is fairly easy for consumers and retailers to understand. Consumers
know that if the goods they bought were not as promised, they can return
the goods and get their money back, provided that they act quickly.

(2) The right to reject inspires consumer confidence, making them more
prepared to try unknown brands or new retailers.

(3) It provides consumers with an effective remedy when they have lost
confidence in a product or retailer, for example if they think that the
product is dangerous, or that the fault will recur.

(4) The right to reject drives up standards, both by encouraging retailers to
check products before they are sold and to improve the repair process.

(5) It is a useful bargaining tool that prevents consumers being trapped in a
cycle of failed repairs.

(6) It is a long-established remedy; removal would lead to disputes as
consumers would still expect to have it.

What consultees said about the right to reject

3.4 The vast majority of consultees agreed with us. There was a widespread
consensus in favour of retaining the right to reject, for the reasons listed above in
paragraph 3.3. In particular, consultees focused upon the positive effect the right
to reject has on consumer confidence and the vital part it plays in the UK regime.

¹ Proposal for a directive on consumer rights, COM (2008) 614 final, see
http://ec.europa.eu/consumers/rights/cons_acquis_en.htm.

The right to reject bolsters consumer confidence

3.5 Respondents said that the right to reject inspires consumer confidence.
Consumer confidence is considered key, particularly in difficult economic times.
The right to reject may be the only satisfactory remedy in circumstances where a
consumer has lost trust in goods because the fault has involved the possibility of
personal injury. In other cases, it may be the only satisfactory remedy where
goods are not fit for purpose and repair or replacement will not remedy the non-
conformity.

3.6 Willett, Morgan-Taylor and Naidoo summarised the views expressed by the
majority when they said:

Losing the short-term right to reject could have an adverse impact on
the competitiveness of SMEs and new entrants into the market. This
is because the absence of the right to reject means that consumers
are locked into longer relationships with traders following the sale of
faulty goods. It means that there is an incentive for consumers to
favour who they perceive as being capable -¦ of repairing the product
effectively. This may well impose a competitive disadvantage on
SMEs, new entrants and new traders from outside of the UK.²

3.7 On the same topic, the Office of Fair Trading wrote:

When considering the issue of rights and responsibilities for remedies
it should always be borne in mind that it is the trader who is in breach
of the contract. Consumers are entitled to expect fault-free
purchases, and easily exercisable remedies where this is not the
case.

It is important that the right to reject is retained. In our view consumer
confidence would be significantly impaired by its removal. While we
appreciate the findings that both consumers and traders have
difficulty understanding the extent of their remedies it is generally the
one remedy that consumers are fairly confident about, at least in the
immediate period following purchases. If this remedy were removed,
consumers may be less adventurous in their purchasing and tend to
favour known brands and suppliers making cross-border trade less
likely.

The right to reject underpins the UK regime

3.8 A large proportion of consultees argued that the right to reject is a fundamental
component of our system, the removal of which would represent a significant
reduction in consumer rights.

² Professor Chris Willett, Martin Morgan-Taylor and AndrÃ© Naidoo of the School of Law,
DeMontfort University.

3.9 It was pointed out that the removal of the right to reject would create
inconsistency between modes of purchase, which might have a negative effect
on the competitiveness of face to face shop sales. In distance sales, consumers
have a "cooling-off period" which entitles them to return goods for any reason.
Abolition of the right to reject might cause consumers to shop by distance means,
rather than visiting the high street, because they will perceive that they are in a
stronger position.

3.10 The cooling-off period in distance sales is provided because the consumer
cannot see and touch the goods at point of sale. In many instances, this is also
the case for the consumer who purchases an item from a shop. The goods may
be presented to the consumer in a sealed package, and the consumer is not
expected to unpack the goods until they arrive home. In other cases, the goods
are paid for in store and delivered to the consumer at a later date. In these very
common scenarios, consumers' lack of opportunity to see the goods they are
buying is very similar to the distance sale scenario. Several consultees
considered that it was anomalous that the purchaser of goods from a shop in
those circumstances would not have a legal right to return goods for a refund if
they were faulty.

3.11 Others pointed out that removal of the right to reject in consumer sales would be
anomalous with its continuance in business sales - consumers would have fewer
rights than businesses. Some suggested that this might encourage consumers to
pose as business purchasers in order to obtain the benefit of the right to reject.
However, it was stressed that this potential anomaly should not be relied upon to
remove the right in business sales.

3.12 Consumer groups made the point that a repaired product may not be as good as
one which has never shown a fault. In many cases a repair will result in a
reduction of market value, and it was thought wrong that this loss should be
borne by the consumer.³ This is particularly important in view of modern methods
of production, where factory machinery routinely achieves much greater precision
and higher standards than can ordinarily be achieved when an article or
component (for example a car engine) is repaired and reassembled. In this
respect, the emphasis on repair in the EU remedies can be seen as distinctly old-
fashioned.

The right to reject drives up standards

3.13 Consultees said that the right to reject encourages higher standards in the quality
of goods sold. It creates an incentive for sellers to ensure that goods are in
conformity at the time of sale because they do not want consumers to return
goods for a refund. For instance, we have been informed that reputable motor
dealers undertake a thorough check of cars prior to sale (for example, the "50
point check") to ensure that there are no faults and that cars will not be returned.
As higher quality goods are less likely to prove faulty they are less likely to need
to be scrapped. This benefits businesses and consumers alike. In the absence of
the right to reject, sellers may reduce the depth of pre-sales quality checks.

³ Which? provided a case study of a faulty car which we summarised at paras 8.19 to 8.21
of the Consultation Paper.

3.14 The right to reject also provides an incentive to traders to ensure effective and
speedy repairs, so that consumers will be prepared to agree to repairs instead of
exercising the right to reject.

3.15 Our discussions with retailers and manufacturers indicate that the large majority
do not seek the abolition of the right to reject faulty goods. Generally, they
recognised that consumers expect to be able to obtain refunds for faulty goods,
and a mismatch between consumer expectations and the law might lead to
disputes.

Manufacturers" comments

3.16 Our project concerns remedies for goods which are faulty. Most manufacturers
we spoke to told us that they were not opposed to the right to reject goods that
are genuinely faulty. Instead, their primary concern was consumers returning
goods that are not faulty under retailers" voluntary policies which permit the return
of goods because consumers change their minds about purchases. The "no-
quibble money back" policies offered by some retailers are undoubtedly popular
with consumers and encourage consumers to shop. However, in some cases, the
costs are passed from the retailer to the manufacturer even though the goods are
not faulty. Manufacturers were concerned that some goods returned due to
consumers" change of mind are difficult to resell or cannot be resold at full price,
and there are associated costs, such as transport costs.

3.17 Some manufacturers also felt that consumers returning goods suspected to be
faulty should be offered better customer service on the shop floor. Those
manufacturers complained that retailers sometimes wrongly classify goods as
faulty when all that is needed is for the retailer to show the consumer how to
operate them correctly.

What consumers said about the right to reject

3.18 Research shows that consumers strongly value the right to reject, and want it to
be retained. We commissioned FDS International Ltd (FDS) to carry out market
research into consumers" views.⁴ The first phase was qualitative research
undertaken in February 2008. This research indicated that although consumers
were generally unaware of their legal rights, most were aware that they had a
legal right to a refund for faulty goods, and valued it highly. In about 20% of
cases, consumers take the view that a refund is the appropriate primary remedy,
and that a repair or a replacement would not be acceptable. This was mirrored by
the consumer research in the 2008 Office of Fair Trading's Report on Consumer
Detriment.⁵

⁴ FDS's report of April 2008 is attached to the Consultation Paper at Appendix A.
⁵ OFT, Consumer Detriment: Assessing the frequency and impact of consumer problems
with goods and services (April 2008).

3.19 As a follow-up, in February 2009, we commissioned FDS to carry out a
quantitative phase of market research in order to obtain more detailed figures
about consumers" views on remedies for faulty goods.⁶ 1021 consumers were
questioned from February to March 2009. 94% of consumers said the right to a
refund was important to them and 89% thought the right should be retained, even
though other remedies (repair and replacement) are available. Consumers
thought that the right to a refund was important: if the product was not fit for
purpose; if the product proved to be dangerous; and because they would not
have to wait for a repair or replacement. 37% of consumers said the right to a
refund made them more confident about buying an unfamiliar brand.

The right to reject in other European jurisdictions

3.20 The European Commission's proposal for a consumer rights directive was drafted
as a measure of maximum harmonisation, which means that member states
would not be able to provide greater rights in any area which fell within its scope.
Therefore, in the Consultation Paper, we looked in as much detail as time
allowed at how consumer remedies currently operate in other member states.⁷
We were greatly assisted in that exercise by legal experts who advised us on the
law in other jurisdictions, and by the European Consumer Centres in 18 member
states.

3.21 We provisionally concluded that if there is a need to harmonise laws across the
EU, there is a strong argument that the harmonised regime should incorporate a
right to reject. We found that there is a fairly strong cultural tradition across
Europe that where consumers take home products only to find that they are
faulty, they should be entitled to return them and receive a refund.

3.22 At least nine European jurisdictions currently have a "right to reject" of some
description. This means that consumers have a right to return goods, cancel the
contract and obtain a refund for faulty goods as a remedy of first instance in
those jurisdictions. In five member states,8 consumers have the right to exercise
a free choice between the four CSD remedies (which means that they can
rescind the contract at first instance and obtain money back). In addition,
consumers in the UK, Ireland and France have a "right to reject" which exists
outside the CSD regime.⁹ It is worth noting that some other jurisdictions outside
Europe, such as New Zealand and the states of the United States, also have a
right to reject.

⁶ Consumer Remedies for Faulty Goods: A Summary of Responses to Consultation (13 May
2009) Part 9 at http://www.lawcom.gov.uk/consumer_remedies.htm.
⁷ See Appendices C and D to the Consultation Paper, provided on our websites at
www.lawcom.gov.uk and www.scotlawcom.gov.uk.
⁸ Latvia, Greece, Lithuania, Slovenia and Portugal.
⁹ We understand that consumers have a similar right in Italy - the azione redibitoria.

3.23 Furthermore, several other member states recognised a right to reject before the
CSD reforms.¹⁰ It is therefore part of the consumer culture even in jurisdictions
where it is no longer recognised in law. Our survey of European Consumer
Centres shows that even in member states where no legal right to reject exists,
retailers will often offer such a right in practice, recognising that consumers desire
it.

3.24 Many retailers, in the UK and in other jurisdictions, have voluntary policies which
permit consumers to obtain refunds for faulty goods. However, we do not think
that the consumer's right to a refund for faulty goods should be left merely to
retailers" voluntary policies. Not only are there wide variations among them but,
as voluntary marketing tools, their terms can and do change from time to time
and it is also possible that a retailer might withdraw its policy entirely. We think
that the right to a refund if goods are faulty is sufficiently important to be
enshrined in law.

The right to reject - latent defects

3.25 Some commentators and consumer advisers have argued that the right to reject
should be extended to cover latent defects. These are defects which do not come
to light for some time - several months or possibly years after purchase.

3.26 One method of extending the right to reject would be to dispense with the rules
on acceptance which apply to sales, and apply the rules on affirmation (or, in
Scotland, personal bar/waiver) to all sale and supply of goods contracts. A
consumer would then be able to reject goods unless they had affirmed the
contract or were personally barred from rejecting them following the discovery of
the fault.¹¹

3.27 Similarly, in the Republic of Ireland, the buyer is deemed only to accept goods
"when, without good and sufficient reason, he retains the goods without intimating
to the seller that he has rejected them".12 The fact that a defect was latent, and
took a while to be discovered, would be a good and sufficient reason for the
delay.

¹⁰ The "right to reject" is a concept which is familiar to many other member states, as it
formed part of their remedial regimes before the CSD. The European Commission's Green
Paper on Guarantees for Consumer Goods and After-sales Services COM (93) 509 final,
indicates that a "right to reject" of some description existed as a remedy for defective
goods in all member states at that time, bar one. The member states with a "right to reject"
were Germany, Belgium, Denmark, Spain, France, Greece, Portugal, Italy, Luxembourg,
the UK and Ireland. The Netherlands was the sole exception, relying primarily on the
remedies of repair and replacement.
¹¹ In England and Wales, the common law doctrine of affirmation applies to supply of goods
contracts, eg in hire purchase or work and materials contracts. This means that consumers
do not lose the right to reject until they learn of the defect. In Scotland, an equivalent result
is achieved through the operation of personal bar. Personal bar cannot operate until the
consumer knows of the defect.
¹² Sale of Goods Act 1893, s 35, as amended by the (Irish) Sale of Goods and Supply of
Services Act 1980.

3.28 Another method of extending the right to reject, in the context of the CSD regime,
would be to give consumers a free choice between repair, replacement, rejection
("rescission") or reduction in price, whenever the right was exercised. This
possibility was also raised in the European Commission's review of the eight
consumer protection directives.¹³

3.29 Conversely, we know from our discussions that in the interests of certainty
retailers are generally keen for the length of time for rejection to be kept quite
short. They feel strongly that it should not be extended. It is also thought that
extending the time for rejection might encourage abuse by some consumers who
may use an item for a period of time, and then seek a refund when they no longer
need it.

3.30 The law currently favours finality, as the right to reject is a short-term remedy. In
particular, section 35(4) of SoGA was intended to prevent a consumer exercising
the right to reject where a defect emerges only after a period of time.¹⁴ As
Reynolds commented:

There must certainly be some element of securing early finality within
the policy of section 35.15

3.31 In our Consultation Paper, we provisionally concluded that this was the correct
approach. The main reason for our provisional conclusion was the difficulty of
accounting for interim use. Currently, consumers who exercise the right to reject
may recover the full purchase price, notwithstanding that they have enjoyed
some use from the goods.¹⁶ In this respect, the right to reject differs from the
European remedy of rescission, where some member states provide that a
deduction can be made for the use the consumer has had from the product.¹⁷

3.32 We provisionally concluded that it would not be fair to allow a long-term right to
reject goods without giving some form of credit for use and enjoyment. However,
giving credit for use and enjoyment raises difficult problems of calculation which
would take away much of the force of the remedy of the right to reject. It is likely
that the consumer would become involved in argument or negotiation. The other
reason for our provisional conclusion that the right to reject should not be
extended is the potential for abuse by consumers who have had the use they
wanted from goods.

¹³ European Commission, Green Paper on the Review of the Consumer Acquis COM (2006)
744 final, para 5.7.2.
¹⁴ SoGA, s 35(4) states: The buyer is also deemed to have accepted the goods when after
the lapse of a reasonable time he retains the goods without intimating to the seller that he
has rejected them.
¹⁵ FMB Reynolds, "Loss of the right to reject" [1988] Law Quarterly Review 16.
¹⁶ See Benjamin's Sale of Goods (7th ed 2006) para 12-068.
¹⁷ SoGA, s 48C(3). Recital 15 CSD.

What consultees said about the right to reject and latent defects

3.33 More than two-thirds of respondents agreed with our provisional conclusion that
the right to reject should not be extended to cover latent defects. Whilst many
could see the attractions of extending the right to reject, they agreed that
consumers who had enjoyed the benefits of goods for some time should give
credit for that use. This, it was felt, would undermine the efficacy of the right to
reject, which is a powerful tool for consumers because it is a "short and sharp"
remedy. For example, there would undoubtedly be arguments about the extent to
which the consumer had enjoyed trouble-free use and what value should be
attributed to that, as against the inevitable inconvenience the purchaser of faulty
goods suffers.

3.34 We think the arguments against extension of the right to reject continue to be
persuasive. In Part 2 of this Report we summarise the law on affirmation and
waiver which applies to hire purchase contracts, and other supply of goods
contracts. Paragraphs 2.45 and 2.46 illustrate the uncertainty of "credit for use"
calculations in hire purchase cases and the considerable potential for argument
they present. The right to reject is a powerful weapon which should be kept for
faults that manifest themselves immediately or after a short period of use. After
the product has been used for a while, the primary remedy should be a repair or
replacement. Under our proposals, retailers would be free to agree to extend the
period if they thought that there was a competitive advantage in doing so.

3.35 We recommend that the right to reject should be retained as a short-term
primary remedy.

A PROBLEM WITH THE RIGHT TO REJECT

3.36 As we explained in Part 2, the law gives consumers the right to reject faulty
goods provided they have not accepted them.¹⁸ The most common form of
deemed acceptance is when a consumer retains goods beyond a reasonable
time, without indicating they have rejected them.¹⁹

3.37 The main reported problem with the right to reject is that there is uncertainty as to
what constitutes a reasonable time. This presents very real difficulties in practice
for consumers and retailers alike. Consultees said that the law would work better
if this were clarified. As Bridge has commented:

A buyer, particularly one who is a consumer, requires a degree of
nerve to exercise rejection rights. First of all, the uncertainty of the
rejection period makes it difficult to give advice on the subject.²⁰

¹⁸ See paras 2.7 to 2.20.
¹⁹ SoGA, s 35(4).
²⁰ M G Bridge, The Sale of Goods (2nd ed, 2009) para 10.71.

3.38 Some consumer advisers, including Consumer Direct,21 told us that consumers
often face difficulties when seeking to exercise the right to reject beyond a two-
week period. This is so despite the fact that, legally, the period in which the right
to reject can be exercised is probably much longer.

3.39 Consumer Direct told us that it is difficult to advise consumers how long they
have to exercise the right due to uncertainties in the law. Consumers expect to be
told how long they have based upon the simplicity of a set period; that is in terms
of a number of days, weeks, or months. They do not find it helpful to be told that
the answer depends on a series of factors that must be applied on a case by
case basis. Retailers told us that it is difficult to train their staff about what the law
requires, especially as the retail sector has a relatively high turnover of staff.

3.40 In the Consultation Paper, we used a faulty washing machine scenario to
illustrate the practical problems these uncertainties can cause. We shall set out
the scenario again here, for ease of reference.²²

A consumer (C) buys a washing machine. C uses it once and goes on
holiday for three weeks. On C's return (four weeks after purchase), C
uses the machine for a week before it breaks down. C contacts the
retailer. The retailer promises to arrange a repair. The retailer rings
back several days later and informs C that a repairman will come to
fix the machine. The repairman comes out and repairs the fault, but
only a few days later the machine breaks again, for a different reason
(Fault (2)). C complains to the retailer and a week later (7 weeks after
purchase), C purports to reject the machine.

3.41 This fairly typical scenario raises a series of questions and highlights the
complexities involved in an assessment of a reasonable time. Can C exercise the
right to reject the machine? When will C lose the right to reject because C is
deemed to have accepted it? When does time begin to run? Is seven weeks after
purchase a reasonable amount of time?

3.42 An examination of case law fails to provide a definitive answer. In Bernstein²³ a
car was held to be accepted after only three weeks, which would suggest that
seven weeks is too long. However, the court discounted a period of illness, so it
may be possible to argue that the holiday period should also be discounted,
which would reduce the period under consideration to four weeks.

²¹ A government-funded telephone and online service offering information and advice on
consumer issues - www.consumerdirect.gov.uk.
²² Consultation Paper on Consumer Remedies for Faulty Goods (Law Com CP 188; Scot
Law Com DP 139) p 67.
²³ Bernstein v Pamson Motors (Golders Green) Limited [1987] 2 All ER 220.

3.43 Does the week long period between the request for repair and repair being
effected count towards a reasonable time? As we have seen,24 Clegg would
suggest that that period should be discounted.²⁵ In addition, the effect of the 2002
Regulations seems to be that the period will not be counted.²⁶ This would reduce
the period under consideration to three weeks.

3.44 Is three weeks beyond a reasonable time? Given the result in Bernstein it might
seem so, but as discussed in Part 2, it is questionable whether Bernstein is good
law.²⁷ Ultimately a reasonable time is a question of fact. One factor which might
be important is whether the fault arose from a particular wash cycle that was not
used immediately.

3.45 The question of how long a reasonable time is before goods are held to be
accepted is particularly problematic in cases where there is a considerable delay
before the goods are inspected, or where there are delays while negotiations or
repairs are undertaken.

3.46 The ambiguity of the period in which the right to reject can be exercised makes it
less likely that a consumer will pursue it in the face of an intransigent retailer.
This is because if a consumer asserts the right to reject in the face of opposition
from the retailer, the consumer will not receive their money back but, at the same
time, will not be able to use the goods. The problem is compounded if the retailer
will not accept the return of the item. It is also compounded if the item is an
expensive item that the consumer is not in a financial position to replace without
a refund; or if it is an essential item that the consumer cannot manage without for
any significant length of time.

A NORMAL PERIOD OF 30 DAYS

The Consultation Paper

3.47 Since this review began, the recurring message from stakeholders has been that
whilst the right to reject should be retained, some clarification is needed as to
how long it lasts. It is clear that the uncertainty over how long the right to reject
lasts adds complexity to what is intended to be a simple and certain tool. This
view was reflected in responses to the Consultation Paper.

A standard period: not an absolute fixed time limit

3.48 In order to overcome the considerable problem of uncertainty, we considered
whether there should be a fixed time limit, after which the right to reject is
automatically lost.

²⁴ See paras 2.12 to 2.13.
²⁵ Clegg v Andersson T/A Nordic Marine [2003] EWCA Civ 320; [2003] 1 All ER (Comm) 721.
²⁶ The Sale and Supply of Goods to Consumers Regulations 2002 may impliedly provide the
answer. SoGA, s 48D (inserted into SoGA by those Regulations) provides that if a request
for repair or replacement has been made, the buyer cannot reject the goods until the seller
has been given a reasonable time to repair or replace. The effect of this must be that time
does not run for the purposes of acceptance while repair is being requested. Otherwise,
the right to reject could be lost during a period where the buyer was not entitled to exercise
it.
²⁷ See para 2.12.

3.49 In the Consultation Paper, we provisionally concluded that there should not be an
absolute fixed time limit. Consultees agreed. We concurred with the Law
Commissions" conclusions in 1987 when they considered a fixed time limit and
rejected it as unworkable.²⁸ The 1987 report concluded that the enormous variety
of goods made it impossible to set a fixed time. Similarly, it would be impractical
to set different time periods for different goods, because the different categories
(however carefully defined) would inevitably create borderline cases where it was
not clear into which category a product fell. A fixed period would also remove any
possibility of flexibility which could be unfair in some cases.

3.50 Very few consultees felt there should be an absolute fixed period with no
exceptions. We provisionally proposed that the legislation should set out a 30-day
period during which consumers should, in normal circumstances, exercise their
right to reject. The 30-day period should run from the date of purchase, delivery
or completion of contract, whichever is later.

3.51 We provisionally concluded that in most cases 30 days would give the consumer
a reasonable opportunity to inspect the goods and to test them for a short period
in actual use. So, in the case of clothes, for example, it enables the consumer to
do more than simply try the clothes on. The 30-day period is intended to allow
enough time to wear the clothes and wash them and, if they fall apart in the
wash, return them to the shop. For a washing machine, 30 days should provide
enough time to install the machine and use the main programmes. For a new
computer, it enables the consumer to install the software they intend to use and
to test it in practice. However, the 30-day period does require the consumer to act
promptly. A consumer will lose the right to reject if they just leave their new
clothes in the wardrobe for six weeks.

What consumers said

3.52 A secondary reason for choosing a 30-day period is that it appears to correspond
with consumers" expectations. Our opinion poll, described in paragraph 3.19 of
this Report, provides some support for a 30-day period. When consumers were
asked to say how long the right should last, the most common reply, given by
30% of consumers, was that the right should last for about a month. This may
partly be because consumers have become used to 30-day "no-quibble money-
back guarantees" offered by some high street retailers. Although the right to
reject faulty goods is quite different from the right to return non-faulty goods, we
think that a 30-day period is one which the public will understand and remember.

3.53 We know that it is very rare for consumers to take disputes to court; it is also very
rare for consumers to employ lawyers to advise them. It is therefore imperative
that the law is capable of being understood, remembered and asserted by
consumers. On balance, and in practical terms, we think that the introduction of
a 30-day normal period for the right to reject will benefit the average consumer. It
will also assist retailers by providing a simple standard for their staff.

²⁸ Sale and Supply of Goods (1987) Law Com No 160; Scot Law Com No 104, p 47.

3.54 At present, consumer advisers are often concerned about advising consumers
that they can reject goods after two weeks. If consumer advisers were able to tell
people that the standard period was 30 days, it would give consumers greater
confidence and reduce the need to rely on ambiguous case law.

What consultees said about a normal period of 30 days

3.55 The majority of respondents agreed in principle with our proposal for a 30-day
normal period. The central argument in favour was that the advantages of clarity
provided by a standard period outweigh the potential disadvantages. The main
benefit of the right to reject is that it is a "short and sharp" remedy that should be
exercised relatively quickly. Generally respondents agreed that the 30-day
normal period would provide sufficient time for most purchases to be tested in
use, and it would encourage consumers to test goods promptly after purchase.

3.56 When we discussed our proposal of a 30-day normal period with Consumer
Direct, they said that they supported the proposal on the ground that consumers
would benefit from clarification of the law; consumers would find it easier to
enforce their right to reject if they knew exactly how long it lasted. For example, it
would be beneficial to the average consumer who faces considerable difficulty in
pursuing the argument that a period beyond two weeks is "reasonable", and
tends to give up as a result. The law would be easier to enforce informally.

3.57 In response to the Consultation Paper, the Office of Fair Trading (including
Consumer Direct) wrote in support of the proposal:

We agree that the idea of a finite time in which the right to reject is
available would be a sensible reform, provided that the period is long
enough. Although we appreciate that even specification is likely to
reduce the period of time in which the right may currently be
exercised in some circumstances, the advantages of simplicity
outweigh the potential disadvantages in our opinion. Further we
believe that many possible disadvantages could be avoided by a
good consumer/trader awareness programme. If both consumers and
traders knew there was a specific period in which this right could be
exercised we think it may give consumers added confidence in their
dealings with traders and vice versa.

Many traders and consumers already appear to believe that
consumers have 30 days in which to return goods (probably as a
result of voluntary systems offered by some traders) so we think that
this period is probably appropriate and gives the consumer sufficient
time to test the goods and enables the trader to have some certainty.

3.58 Also in support of our proposal for a 30-day normal period, Alan Miles of the
Institute of Consumer Affairs concluded:

I"m all for simplification and clarity and feel that the greater good will
be served if consumers can understand the law ... .29

3.59 The British Retail Consortium responded:

The BRC is not campaigning for the removal of the initial right to
reject. On the contrary, we are working for its introduction in a revised
form in EU law.

Given even the highest courts in the land seem to have difficulty in
determining the meaning of "reasonable time" it is essential to define
it in legislation. If we are looking at a purely UK solution the proposal
for 30 days would be acceptable-¦ .

3.60 Similarly, the Confederation of British Industry wrote:

The main problems in relation to the right to reject have arisen in
respect of the length of time within which the consumer may exercise
that right.

To clarify and simplify the position we would support a defined and
short-term right of rejection.

-¦if it appears that the Directive will be long delayed then careful
consideration might be given to the introduction of a right to reject of
limited duration in order to clarify and simplify the UK position.

We consider that it would be helpful for the right to last for a defined
period to provide certainty about the exercise of the right for
consumers as well as business. There are merits to the period being
30 days as suggested by the Law Commissions.

3.61 Some consultees feared that our proposal for a normal period of 30 days would
be misinterpreted by retailers as an absolute cut-off, which would lead to a
reduction in consumer protection. They felt that the 30-day period should be
expressed as a minimum period.

3.62 Consumer Focus responded that the 30-day normal period was too short. They
also suggested various alternatives, for example that the rules on affirmation
should apply,30 or alternatively that the consumer should have a free right to
choose between all of the CSD remedies.³¹

3.63 Which? objected to our proposal for a 30-day normal period. They argued that
the right to reject "should continue for as long as the consumer has a legal
remedy available (ie six years in England and Wales, five years in Scotland)."

²⁹ The Institute of Consumer Affairs Newsletter Spring 2009 Issue 67, p 2.
³⁰ The rules on affirmation are explained at paras 2.38 to 2.43 of this Report.
³¹ The CSD remedies are explained in more detail at paras 2.28 to 2.35 of this Report.

3.64 Others proposed that, rather than setting a standard period, the law should clarify
the relevant factors for determining the reasonable period. However, we think that
the law requires more than a restatement or clarification of the principles that are
applied in case law. Such a restatement of principles would not advance us much
further forward from where we are now; and most importantly, it would not assist
the average consumer in understanding how long they have to reject faulty goods
and in asserting that right.

3.65 We recommend that the law should do more to clarify how long the right to
reject lasts. We recommend a normal period of 30 days in which the right to
reject should be exercised. This normal period could be extended or
reduced in the limited circumstances set out below.

THE 30-DAY NORMAL PERIOD: REASONS FOR A SHORTER OR LONGER
PERIOD

3.66 Whilst the majority of respondents agreed with our proposal for a 30-day normal
period, there was less consensus about the circumstances in which that period
should be shortened or lengthened.

3.67 Some consultees felt that too many exceptions to the period would undermine
certainty and defeat the purpose of clarifying the law. For example, the British
Retail Consortium said: "The fewer caveats, uncertainties and opt outs there are,
the less will be the room for misunderstandings."

3.68 Conversely, others were concerned that a greater degree of flexibility was
necessary to ensure fairness. They pointed out that the law currently allows a
great deal of flexibility to enable various personal circumstances as well as
objective circumstances to be taken into account. However, in our view, this
leads to a large degree of uncertainty, which most consultees have complained is
undesirable.

3.69 On balance, most consultees seem to agree that the 30-day normal period
should apply with a limited number of exceptions, including perishable goods,
express agreement, and objective circumstances which are within the reasonable
contemplation of the parties. Professor Roy Goode represented the views of the
majority in concluding that objective, but not personal, circumstances should be
taken into account:

I agree that the right to reject should be retained as a short-term
remedy but should not be extended to allow for latent defects which
appear only after a prolonged period. Finality is important in sales
law-¦ . There should be a presumption that the period for rejection
should be 30 days, capable of being displaced where the
circumstances otherwise require, as in the case of perishables
(shorter period) or foreseeability of a longer period.

3.70 Having considered the arguments, we found the views of the majority persuasive.
In order for the 30-day normal period to be effective, and attempting to strike an
acceptable balance between flexibility and certainty, we think that the
circumstances in which it can be departed from should be limited to a small
number of specified categories. Below, we set out our recommendations for the
possible reasons for departing from the 30-day normal period.

Reasons for a shorter period

Perishable goods

3.71 In the Consultation Paper we asked whether it should be open to the trader to
argue that the right to reject should be exercised in less than 30 days where the
goods are of a type expected to perish within 30 days, such as fresh food. In
these cases, a 30-day normal period would be incompatible with the nature of the
goods.

3.72 On the question of perishable goods, the vast majority of respondents agreed
that it should be possible for the retailer to argue for a shorter period. Consumers
should not be given the impression that they can take a month to return sour milk
or bad meat. It is important that consumers should return goods in a state where
the presence of the fault can still be detected.

3.73 This argument would only apply where the consumer claims that perishable
goods are faulty (that is where they are not of satisfactory quality under section
14 of SoGA). It would not apply where the consumer claims goods do not
conform to contract for other reasons, such as that they did not meet their
description. Nor would it apply to foodstuffs which are not expected to perish
within 30 days, such as vintage wine.

3.74 We recommend that it should be open to the trader to argue that the right to
reject should be exercised in less than 30 days where the goods are of a
type expected to perish within 30 days; in these cases, a 30-day normal
period would be incompatible with the nature of the goods.

Acts inconsistent with returning goods

3.75 In the Consultation Paper, we asked whether the legislation should provide that
where a consumer has carried out an act which is inconsistent with returning the
goods (such as altering clothes), they may not reject for a fault which should have
been discovered before the inconsistent act.

3.76 The principle behind this is that in many cases it is reasonable to expect
consumers to check goods before they alter them. For example, a consumer
should check the colour of paint or tiles before applying them to a wall.

3.77 On the other hand, we do not wish to suggest that altering goods should always
result in the loss of the right to reject. In many cases, altering goods is a
necessary part of the testing process. For example, a consumer will only be able
to discover that the wine is bad after they have opened the bottle.

3.78 Less than half of respondents answered this question directly, and their views
were split. No one argued strongly in favour of retailers being able to argue for a
shorter period where a consumer seeks to reject for a fault which should have
been discovered before the inconsistent act. Those against appeared to have
stronger views than those in favour; they objected on the grounds that exceptions
defeat the aim of simplifying the law, and that it would be an unnecessary
complication.

3.79 Notably, the British Retail Consortium did not express support for this exception.
The British Retail Consortium's general approach was "the fewer caveats the
better", and the majority of consultees who responded to the Consultation Paper
in general appeared to favour sacrificing this type of exception for the benefit of
simplicity. Some respondents were concerned that such an exception might be
difficult for consumers and retailers to understand and apply in practice. For
example, the Office of Fair Trading wrote:

We do not agree with this proposal as we believe it complicates the
issue and will introduce uncertainty and the possibility for legal
dispute. -¦

This type of exception to the right will make consumers uncertain as
to what they are able to do with a product and when they can return
goods.

3.80 Other respondents, such as Dr Christian Twigg-Flesner queried whether the
exception might introduce a "duty to examine" goods after purchase, and pointed
out that it might cause confusion.

3.81 We find the arguments submitted against this exception persuasive, in particular
that consumers and retailers would find such an exception difficult in practice,
and it would detract from the simplicity of the 30-day standard period for the right
to reject.

3.82 We recommend that retailers should not be able to argue for a shorter
period than 30 days where a consumer seeks to reject for a fault which
should have been discovered before an inconsistent act.

Reasons for a longer period

Objective circumstances

3.83 There are some instances where it is clear to both parties from the nature of the
sale that the consumer will not be able to test the goods in use during the
following 30 days. Two-thirds of respondents agreed with the proposal that, in
such circumstances, a consumer should be able to argue for a longer period than
30 days.

3.84 In appropriate cases, the extension could be quite lengthy. Examples include
seasonal goods, such as skis bought in April, which might not be used until the
following winter. Similarly a lawnmower bought in November would typically
remain unused for five or six months.

3.85 Macleod wrote about the example of skis bought at an end of ski-season sale.³²
When this scenario was discussed in Parliament, it was said that if the skis were
left unused in a cupboard for many months, the court should discount that period,
so that the reasonable time for exercising the right to reject would be extended.³³

³² J K Macleod, Consumer Sales Law (2nd ed, 2007) para 29.07A.
³³ House of Commons Standing Committee C, 16 March 1994, col 37.

3.86 Several other respondents to our Consultation Paper used Christmas presents
purchased in autumn as an example. In the FDS research, consumers discussed
a scenario in which a teddy bear was bought in October, and fell apart as soon as
it was opened on Christmas day. Almost everyone thought that the consumer
should be entitled to a refund in this case.³⁴

3.87 Another example would be a pregnant woman who buys baby equipment, such
as a pram and cot, in preparation for the birth of her child.

3.88 We recommend that where it is reasonably foreseeable by, or reasonably
within the contemplation of, both parties that a longer period will be needed
to inspect the goods and to try them out in practice, then a consumer
should be able to argue for a period longer than 30 days.

Personal factors

3.89 In the Consultation Paper, we asked whether it should be open to consumers to
argue that the period should be extended for longer than 30 days where they
have been unable to test the goods for a specific good reason (not merely
disinclination), for example because they have been ill or on holiday. There would
need to be some element of inability to test goods, rather than it merely being the
consumer's choice not to test. However, this category covers circumstances that
are outwith the trader's knowledge. Under current law, personal factors such as
periods of illness can extend the period for rejection. For example, in the
Bernstein case, the judge commented:

I discount the period when the plaintiff was ill because reasonable
seems to me to be referable to the individual buyer's situation as well
as to that of the seller.³⁵

3.90 Subsequent cases have also suggested that the current law should take into
account the buyer's personal circumstances, even if the retailer could not foresee
them.³⁶ However, the period allowed for these personal circumstances has
typically been short, on the ground that it has to be weighed against what may
seem reasonable to the seller.

3.91 Consultees" views were split on this question, with the very slight majority against
a consumer being able to argue for a longer period in these circumstances; this
was generally on the ground that it would be undesirable to introduce subjectivity
and uncertainty which would rob the 30-day period of its simplicity. Some were
also concerned about the potential for abuse. We are persuaded that personal
factors would erode the advantages of certainty which a 30-day normal period
would bring.

3.92 We recommend that personal circumstances should not be able to extend
the 30-day normal period.
³⁴ See Appendix A to the Consultation Paper on Consumer Remedies for Faulty Goods (Law
Com CP 188; Scot Law Com DP 139).
³⁵ Bernstein v Pamson Motors (Golders Green) Limited [1987] 2 All ER 220 at 230-231.
³⁶ See for example, Judge Raymond Jack's statement in Truk (UK) Ltd v Tokmakidis GmbH
[2000] 2 All ER (Comm) 594 that the reasonable period should bear in mind both the
buyer's and the seller's position.

Express agreement
3.93 In some cases, the seller may specifically agree to extend the period for the right
to reject by, for example, providing a "gift receipt". We proposed that where
sellers agree to allow the buyer to test the goods outside the 30-day period, the
normal period should be extended.

3.94 The vast majority of those who responded to this question agreed that this should
be possible. A number of those added, however, that it should not be possible to
reduce the period by express agreement. We agree with this view.

3.95 We recommend that a consumer should be able to argue for a period longer
than 30 days where the parties agreed to an extended period.

THE REVERSE BURDEN OF PROOF FOR THE RIGHT TO REJECT
3.96 Under the CSD, durable goods are presumed to be faulty at the time of the sale if
the fault appears within six months of delivery. This means that if such a fault
appears it is up to the retailer to show that the goods were not faulty at the time of
delivery. In the Consultation Paper, we asked whether this should be extended to
the right to reject. Respondents agreed with this proposal because it would
simplify the law and make it more consistent.

3.97 We recommend that a consumer who exercises the right to reject should be
entitled to a reverse burden of proof that faults appearing within six months
of delivery were present when the goods were delivered.

THE RIGHT TO REJECT FOR "MINOR" DEFECTS
3.98 Under current law, once a consumer has shown that one of the implied terms of
quality has been breached, they may exercise the right to reject, provided they
have not accepted the goods. There is no exclusion for minor defects, such as
imperfections in appearance, finish or small malfunctions.

3.99 SoGA provides that the quality of goods includes their state and condition.
Appearance and finish, and freedom from minor defects are among the factors
which are, in appropriate cases, aspects of quality.³⁷

3.100 This provision in SoGA resulted from the Law Commissions" 1987 Report, in
which they recommended that the new definition of quality should specifically
refer to appearance, finish, and freedom from minor defects.³⁸ The Law
Commissions made that recommendation in order to clarify the law, because at
the time doubt about the extent to which the implied term as to quality in SoGA
covered minor defects led to a lot of unnecessary disputes. The Law
Commissions also thought that damages were unlikely to be a satisfactory
remedy for goods rendered of unsatisfactory quality by minor defects:

³⁷ SoGA, s 14(2B).
³⁸ Sale and Supply of Goods (1987) Law Com No 160; Scot Law Com No 104.

Even if compensation were agreed, this would often still not be an
adequate remedy for the consumer. What he wanted was goods of
the proper quality at the full price, not defective goods at a lower
price.³⁹

3.101 Now, in 2009, it is evident that the appearance of goods is as important (if not
more important) to consumers. In many cases consumers spend a great deal of
time selecting goods specifically because of their appearance. Therefore, it is
appropriate that dents, scratches and blemishes will sometimes be breaches of
the implied term as to quality. In these cases, a repair or replacement may not be
practical or possible, and the consumer will not want a reduction in price because
they have selected the goods for their appearance and paid for a specific
appearance.

3.102 This point emerged strongly from the research carried out by FDS.⁴⁰ When
participants were asked what remedy they would expect in the case of a
scratched table, most were very reluctant to consider keeping an item which did
not look good. They gave many examples of carefully choosing kettles and other
kitchen equipment to match their dÃ©cor. They would not want to keep items which
were discoloured or did not match the sample.

3.103 When considering this area of law, it is important to note that not all faults entitle
the consumer to exercise the right to reject. The right will only arise where the
fault is significant enough to amount to a breach of an implied term, for example if
it renders the goods of unsatisfactory quality.⁴¹ As Howells and Weatherill note:

The 1994 amendments clarify that appearance and finish and
freedom from minor defects are relevant factors, but note that the
presence of such a defect will not necessarily render the goods
unsatisfactory as they are only to be considered in appropriate cases
as part of the overall assessment of the goods" quality.⁴²

3.104 They go on to explain that, in some cases, the defect might be so minor that it is
considered de minimis. That is, the defect may be too trivial to constitute a
breach. For example, in Darren Egan v Motor Services (Bath) Ltd Lady Justice
Smith said:

³⁹ Above, p 37.
⁴⁰ See Appendix A to the Consultation Paper on Consumer Remedies for Faulty Goods (Law
Com CP 188; Scot Law Com DP 139).
⁴¹ In Scotland, the breach must be material: SoGA, s 15B(1)(b). In a consumer contract,
however, breach of any term as to quality or fitness for purpose, or any term that the goods
will correspond with a description or sample, is deemed to be a material breach: SoGA, s
15B(2).
⁴² Howells and Weatherill, Consumer Protection Law (2nd ed 2005) p 178.

However, it seems to me unlikely that a buyer will be entitled to reject
goods simply because he can point to a minor defect. He must also
persuade the judge that a reasonable person would think that the
minor defect was of sufficient consequence to make the goods
unsatisfactory-¦ . The reasonable person may think that the minor
defect is of no consequence.⁴³

3.105 This differs from Article 3(6) of the CSD, which states that "the consumer is not
entitled to have the contract rescinded if the lack of conformity is minor." At
present, the UK, among other member states, has not implemented that
provision. However, under the European Commission's proposal for a consumer
rights directive, this would change. Member states would no longer be permitted
to allow consumers to rescind a contract for minor defects. Furthermore, as
currently drafted, consumers would lose the right to reject. The only remedies for
minor defects would be repair or replacement and, if those were not possible or
proportionate, price reduction. Therefore, in some cases, a consumer would only
be offered a reduction in price.

3.106 In discussions about the proposed directive, some consumer representatives
have expressed concern that the combined effect of Article 26(2) which allows
the trader to choose the remedy, and Article 26(3) which does not allow
rescission if the lack of conformity is minor, will in practice result in a real
reduction in consumer protection on the following basis. The risk is that
rescission will no longer be offered because the temptation will be for the retailer
to argue that any fault is minor. Rescission will often be the least desirable option
from the trader's point of view. This might mean that in practice the trader
exercises a choice of three options: repair, replacement or price reduction. Price
reduction might be the retailer's preferred option because it could be cheaper
than repair or replacement - the retailer is not bound by clear rules about how it
should be calculated. In practice, the consumer would seldom be in a position to
dispute the trader's conclusion.

3.107 Our research with the European Consumer Centres indicated that many member
states which have implemented Article 3(6) of the CSD experience considerable
difficulties in practice with the question of what constitutes a minor defect, and
that this is a significant cause of disputes.⁴⁴

3.108 In the Consultation Paper, we provisionally proposed that legal protection for
consumers with respect to minor defects should not be reduced. Virtually all
respondents agreed. They expressed a strong concern that reducing protection in
this area would be a "major retrograde step", weakening the consumer's position
vis-Ã -vis the trader. One of the reasons that excluding minor defects would be
perilous is that there is a lack of clarity over what constitutes a minor defect. It
typically involves a subjective judgment, and disputes about what constitutes a
minor defect would detract from the simplicity of the right to reject. Many
respondents also added that the current law creates an incentive for the
production of high quality goods.
⁴³ [2007] EWCA Civ 1002; [2008] 1 WLR 1589.
⁴⁴ The European Consumer Centre Questionnaire responses are summarised at paras 6.49-
6.58 of the Consultation Paper on Consumer Remedies for Faulty Goods (Law Com CP
188; Scot Law Com DP 139).

3.109 Consultees pointed out that the appearance of goods is often as important as
function to consumers. If a consumer purchases a new item, they are paying the
price for something new, not second-hand or repaired. The consumer, if given the
option, would usually not have chosen to purchase the damaged item, even at a
discount. The City of London Law Society spoke for the majority when they
responded:

We would agree with the views expressed in the Law Commission's
1987 report that cosmetic issues, such as product finish, are of major
importance to consumers. The current law does not require absolute
perfection in goods sold by retailers and the 1994 reforms to the Sale
of Goods Act 1979 recognise freedom from minor defects as an
element of "satisfactory quality". We are not aware that this has
caused major problems in practice. Removing the right to reject for
"minor" defects would create further uncertainty in the law and would
lead to costly disputes.

3.110 We recommend that legal protection for consumers who purchase goods
with "minor" defects should not be reduced with regard to the right to
reject and also to the CSD.

INTEGRATION OF CSD REMEDIES WITH THE RIGHT TO REJECT

Rejection with three possible options

3.111 In Part 2 of the Consultation Paper, we explained that the rejection of goods and
the termination of the contract are two separate concepts. The rejection of goods
(that is, the refusal to accept goods) is not necessarily followed by termination of
the contract. For example, the consumer may reject goods and give the trader an
opportunity to cure the fault. We use the short-hand term of "right to reject" to
mean rejection and termination (including a refund) or, in Scots law, the
consumer treating the contract as repudiated by the trader.⁴⁵

3.112 As stakeholders complained that they found the two separate remedies regimes
confusing and disjointed, we considered how the right to reject under SoGA might
be better integrated with the CSD remedies in order to make the remedies regime
simpler. We proposed that this could be done by combining the right to reject with
repair and replacement. These three first instance remedies could be joined
under the umbrella of the concept of rejection.

3.113 A new provision in SoGA could provide that the consumer buyer can reject faulty
goods with three possible remedies of first instance: termination plus full refund;
or alternatively the consumer can request repair or replacement. A diagram of the
remedial regime would look like this, focusing on the three remedies that
consumers use most: refund, repair and replacement.

3.114 There was a large degree of consensus from consultees on this proposal. The
great majority of respondents agreed with the principle that the provisions should
be simplified in this way and that this was a sensible approach. Many concurred
with the Bar Council's view:

Assuming this can be done, then we agree that this is the ideal
outcome. However, if this cannot be achieved at European level, then
an independent right to reject should be retained.

3.115 Also in agreement, the Faculty of Advocates wrote:

The Faculty considers that clarity in consumer law is particularly
important. The Faculty agrees with the proposal that the SoGA and
CSD remedies be integrated into a single instrument through the
broadening of the concept of "rejection".

It considers, however, that it is crucial in any single instrument that
termination and refund are a first tier remedy (as is presently
proposed) to avoid a consumer being required by a seller to accept
mere repair or replacement.

3.116 The CSD provides that its remedies are available if goods do not conform to
contract. Unfortunately, it does not define non-conformity, as such; instead it
provides that goods are presumed to be in conformity if they satisfy a list of
conditions, relating to description, fitness for purpose, and quality and
performance.⁴⁶ On the other hand, SoGA is much clearer about when remedies
apply because it defines non-conformity as a breach of an express term of the
contract or of a term implied by section 13, 14 or 15.47

⁴⁵ That is, rescinding the contract as a result of a material breach.
⁴⁶ Article 2.
⁴⁷ SoGA, s 48F.

3.117 The Office of Fair Trading was concerned that if the right to reject were integrated
with CSD remedies so that it was only available in cases of non-conformity (as
set out in the CSD), this would restrict the right to reject. We agree with the Office
of Fair Trading's point that the right to reject should continue to be available for
breach of contractual conditions generally, and this should not be lost as a result
of integration of the right into the CSD.

3.118 We recommend that the right to reject and CSD remedies should be better
integrated in a single instrument, by use of the concept of rejection.

The right to reject: the effect of repairs and negotiations

3.119 In the Consultation Paper, we provisionally proposed that once a consumer has
accepted a repair, their right to reject should cease. If the repair fails, the
consumer should proceed to a second tier remedy along the lines we proposed in
relation to the reform of the CSD. We made this provisional proposal in the
interests of simplicity.

3.120 This differs significantly from the current law, which provides that if a consumer
seeks to exercise the right to reject, but is persuaded by the retailer to allow one
or more attempts at repair, then the right to reject is suspended. If the repair(s)
fails, the consumer may exercise the right to reject.⁴⁸

Consumers should not be discouraged from attempts at cure

3.121 The majority of respondents disagreed with our provisional proposal. There was
general concern that it would discourage consumers from agreeing to attempts at
cure, because in doing so they would lose the right to reject. It was felt that
attempts at cure should be encouraged where acceptable to both parties, and the
consumer should not be penalised for being cooperative.

3.122 Retailers, academics, and consumer groups alike feared the proposal would lead
to an undesirable reduction in repairs, as consumers would be advised not to risk
repair. For example, the British Retail Consortium said:

-¦ We believe that if a consumer who waives his right to a refund in
the first 30 days in favour of a repair or replacement loses his right to
a refund if the repair or replacement also fails, then consumers will
learn simply to demand a full refund in the first 30 days and start
again. This would be detrimental where a simple repair would have
been possible and should have been tried.

3.123 In view of the feedback we have received, we are persuaded that the current law
should be retained. It is important that the law should not discourage consumers
from accepting repairs.

⁴⁸ SoGA, s 35(6)(a). This provision in SoGA was introduced following a recommendation
made by the Law Commissions in 1987. The objective of that recommendation was to
encourage attempts at repairs.

3.124 In the context of our recommendation for a period of 30 days in which the right to
reject should normally be exercised, we consider that where a consumer has
initially sought to reject goods, but accepts the trader's offer of repair, the
consumer should be able to argue that they need longer than 30 days in which to
test goods. This is because it would be within the contemplation of both parties
that the consumer would need to inspect goods following repair.

3.125 We recommend that the 30-day period should be suspended whilst repairs
or negotiations about repairs take place. Where a consumer discovers a
fault within 30 days and seeks to exercise the right to reject, but accepts
the trader's offer of repair, or where there are negotiations about the
possibility of repair, the 30-day period should be suspended.

3.126 Section 30 of SoGA provides consumers with a choice between exercising the
right to reject or asking for a cure where the seller has delivered the wrong
quantity of goods. Under the European Commission's proposed directive, as
drafted, consumers would not be entitled to exercise the right to reject goods.

3.127 In the Consultation Paper, we invited views on whether there are reasons to
retain section 30 of SoGA for consumer sales, or whether cases of wrong
quantity can be dealt with through the application of general principles applying to
non-conforming goods, that is the application of the duty to provide goods that
correspond to their description.⁴⁹ Generally, consultees doubted that the duty to
deliver the correct quantity of goods may be thought of as an application of the
more general duty to provide goods which correspond to their description.
Consultees tended to see section 30 as a reasonable, sensible and logical set of
rules to deal with the wrong quantity of goods being delivered.

3.128 Professor CJ Miller was among those who made the point that wrong quantity
does not necessarily fall within section 13 of SoGA which relates to description.
Professor Roy Goode shared that view, and commented:

I do not agree that delivery of the wrong quantity goes to description,
since this is concerned with the identity of the subject matter of the
contract.

3.129 Some consultees also expressed doubt about whether wrong quantity amounted
to non-conformity under the CSD. In view of this, and the doubt that wrong
quantity should be dealt with as a breach of the implied term as to description, we
think that the provisions of section 30 of SoGA should be retained.

3.130 We recommend that the provisions of section 30 of SoGA, which sets out
remedies for consumers where a retailer delivers the wrong quantity of
goods, should be retained.

⁴⁹ SoGA, s 13.

THE DOMESTIC REMEDY OF DAMAGES

4.1 As we mentioned in Part 2 of this Report, the Sale of Goods Act 1979 (SoGA)
provides that where goods are faulty, the buyer may be entitled to damages.
Damages may be payable both where the buyer has rejected the goods,1 and
where the buyer has not rejected them.²

4.2 Generally, there are two types of loss for which a consumer buyer might seek
compensation:

(1) The difference in value. Where the buyer keeps the goods, this is the
difference between the value of the goods contracted for and the value of
the goods actually received. Where the buyer has rejected the goods, it
is the difference between the contract price and the current market price.

(2) Any consequential losses, including any injuries or damage to other
property caused by the faulty goods.

4.3 The general contractual limits on foreseeable losses apply, so that consequential
losses will only be recoverable if they were within the reasonable contemplation
of the parties at the time of the sale.³

RETENTION OF THE DOMESTIC REMEDY OF DAMAGES

4.4 Throughout this project, there has been strong support from stakeholders for
retention of the domestic remedy of damages. This was reflected in the
responses to the consultation.

4.5 Consultees described damages as an essential element of our remedial system;
a useful "catch all" and flexible enough to deal with a variety of situations. They
pointed out that there are some circumstances where the other legal remedies
are not sufficient, bearing in mind that consumers should be compensated by
being put into the position in which they would have been had the goods
conformed to the contract. For example, by the time consumers go to court, they
often claim damages for the cost of repair or replacement, having had no
alternative but to arrange for repair or replacement themselves. Others noted that
a claim for damages requires consumers to mitigate their loss, which is sensible
and beneficial.

¹ SoGA s 51 allows the buyer to receive the difference between the contract price and the
current market price.
² Above, ss 53 (for England) and 53A (for Scotland).
³ The general rule is derived from Hadley v Baxendale (1854) 9 Exch 341. See also SoGA,
ss 53 (for England) and 53A (for Scotland).

GUIDANCE ON DAMAGES
4.6 A secondary issue that was brought to our attention is that in practice there is a
considerable amount of uncertainty about the circumstances in which a consumer
may claim damages with respect to faulty goods. Office of Fair Trading research
has shown that it is not uncommon for consumers to experience financial loss
due to faulty goods.⁴ However, it appears that consumers rarely claim for such
financial loss. There is even greater confusion about whether consumers can
claim for non-financial loss, such as disappointment, distress and inconvenience.

4.7 In the Consultation Paper, we sought views on whether the issue of damages
should be left to the common law or whether guidance would be helpful on the
circumstances in which damages should be payable to consumers. In particular,
should damages be available for loss of earnings, distress, disappointment, and
inconvenience? If so, for which types of goods, and in which circumstances?

4.8 The majority of respondents felt that guidance would be useful so that consumers
are more aware of when damages are and are not available. The Bar Council's
response reflected the view of the majority:

Guidance as to what the common law states might be helpful, in
particular for litigants in person or their advisers who frequently plead
such claims unsuccessfully.

4.9 Some consultees commented on the circumstances in which damages should be
payable. Most considered that damages should be payable where quantifiable
financial loss within the contemplation of the parties flows from the breach of
contract. This would include proven loss of earnings and other costs. That was
seen as a fairly non-contentious matter.

4.10 Non-financial loss, such as distress, disappointment, and inconvenience were
more contentious topics. However, the majority of those who expressed a view
on such potential heads of loss favoured the possibility of recovery in appropriate
cases. For example, the Institute of Consumer Affairs wrote:

Clear guidelines should be produced, this will be helpful for
consumers, traders and consumer advisers. All types of goods should
be covered and any monetary loss made good. It is obviously more
difficult to adduce damages for more abstract features such as
distress and loss of enjoyment but nevertheless we see no reason
why, if sufficient justification is produced, these should not be
included.

4.11 In our view, guidance on damages should include the following heads.

⁴ OFT, Consumer Detriment: Assessing the frequency and impact of consumer problems
with goods and services (April 2008).

Damages for financial loss

4.12 We have mentioned the possibility of a claim for the difference in value.⁵ The
consumer may also seek damages where they incurred quantifiable financial loss
in terms of expenses in obtaining substitute goods, or otherwise as a result of the
breach of contract. Examples include travel costs and telephone calls.⁶

4.13 Damages will be recoverable where the goods themselves are damaged due to
their defective condition. A leading textbook on the sale of goods gives the
example of a collision due to defective brakes causing further damage to a motor
vehicle.⁷

Damages for non-financial loss

4.14 Damages will be recoverable for loss which is within the reasonable
contemplation of the parties where the faulty goods cause physical injury to the
buyer, their property or family.⁸

4.15 Other non-financial loss, such as distress, disappointment and inconvenience are
more contentious topics. However, the law does allow for these heads of
damages where pleasure or peace of mind is a major or important part of the
contract.⁹

4.16 The main case in English law is Farley v Skinner.¹⁰ In this case, Lord Steyn cited
Bingham LJ in Watts v Morrow:11

A contract-breaker is not in general liable for any distress, frustration,
anxiety, displeasure, vexation, tension or aggravation which his
breach of contract may cause to the innocent party. This rule is not, I
think, founded on the assumption that such reactions are not
foreseeable, but on considerations of policy.

⁵ See para 4.2(1), and SoGA, s 51(3). If, at the time of breach, the market price is the same
as or lower than the contract price, the buyer is entitled to nominal damages.
⁶ See Samuels v My Travel Tour Operations Ltd (t/a Cresta Holidays) [2005] CLY 1979
(Barnet County Court), where the consumer sued the travel operator for damages for
breach of contract regarding a luxury holiday; the judge awarded Â£135 to compensate the
claimant for expenses including taxi fares and telephone calls.
⁷ Benjamin's Sale of Goods (7th ed) 2006 at 17-073.
⁸ Benjamin's Sale of Goods (7th ed) 2006 at 17-072. Damages may also be available in
certain circumstances under the Consumer Protection Act 1987, but such a claim would
normally be against the producer.
⁹ Benjamin's Sale of Goods (7th ed) 2006 at 17-071. See also Lord Steyn in Farley v Skinner
[2002] 2 AC 732 at p 750.
¹⁰ Farley v Skinner [2002] 2 AC 732.
¹¹ [1991] 1 WLR 1421.

But the rule is not absolute. Where the very object of a contract is to
provide pleasure, relaxation, peace of mind or freedom from
molestation, damages will be awarded if the fruit of the contract is not
provided or if the contrary result is procured instead. If the law did not
cater for this exceptional category of case it would be defective.¹²

4.17 In Farley v Skinner, Lord Steyn noted some cases where damages had been
awarded because the object of the contract had been to provide pleasure,
relaxation, or peace of mind. These included: Diesen v Samson which concerned
a photographer who failed to turn up at a wedding;13 Jarvis v Swans Tours Ltd
which concerned a disastrous holiday;14 and Jackson v Chrysler Acceptances Ltd
detailed below.¹⁵

4.18 In Jackson v Chrysler Acceptances Ltd, the consumer agreed to the hire
purchase of a car from the defendant finance company. The consumer made
clear to the plaintiff that he wanted the car for a family trip to France. The car was
faulty and spoilt the holiday. The judge awarded Â£75 for the spoilt holiday. The
Court of Appeal increased the total damages awarded, some of the increase
being attributable to a finding that Â£75 was not sufficient compensation for the
spoilt holiday. It should also be noted that in Bernstein, which concerned another
faulty car, the judge awarded the buyer damages for a ruined day out occasioned
by the breach of contract.¹⁶

4.19 The Scottish courts also award damages for trouble and inconvenience resulting
from a breach of contract.¹⁷ In Smith v Park, which concerned a second-hand car,
the court held that the breach of contract had caused the buyer considerable
trouble, inconvenience and expense.¹⁸ The court awarded the buyer damages of
Â£75, based on the trouble and inconvenience caused. Sheriff Croan said:

The case of Webster & Co. v Cramond Iron Co (1875) 2 R 752 is
authority for the view that when a contract is broken and the pursuer
has been put to trouble and inconvenience even though no specific
damage is proved the pursuer is entitled to an award of damages.¹⁹

¹² At 745, citing Bingham LJ in Watts v Morrow [1991] 1 WLR 1421 at 1445.
¹³ 1971 SLT (Sh Ct) 49.
¹⁴ [1973] QB 233.
¹⁵ [1978] RTR 474.
¹⁶ Bernstein v Pamson Motors (Golders Green) Limited [1987] 2 All ER 220.
¹⁷ See McBryde, The Law of Contract in Scotland (3rd ed 2007) para 22-99.
¹⁸ 1980 SLT (Sh Ct) 62. This case concerned breach of the duty under the Supply of Goods
(Implied Terms) Act 1973, s 3.
¹⁹ Above, p 63.

4.20 In Mack v Glasgow City Council a tenant sought damages from a landlord for the
inconvenience of having to live in unpleasant conditions resulting from the
landlord's failure to keep the flat in a habitable condition.²⁰ The court held that
where a breach of contract caused inconvenience, that inconvenience might be
reflected in an award of damages, which would not be confined to nominal
damages.²¹ The court stated that it would look at the true nature of the claim and
award damages for inconvenience.

4.21 Several consultees, such as Consumer Focus, responded that the common law
was adequate on the question of damages, but that the real difficulty is informing
consumers and their advisers about the law on damages. Consumer Focus
responded:

The difficulty is that even in Scotland, where the principle of damages
for trouble and inconvenience is more clearly settled, it seems not to
be one that is well-known to consumers and their advisers. This
raises wider issues about informing consumers of their rights and is
best dealt with in discussing that problem.

4.22 In our view, if clear and helpful guidance on damages were issued, as we
recommend, it would serve as a useful tool in the education of consumers and
retailers. It would also assist consumer advisers.

4.23 Respondents to the recent Consumer Law Review undertaken by the Department
for Business, Enterprise and Regulatory Reform highlighted gaps in knowledge of
consumer rights.²² The Government intends to appoint a new Consumer
Advocate who will improve the co-ordination and effectiveness of consumer
education.²³ We hope that the Consumer Advocate will give consideration to who
is best placed to draft guidance on damages, and the other areas of law with
regard to which we recommend that guidance should be issued.

4.24 We recommend that the domestic law on damages should be retained.

4.25 We recommend that guidance should be drafted and issued on the
circumstances in which consumers can claim damages to compensate
them where they have purchased goods which do not conform to contract.

²⁰ 2006 SC 543.
²¹ Above, paras 7 and 15, citing Webster v Cramond Iron Co. (1875) 2 R 752 as authority. In
Scots law, damages are also awarded for mental distress (solatium); see MacQueen and
Thomson, Contract Law in Scotland (2nd ed, 2007), para 6.28. Solatium can provide the
basis of a claim where, because of the nature of the contract, the likelihood of distress was
or ought to have been in the contemplation of the defender at the time of the contract.
²² Consumer Law Review Call for Evidence, Summary of Responses (July 2009). Available
at www.berr.gov.uk/files/file52071.pdf. The Department for Business, Enterprise and
Regulatory Reform is now the Department for Business, Innovation and Skills (BIS).
²³ White Paper: A Better Deal for Consumers (July 2009) pp 8 and 60.

PART 5
THE RIGHT TO REJECT IN OTHER SUPPLY OF
GOODS CONTRACTS

5.1 In the Consultation Paper, we discussed how other supply of goods contracts
should be treated, for example work and materials contracts, exchange, hire and
hire purchase contracts. In these contracts, unlike sales contracts, the right to
reject is not lost by acceptance. In England and Wales, the right to reject
continues until the contract has been affirmed. Affirmation can only take place
once the consumer is aware of the fault. Similarly, in Scotland, the right to reject
is lost when the consumer, through words or conduct, waives the right to reject.

THE PROBLEM WITH THE CURRENT LAW

5.2 During this project, many stakeholders have told us that it is undesirable that
different rules apply depending on the method of purchase, because it adds to
the complexity of the law. The effect can be illustrated by looking again at the
washing machine scenario we set out in paragraph 3.40 of this Report. We raised
the question of whether the consumer in that scenario would have the right to
reject. The applicable law is different if a consumer purchases a washing
machine on hire purchase or as part of a fitted kitchen, as opposed to a straight
sale. Generally, a consumer has longer to exercise the right to reject under a hire
purchase agreement, or a work and materials contract.

5.3 The courts have struggled with this issue. In Jones v Gallagher the buyers had
made some complaints about a fitted kitchen soon after the work was done.¹
Some remedial work was undertaken but further complaints were made. The
buyers then tried to reject the kitchen five months later. The Court of Appeal held
that they could not do so as they had accepted the kitchen. The validity of this
decision has been doubted because the Court of Appeal appears to have
erroneously considered acceptance within the meaning of the Sale of Goods Act
1979. The court should have considered whether the contract had been affirmed,
as the transaction in Jones was not one of sale, but a contract for work and
materials.

5.4 If judges and lawyers are confused by the law in this area, it is unrealistic to
expect consumers to understand it. We know that consumers seldom obtain legal
advice in consumer disputes. Moreover, some consumer advisers have told us
that they find it difficult to advise consumers on this area. Even though the law is
theoretically more favourable to consumers, we doubt whether it is often used
because it is so complex. The majority of consultees expressed the view that it is
paramount that the law should be simple enough for consumers to understand
and use.

¹ Jones v Gallagher (trading as Gallery Kitchens and Bathrooms) [2004] EWCA Civ 10;
[2005] 1 Lloyd's Rep 377.

5.5 The UK Government's recent White Paper highlights the need for simplification
and uniformity of the law where possible. The Department for Business,
Innovation and Skills ("BIS", previously the Department for Business, Enterprise
and Regulatory Reform) began a Consumer Law Review in May 2008. Under the
heading of "Sale and supply of goods and services" the White Paper states:

Responses to the Consumer Law Review suggested that there would
be strong benefits for business, consumers and enforcers from a
coherent consolidated law which as far as possible minimised the
differences between different types of contract and different manners
of purchase.²

5.6 The White Paper also states the Government's aims in relation to the
modernisation of consumer law, based upon the Consumer Law Review, one of
which is that: "Consumer rights should be accessible to the many, not the few."3

THE CONSULTATION PAPER
5.7 At an early stage, we were made aware that this was a contentious issue. Whilst
many pointed out the undesirable complexity of the law, there was no consensus
as to how it should be simplified.

5.8 We considered whether our proposal for a 30-day normal period for exercising
the right to reject goods should also apply to other supply of goods contracts. We
thought that the arguments differed between contracts where property passes
(such as work and materials contracts, hire purchase, exchange and barter) and
those where property does not pass (such as hire contracts). However, we
reached no concluded view. On the one hand, we thought that removing the
distinction would simplify the law. On the other hand, we had been told that
affirmation/waiver is an important safeguard for consumers in certain contracts
where faults may not be apparent for some time.

5.9 We asked consultees whether the 30-day normal period for exercising the right to
reject should also apply to other supply of goods contracts in which property is
transferred, or whether the current law should be retained. Respondents" views
were split with half in favour and half against.

Arguments in favour of the 30-day normal period applying to other supply
of goods contracts where property is transferred

5.10 The Office of Fair Trading (including Consumer Direct) were among those who
argued that the benefits of simplicity of the 30-day period applying to these
contracts would outweigh any perceived loss of consumer rights. They pointed
out that consumers generally do not know about these rights and therefore there
would be little practical detriment; the proposal would bring greater benefits to
consumers as they would benefit from simplification of the law.

² A Better Deal for Consumers (July 2009) para 4.2.4.
³ Above, p 9.

5.11 Others agreed that simpler law would benefit consumers, advisers and retailers.
Some said it did not make sense to have different rights if a faulty cooker was
bought as part of a fitted kitchen, as opposed to a free-standing model bought
separately. Several consultees considered that it was difficult in practice to
distinguish a sale contract from a contract to supply goods and services. Courts
struggled with this classification as well as the application of the law on
acceptance as opposed to affirmation (as seen in the Jones case).4

5.12 The Association of Her Majesty's District Judges responded:

The Consultation Paper points out rightly the difficulty often
encountered in analysing which type of contract is applicable. In our
view, in any contract where property which is substantial (within the
context of the contract) is transferred, the same rules should apply as
for sales of goods, even if this in theory means a possible reduction in
consumer protection.

Arguments against the 30-day normal period applying to other supply of
goods contracts where property is transferred

5.13 Many of those who argued against this did so on the basis that the current law
should be retained, expressing the view that the arguments for uniformity do not
outweigh the reduction of consumers" rights. Several said that they could see no
justification for a change in the law, and there was no evidence of it causing
unfair results in practice.

5.14 The Local Authorities Co-ordinators of Regulatory Services expressed concern
that a 30-day period would operate particularly harshly in these contracts. Others
pointed out that in many of these contracts the consumer is much more reliant on
the trader who has selected, obtained, examined and fitted the goods on the
consumer's behalf. In these cases it is common for the consumer to rely on the
trader's expertise, skill and advice in relation to the goods.

5.15 The Council of Her Majesty's Circuit Judges concurred that the current law
should be retained, and said that faults in these contracts often take longer to
appear:

Although we see benefit in simplifying the law to substitute the 30-day
rejection period in supply contracts other than simple sale of goods
contracts, we do not consider that the benefit of simplification should
outweigh the views of consumer groups as to the advantages of the
different regimes in contracts of work and materials and exchange,
particularly as, in those contracts, it is more often than not that
defects may take a substantial time to manifest themselves. We
therefore consider that the current law should be retained.

5.16 Which? expressed the view that a single remedies regime based upon
affirmation/waiver should apply to both sales contracts and supply contracts.
They suggested that this would increase clarity and provide more appropriate
protection.

⁴ See para 5.3 above.

5.17 This is a particularly difficult area because of the diversity of views among
consultees. The arguments are finely balanced. However, we are mindful of the
policy expressed in the Government's White Paper.⁵ We are persuaded that the
law requires simplification so that it can be used by consumers, explained by
consumer advisers, and understood by retailers.

5.18 The current law is not satisfactory, not merely because it is not widely known, but
also because its application presents problems in practice. The main benefit of
the current law for consumers is that the right to reject can be exercised for
defects of which the consumer is not aware for some length of time, such as
latent defects. In paragraph 3.35 of this Report we recommend that the right to
reject should be retained as a short-term remedy, and should not be available for
defects which are discovered only after a period of time. One of the reasons for
that conclusion was the difficulty in accounting for interim use, illustrated in hire
purchase cases.⁶ These cases also highlight problems with the application of the
law on affirmation/waiver.

5.19 Affirmation is not necessarily a straightforward concept. It has its own
complexities, as it shares much in common with the principle of "acceptance" in
the Sale of Goods Act 1979 (SoGA) which has been heavily criticised by
consultees. Our summary of the law, in paragraphs 2.41 and 2.42 of this Report,
explains that affirmation may be implied by the buyer's actions; it may also be
deemed if the buyer's delay is of such a length as to constitute evidence of
affirmation. This is very similar to the problematic concept of deemed acceptance
under SoGA where the buyer retains goods beyond a reasonable time. The
courts take many of the same factors into account, such as the conduct of the
parties, repairs, negotiations and the nature of the goods. If the aim is to simplify
the law, then the vehicle for simplification should not be affirmation.⁷

5.20 Whilst some fear that the 30-day normal period might operate particularly harshly
in supply of goods contracts, it ought to be noted that according to our
recommendation the period does not start to run until the date of purchase,
delivery or completion of contract,8 whichever is later. So, for example, in a work
and materials contract, where goods are under the control or possession of a
trader for a prolonged period, or where the trader takes some time to finish the
job, so that the consumer is unable to examine the goods, the 30-day period will
not begin to run until work is complete.

⁵ See paras 5.5 and 5.6 above.
⁶ See paras 2.44 to 2.45.
⁷ The same can be said of the law of waiver in Scotland.
⁸ The period cannot start to run until "delivery" has taken place. This means that the
consumer must have material possession of the goods. The goods must be in the
consumer's control so that the consumer has the opportunity to test the goods in use.

5.21 It should also be noted that the 30-day normal period is a standard period and not
an absolute fixed period. Therefore, account can be taken of circumstances
rendering it reasonably foreseeable that the consumer will need longer than 30
days to inspect the goods and to try them out in practice. A typical example in a
work and materials contract would be double-glazing or a conservatory fitted or
built in summer. It would be within the contemplation of the parties that the
consumer might need longer than 30 days to test the goods in use - the
consumer would need to check the windows were watertight in storm conditions.

5.22 A further point to consider is that the Consumer Sales Directive applies to work
and materials contracts.⁹ This means that, for that type of contract, if a consumer
does not have the right to reject because they are out of time, other remedies are
available such as repair or replacement.

5.23 We invited views on the issues raised by hire purchase contracts, in particular
whether they should be treated as supply contracts to transfer property in goods,
or analogous to hire contracts. Respondents" views were split with approximately
half thinking that hire purchase should be treated as a supply contract to transfer
property in goods and the other half thinking that hire purchase should be treated
in a different way. Only two thought hire purchase contracts should be treated as
analogous to hire contracts.

5.24 Hire purchase is still an important method of financing car purchases for
consumers. The Finance and Leasing Association said:

In 2007, 63% of the consumer motor finance agreements written (for
the purchase of new and used cars) were hire purchase agreements.
It remains, therefore, the most popular method of finance for
purchasing vehicles.

5.25 We have also been informed that hire purchase is still used in the purchase of
household appliances and goods. In the vast majority of hire purchase contracts,
it is envisaged by the parties that the transaction will result in a transfer of
property to the consumer, and more often than not, the transaction does end in
the transfer of ownership. In a relatively small proportion of cases, the transaction
does not end in the transfer of ownership. This is more likely where the hirer is
required to make a large "balloon" payment at the end of the agreement if they
wish to obtain ownership.¹⁰ As the Bar Council wrote:

The popularity of agreements which carry a large "balloon" payment,
rather than a typical small option to purchase fee, has complicated
the picture. It is accordingly difficult to align hire purchase with either
sale or hire, since traditional hire purchase is very similar to sale, but
the "balloon" agreements perhaps have more in common with hire.

⁹ See paras 2.47 to 2.49 of this Report for a more detailed summary of the application of
CSD remedies to supply of goods contracts.
¹⁰ In these cases, at the end of the contract, the hirer has the choice of making the large
balloon payment to acquire ownership, or alternatively not making the balloon payment
and terminating the contract without acquiring ownership.

5.26 However, even where a transfer of ownership does not occur in practice, the hire
purchase contract gives the consumer the right to own the goods if they make all
the payments. That right does not exist in pure hire contracts. We therefore
consider that for the purpose of our 30-day normal period recommendation and
the right to reject, hire purchase transactions should be treated in the same
manner as contracts where property is transferred.

5.27 We recommend that the 30-day normal period should apply to supply of
goods contracts where property is transferred (such as work and materials
contracts and exchange and barter). It should also apply to hire purchase
contracts.

5.28 As discussed in paragraph 2.48 of this Report, the CSD does not apply to hire
purchase contracts. This means that consumers do not have the right to request
repair or replacement of faulty goods. The House of Lords European Union
Committee recently conducted an inquiry on the European Commission's
proposal for a consumer rights directive.¹¹ We note that several stakeholders
thought that hire purchase should be included within the scope of the proposed
directive so that the hirer would have additional remedies.

5.29 In the Consultation Paper, we provisionally proposed that for hire contracts the
current law should be preserved.

5.30 The current law is that when goods develop a fault, the consumer is entitled to
terminate the contract, paying for past hire but not future hire. The doctrine of
affirmation applies to the exercise of the right to reject. However, the monthly hire
charge is a convenient basis for valuing use. It seems legitimate that the trader
continues to have an obligation to ensure that the goods conform to contract
throughout the period of hire because the trader retains ownership of the goods.
It is not envisaged that the consumer will benefit from a future transfer of
ownership. The consumer is only paying for the use of goods. The argument that
the consumer should be able to exercise the right to reject once they become
aware of a fault which interrupts use is persuasive.

5.31 The vast majority of respondents agreed with this proposal, on the basis that the
current law appears to be understood and operate well in practice. The Judges of
the Court of Session succinctly represented the views of the majority in saying:

We consider that the law as it presently stands appears to be
understood and operate well in practice. In these circumstances we
consider that there is neither demand, nor justification, for innovation
in the law.

5.32 The CSD does not apply to hire contracts, so that consumers do not have the
right to request repair or replacement.

¹¹ EU Consumer Rights Directive: getting it right, Volume I: Report of the House of Lords
European Union Committee (2008-09) p 26.

5.33 We recommend that the current law on the right to reject for hire contracts
should be preserved.

PART 6
REFORMING THE CONSUMER SALES DIRECTIVE

6.1 The UK implemented the Consumer Sales Directive (CSD) in 2002. In 2004, the
European Commission launched a review of the eight consumer protection
directives.¹ The European Commission published a proposal for a new directive
on consumer rights in October 2008.2 This is intended to reform four existing
consumer protection directives, including the CSD.

6.2 The provisional proposals in our Consultation Paper were put forward as part of
the current debate within the EU about how the CSD should be reformed, and
aimed at improving the remedies in it. As well as forming part of the European
debate, it may be possible to implement some reforms in the UK only, provided
that any replacement of the CSD continues to be a measure requiring only
minimum harmonisation.

6.3 The proposed directive has been drafted as a measure of maximum
harmonisation, which would mean that member states could not maintain or
adopt provisions diverging from those it lays down. In contrast, minimum
harmonisation means that member states may maintain or adopt measures which
give greater rights.

6.4 The European Commission's rationale for maximum harmonisation is that it
would decrease fragmentation and increase legal certainty. The European
Commission believes that this will contribute to the better functioning of the
business-to-consumer internal market by enhancing consumer confidence in
the internal market and reducing businesses" reluctance to trade cross-
border.³ Meglena Kuneva, the European Commissioner for Consumer Affairs,
has expressed particular concern about the low level of consumers currently
engaging in cross-border purchasing.

6.5 We note that stakeholders have expressed doubts about whether the proposed
consumer rights directive, as a measure of maximum harmonisation, will achieve
its objective of increasing cross-border retail transactions.

6.6 The House of Lords European Union Committee conducted an inquiry into the
proposed consumer rights directive, in which it received evidence from
stakeholders. In its report, the Committee questioned the ability of the proposal
as drafted to deliver the European Commission's desired increase in cross-
border trade:

¹ European Commission, European Contract Law and the revision of the acquis: the way
forward COM (2004) 651 final.
² Proposal for a directive on consumer rights, COM (2008) 614 final, see
http://ec.europa.eu/consumers/rights/cons_acquis_en.htm.
³ Proposal for a directive on consumer rights, COM (2008) 614 final, see "Explanatory
Notes" and Recital 8.

We consider that the Government should withhold agreement from
the proposal as drafted. We are unconvinced that it will deliver the
desired boost in trade across borders and we fear that, in some
instances, it may reduce the overall level of protection currently
afforded to consumers. The proposal should not be abandoned, but
some of the issues as highlighted in this report must be revisited. -¦

We agree that there is a need to update the existing Directives. -¦The
[European] Commission's solution is to apply the principle of "full
harmonisation", whereby Member States" national rules will no longer
diverge from those set at the EU level. We acknowledge that this
could increase legal certainty for both consumers and businesses.
Nevertheless, we would prefer to see a more targeted use of this
principle, harmonising certain aspects but allowing Member States
room to manoeuvre in other areas.⁴

6.7 The report continues:

We recommend that the [European] Commission gives further
consideration to other factors, such as language, culture, distance of
delivery and handling of cross-border complaints, and the extent to
which these may also be responsible for current low levels of cross
border retail trade.⁵

6.8 Below we discuss why we agree with the House of Lords European Union
Committee, and think that the proposed directive should not be agreed without
substantial changes to Chapter IV: Other consumer rights specific to sales
contracts.

6.9 In Part 3 of this Report,6 we recommend that the right to reject should be retained
as a primary remedy in the UK. In the context of the proposed directive, this could
be achieved in at least three ways. Firstly, if the proposed directive were adopted
as a measure of minimum harmonisation, this would permit the UK government
to provide greater rights than those laid down by the proposed directive.
Alternatively, the proposed directive could be adopted as a measure of maximum
harmonisation incorporating the right to reject.

6.10 A third alternative, which has recently been debated by commentators and
stakeholders, is "differentiated harmonisation", also known as "targeted full
harmonisation".7 This would mean that harmonisation would be targeted at areas
of consensus and, for example, that the right to reject might be excluded from the
scope of full harmonisation. Consequently, the UK could retain its right to reject,
and other member states could retain theirs.

⁴ EU Consumer Rights Directive: getting it right, Volume I: Report of the House of Lords
European Union Committee (2008-09) p 5.
⁵ EU Consumer Rights Directive: getting it right, Volume I: Report of the House of Lords
European Union Committee (2008-09) p 15.
⁶ See para 3.35.
⁷ For example, see EU Consumer Rights Directive: getting it right, Volume I: Report of the
House of Lords European Union Committee (2008-09) p 19, paras 58-60.

The right to reject

6.11 In Part 3 of this Report we explain our conclusion that if there is a need for the
maximum harmonisation of laws across the EU, there is a strong argument that
the harmonised regime should incorporate a right to reject.⁸ This argument has
gained strong support. For example, in its submission to the House of Lords
European Union Committee, with respect to the European Commission's
proposal for a consumer rights directive, the British Retail Consortium wrote:

For example, we support the introduction of a right to get a full refund
for defective goods in the first 14 or 30 days, with a reversed burden
of proof - provided it can be agreed on a full harmonisation basis.

-¦in our view the appropriate way forward would be to change the
Directive to introduce a right to reject for a limited period of 14 or 30
days. This would be an alternative to repair or replacement for that
period - though these should remain options for the consumer.⁹

6.12 In a recent article, Dr Christian Twigg-Flesner wrote that our proposals could
provide a template for a better EU-wide scheme:

Therefore, it is submitted that the Law Commission's proposals
should be given very serious consideration by the European
legislator. Adopting this on an EU-wide basis would provide a set of
consumer remedies which would be more favourable and might stand
a better chance of encouraging consumers as well as traders to take
advantage of the internal market. It would also be appropriate where
the non-conformity is the lack of goods" fitness for the particular
purpose for which the consumer requires them.

It seems more likely that a consumer might buy goods abroad if he
has the opportunity of getting the quick remedy of a full refund if they
do not work, rather than being locked into a circle of repair and
replacement.¹⁰

⁸ See paras 3.20 to 3.24.
⁹ EU Consumer Rights Directive: getting it right, Volume II: Evidence House of Lords
European Union Committee (2008-09) pp 155 and 159.
¹⁰ Dr Christian Twigg-Flesner, "Fit for purpose? The proposals on sales" in G Howells and R
Schulze (eds), Modernising and Harmonising Consumer Contract Law (2009).

A cycle of failed repairs

6.13 During the course of our review, stakeholders repeatedly told us that clarification
of how the CSD operates is required. In particular, there was confusion about
how a consumer can move from first tier to second tier remedies. What amounts
to "unreasonable delay" and "significant inconvenience"? In practice, these terms
allow considerable scope for dispute. Consumers are particularly concerned
about becoming locked into a cycle of failed repairs, because it is difficult to prove
that an unreasonable delay or a significant inconvenience has been caused. For
example, after how many repair attempts can a consumer say they have been
significantly inconvenienced? Our research among European Consumer Centres
shows that there is no consistency; member states have different approaches to
this question and it is a problem area.

6.14 The consumer suffers financial and non-financial losses as a result of failed
repairs and replacements. For example, the cost of telephone calls, travel,
obtaining expert advice and assistance, and time off work.¹¹ These costs have a
greater effect on consumers with lower incomes.

6.15 Which? summarised a recent case they had advised on which illustrates that the
question of numerous repairs can prove to be a problem under the CSD regime:

A car was purchased for more than Â£30,000. The car developed an
electrical fault which meant that control of certain functions of the car
was lost. For example, the windows would open without warning,
which made it difficult to leave the car parked.

Sometimes the effects were more serious. Once the electrical fault
caused the engine to start and the car lurched forward whilst parked.
Another time the car accelerated to 60 mph without warning. The
consumer had to drive the car into a lay-by and apply the brakes
while the wheels continued to spin at 60 mph.

As a result of a total loss of confidence in the car, the consumer was
unable to drive it and was forced to cancel a holiday. The dealer
refused the consumer's attempt to reject the car, on the ground that
the consumer was out of time. Instead, the dealer attempted to repair
the car. After each repair, initially the problems appeared to have
been corrected, but would then return soon after.

The consumer became locked into a cycle of failed repairs. Each time
remedial work was carried out it was done quickly and efficiently and
within a reasonable time, and so in practice each repair in isolation
could not be said to have caused significant inconvenience; as such it
is questionable that the right to rescind was triggered under the CSD.
Ultimately, the consumer purchased another car while the faulty car
remained in his garage for approximately two years.

¹¹ The Office of Fair Trading Consumer Detriment: Assessing the frequency and impact of
consumer problems with goods and services (April 2008).

6.16 The European Commission has made some suggestions for reform in its
proposed consumer rights directive. For example, it proposes to allow consumers
to proceed to a second tier remedy where "the trader has implicitly or explicitly
refused to remedy the lack of conformity" or where "the same defect has
reappeared more than once within a short period of time".12 However, we are
concerned that those proposals do not provide sufficient clarity. They raise further
difficult questions. For example, what is a short period of time? What constitutes
implicit refusal? We consider that further clarification is needed. In our view, that
clarification is generally best dealt with at a European level, and it should be
provided within the new directive.

CLARIFYING WHEN CONSUMERS MAY MOVE TO A SECOND TIER
REMEDY: "REASONABLE TIME" AND "SIGNIFICANT INCONVENIENCE"

6.17 In the Consultation Paper we made several proposals to clarify the CSD. Firstly,
we provisionally proposed that the directive which replaces the CSD should state
that after two failed repairs, or one failed replacement, the consumer is entitled to
proceed to a second tier remedy.

6.18 All respondents who expressed a view appeared to agree that the law requires
clarification in this area. Most pointed out that the benefit of our proposal would
be that it would introduce a much needed measure of certainty.

6.19 One-third of respondents agreed with our proposal. Another third said our
proposal should have gone further, namely, to allow a consumer to proceed to a
second tier remedy after one failed replacement or one failed repair.

6.20 This means that a combined total of two-thirds of respondents felt that consumers
should be able to proceed to a second tier remedy after one failed replacement,
and either one or two failed repairs. Many argued that it would be clearer and
more consistent to equalise the number of attempts at repair or replacement that
are permitted before the consumer should be entitled to proceed to a second tier
remedy. We find that argument persuasive. We think it would be beneficial if the
directive were to provide such a level of clarity, which would be easy for
consumers and traders to understand.

6.21 We recommend that the directive which replaces the CSD should state that
after one failed repair or replacement, the consumer is entitled to proceed
to a second tier remedy.

6.22 Our second provisional proposal was that further guidance should be provided
stating that the consumer should be entitled to rescind the contract, either after
one failed repair where the product is in daily use, or immediately where the
product is essential, unless the retailer has reduced the inconvenience to the
consumer by, for example, offering a temporary replacement or a 24-hour repair.

¹² Proposal for a directive on consumer rights, COM (2008) 614 final, see
http://ec.europa.eu/consumers/rights/cons_acquis_en.htm, art 26(4)(a) and (d).

6.23 In our view, the category of essential items should be a narrow one, consisting of
only those types of goods on which people are particularly dependent for their
health, safety or well-being. These might include items such as wheelchairs, stair
lifts, and hearing aids, the absence of which must by their very nature amount to
significant inconvenience; and such a level of inconvenience that it would be
unreasonable to expect a consumer to tolerate it. For such items, a repair might
be unsatisfactory unless a temporary replacement was provided.

6.24 Many consultees had previously indicated their support for the proposal that the
consumer should be entitled to rescind the contract after one failed repair when
responding to the previous question. As a result, the response rate for this
question was relatively low. Of those who did respond, about half agreed with the
proposals. The remainder made other suggestions, some of which were more
generous to the consumer, such as that the consumer should be able to rescind
immediately where the product is in daily use as well as where the product is
essential.

6.25 We have concluded that the consumer should be entitled to rescind immediately
where the goods fall into the narrow category of genuinely essential items we
have described. We think this change would be important if the right to reject we
have recommended is not incorporated into the proposed directive, and if it is not
permitted under UK law. We do not think that category should encompass all
goods that are in daily use as this would result in a very wide category, covering
many household appliances, such as kettles and toasters.

6.26 We recommend that the directive which replaces the CSD should state that
the consumer should be entitled to rescind the contract without affording
the retailer the opportunity to repair or replace where the product is
essential, unless the retailer has reduced the inconvenience to the
consumer by, for example, offering a temporary replacement.

BEST PRACTICE GUIDANCE

6.27 Thirdly, we provisionally proposed that there should be best practice guidance on
the repair and replacement process under the CSD. This guidance should cover
common problem areas. For example, it would be helpful to state that the retailer
should use best endeavours to:

(1) estimate how long repairs will take;

(2) keep the consumer informed of material developments, including
information about the nature of the fault;

(3) provide reliable appointment times; and

(4) keep appointments.

6.28 This proposal was intended to address consumer dissatisfaction and disputes
about the repair and replacement process.

6.29 Most of those who responded to this question agreed with our proposals, citing
the benefits of clarification. The main argument in favour of the proposal was
summarised by Professor CJ Miller who said that clarification would reduce the
annoyance, frustration and the potential for loss of earnings occasioned by the
inefficiencies in the repair and replacement process.

6.30 On the question of whether guidance should be at EU or national level, views
were divided with approximately half saying that guidance should be at EU level
and half saying it should be at national level. We think that this type of guidance
is best dealt with at national level because of the variations in trade practices
between different member states. We would suggest that, in the UK, guidance
should be developed by the Department for Business, Innovation and Skills, in
consultation with industry and consumer groups.

6.31 We note that the necessity for this type of guidance will be reduced if the directive
which replaces the CSD states the consumer is entitled to proceed to a second
tier remedy after one failed repair or replacement, as we recommend above in
paragraph 6.21. This is because the consumer will be less likely to become
locked into a cycle of failed repairs or replacements.

6.32 We recommend that once the proposed directive is finalised the
Department for Business, Innovation and Skills should give consideration
to whether best practice guidance is needed on the repair and replacement
process.

OTHER REASONS TO PROCEED TO SECOND TIER REMEDIES:
DANGEROUS GOODS AND UNREASONABLE BEHAVIOUR

6.33 Our fourth proposal regarding the CSD was that it should be reformed to allow a
consumer to proceed to a second tier remedy when a product has proved to be
dangerous or where the retailer has behaved so unreasonably as to undermine
trust between the parties.

6.34 The research carried out by FDS showed that consumers felt strongly that they
should be able to return goods and receive a refund in these circumstances.¹³
One example which was given by a consumer was where the brakes failed on a
new car whilst she was driving at speed on the motorway. The consumer
survived the experience, but was considerably shaken and felt lucky to be alive.
She did not want to drive that make or model of car again. Another example
might be an electrical item that bursts into flames. The consumer may not feel
safe using the product again. We think that, in these circumstances, the
consumer should be entitled to bypass the remedies of repair or replacement and
proceed to rescission.

¹³ FDS's report of April 2008 is attached to the Consultation Paper at Appendix A.

6.35 Where traders have, to the detriment of buyers, deliberately delayed in answering
correspondence or providing information, or unreasonably refused to tell a buyer
what was wrong with a faulty product, the UK courts have taken the view that this
type of behaviour should permit the buyer to receive a refund.¹⁴ In these cases
the traders behaved so unreasonably as to undermine the buyer's trust, and the
relationship broke down. We think that the CSD should recognise that
unreasonable behaviour of this type should permit the consumer to rescind the
contract without proceeding through the first tier remedies.

6.36 The overwhelming majority of respondents supported our proposal. Some
respondents, including the Local Authorities Co-ordinators of Regulatory Services
and the Office of Fair Trading, suggested that care should be taken with the
terminology and definitions of "dangerous" and "unreasonable behaviour", in
order to avoid disputes and prevent ambiguity in practice.

6.37 The British Retail Consortium objected to this proposal saying that the tests
would be too subjective:

In the context of a faulty product, whether or not it is dangerous is
likely to be a highly subjective judgment for the consumer. While that
consumer may believe or "feel" it is dangerous, the retailer might
objectively believe that it was not the product that was dangerous but
its improper use - or indeed that it was defective but not dangerous.
The proposal is, therefore, likely to give rise to excessive disputes
and to undermine the simplification process. In classifying a product
as dangerous it is vital that objective criteria be set and objective
assessments be made - not least because it is entirely possible that
the apparent danger may have been caused by misuse. The same is
true of an assessment of whether the retailer has behaved
unreasonably. The consumer who has been denied something is
likely to believe that the retailer has acted unreasonably.

6.38 We agree that the categories of dangerous goods and unreasonable behaviour
should be narrow, and there should be a degree of objectivity. The consumer
should be able to show that the goods they purchased proved dangerous. That
is, a reasonable person would have concluded that the goods they purchased
represented a risk to their health and safety. A kettle bursting into flames would
satisfy that criterion. Similarly, a consumer would have to show that they were
acting reasonably in concluding that a trader had acted so unreasonably as to
undermine trust. That is, a reasonable person would have arrived at the same
conclusion.

6.39 We recommend that the CSD should be reformed to allow a consumer to
proceed to a second tier remedy when a product has actually proved to be
dangerous or where the consumer can show that the retailer has behaved
so unreasonably as to undermine trust between the parties.

¹⁴ See, for example, J&H Ritchie Limited v Lloyd Limited 2007 SC (HL) 89; [2007] 1 WLR 670; [2007] 2 All ER 353.

RESCISSION AND THE DEDUCTION FOR USE

6.40 If a consumer progresses to the second tier remedy of rescission, they are
entitled to a refund. However, the retailer is permitted to deduct an amount to
reflect the consumer's use of the faulty goods.

6.41 This deduction for use is an option in the CSD¹⁵ which the UK chose to
implement, but many member states did not. Under the European Commission's
proposals for a new directive, this option would be removed. Recital 41 of the
proposed directive states that "the consumer should not compensate the trader
for the use of the defective goods".

6.42 In the Consultation Paper, we provisionally concluded that the European
Commission is right to propose the removal of the deduction for use. We arrived
at this provisional conclusion for several reasons. In meetings, stakeholders told
us that the deduction for use is seldom used, and uncertain. Currently, there is no
indication as to how it should be calculated which leads to disputes.

6.43 The deduction for use is an inflammatory topic with consumers. Consumers said
that if they had been unfortunate enough to buy a faulty product, and repairs
and/or replacements had been unsuccessful, they would feel aggrieved if they
were then charged for use of the product. Further, they felt that if the refund was
going to be reduced in this way, the consumer should be entitled to
compensation for time off work, other associated costs such as telephone calls,
and also for general inconvenience.¹⁶

6.44 Common sense tells us that in order to get to the second tier remedy of
rescission, it is highly likely that the consumer would have suffered considerable
delay and inconvenience, and probably at least one attempt at repair or
replacement.

6.45 In the Consultation Paper, we asked whether consultees agreed that the
"deduction for use" in the event of rescission should be abolished. Two-thirds of
those who responded to this question were in favour of this proposal for
consumer sales, mainly for reasons of simplicity, and to reduce uncertainty and
the potential for disputes.

6.46 The Citizens Advice Bureau said that the damages the consumer suffers will
often offset usage. Most agreed with that view. Similarly the Council of Her
Majesty's Circuit Judges commented:

The calculation of the appropriate reduction is fraught with difficulties
and in most cases the rough and ready set off between the use the
consumer has had of the goods and the likely inconvenience he or
she has experienced in obtaining repairs or replacements seems to
strike an equitable balance.

¹⁵ Recital 15.
¹⁶ See Appendix A to the Consultation Paper on Consumer Remedies for Faulty Goods (Law
Com CP 188; Scot Law Com DP 139).

6.47 Those respondents who objected to the abolition of the deduction for use
generally did so on the ground that the consumer might have had a substantial
period of trouble-free use, and it was appropriate that the consumer should pay a
reasonable amount for this. Several agreed with our proposed method of
calculation based on the expected life span of the goods, discussed at paragraph
8.150 of the Consultation Paper.

6.48 The Radio, Electrical and Television Retailers" Association suggested a different
approach in terms of calculating the deduction for use. That is, to have no
reduction in the refund during the first six months from the date of
purchase/delivery, but after that a reduction of some 10-15% per year.

6.49 On balance, we think that the European Commission is right to propose the
removal of the deduction for use. The arguments in favour of the abolition of the
deduction for use are more persuasive than the arguments against. The
deduction for use is uncertain and relatively rarely used. It adds complications to
the law, and causes disputes as consumers retaliate with damages claims. We
favour simplicity and, in our view, the approach of the Council of Her Majesty's
Circuit Judges set out in paragraph 6.46 is a sensible one.

6.50 We recommend that the "deduction for use" in the event of rescission
should be abolished.

THE SIX-MONTH REVERSE BURDEN OF PROOF

6.51 Under the CSD regime, goods which do not conform to contract at any time
within six months of "delivery" will be considered not to have conformed at that
date.¹⁷ Normally, "delivery" means the point at which goods are first delivered to
the consumer. However, we raised the question of whether the redelivery of
repaired goods, or delivery of replacement goods, qualify as relevant deliveries.

6.52 In the Sale of Goods Act 1979 (SoGA), delivery is defined as "voluntary transfer
of possession from one person to another",18 which could cover a redelivery.
Elsewhere, in Part 5A of SoGA, however, the term is used in a manner which
seems inconsistent with this interpretation.

6.53 Benjamin's Sale of Goods argues in favour of restarting the six-month period
upon redelivery. This is said to be "consistent with the thrust" of the European
approach, though it is recognised that difficult problems may arise if different
defects manifest themselves at different times.¹⁹

6.54 Our view was that the same logic that provides a six-month reverse burden of
proof for the original delivery should also apply where there is redelivery following
cure, or delivery of a replacement. Therefore, we provisionally proposed that the
six-month reverse burden of proof should recommence after goods are
redelivered following repair or replacement.
¹⁷ SoGA, s 48A(3).
¹⁸ SoGA, s 61(1).
¹⁹ Benjamin's Sale of Goods (7th ed 2006) para 12-087. R Bradgate and C Twigg-Flesner,
Blackstone's Guide to Consumer Sales and Associated Guarantees (2003) p 97 agrees
that it would be "common sense" to restart the period, but says that this may go against the
strict reading of the Directive.

6.55 The large majority of those who responded to this question agreed with the
proposal, for the reasons put forward in the Consultation Paper. Only a handful
disagreed. For example, the British Retail Consortium argued:

The six-month reversal relates to the original purchase and is
provided because a fault that appears in that time is presumed to
have been present at the time of delivery. It does not relate to a repair
but the good itself. Should the repair be unsuccessful the consumer
has alternative routes -¦ . He does not need a new six-month period
to be protected.

6.56 Some respondents suggested that the six-month reverse burden should begin
again in the case of replacement but not repair. Others suggested that there was
some merit in the argument that the reverse burden should be suspended while
repairs are being carried out and resumed after the repair is complete.

6.57 We find these arguments convincing. It would mean that if a fault was discovered
two months after purchase, and repairs took two weeks, the reverse burden
would restart after repair and run for a further four months. We think that a fresh
six-month reverse burden should commence after replacement.

6.58 We recommend that the six-month reverse burden of proof should be
suspended while repairs are being carried out and should resume after
goods are redelivered following repair.

6.59 We recommend that a further six-month reverse burden of proof should
start after goods are redelivered following replacement.

THE TIME LIMIT FOR BRINGING A CLAIM

6.60 The CSD currently states that member states must allow consumers at least two
years to bring a claim before the courts.²⁰ The UK exceeds this minimum, as the
limits which apply are those set in general contract law. In England and Wales
there is a limitation period of six years,21 and in Scotland a prescriptive period of
five years.²²

6.61 Under the European Commission's proposed directive consumers would not be
able to pursue a retailer for any fault which becomes apparent more than two
years after delivery.²³ Our concern was that this provision might not be suitable
for some goods which are intended to be long-lasting and where defects may
take time to come to light, such as boilers. It seems odd that a business buyer in
these circumstances would have a remedy, but a consumer buyer would not.

²⁰ Art 5(1).
²¹ The Law Commission published a Report on the law on the limitation of actions in July
2001 Limitation of Actions (Law Com No 270), which recommended changes to the law on
limitations. The Government accepted the Report and is considering its implementation.
²² Prescription and Limitation (Scotland) Act 1973, s 6.
²³ Art 28(1).

6.62 We provisionally proposed that the time limits for bringing a claim should continue
to be those applying to general contractual claims within England, Wales and
Scotland. More than three-quarters of respondents supported our proposal.

Arguments in favour of the proposal

6.63 Many consultees were concerned that the time limits for bringing claims are
already complicated enough for consumers without introducing new ones. The
Faculty of Advocates added that consumers might be misled into thinking they
had the usual period to bring a claim, only to discover, after the expiry of two
years, that their claim has become time barred.

6.64 The City of London Law Society concurred:

Multiple limitation periods for claims of this nature would add yet
another complexity to the law that would confuse consumers further.
We view it as extremely unlikely that a consumer would be able to
make a successful case beyond the period of two years. It is for this
reason that we do not feel it is necessary to add the extra limitation
period into the law, when we feel that the position as it currently
stands is adequate to cover instances of consumer abuse.

6.65 Gillian Black and others agreed with our proposal and added:

We do not understand why a consumer should be deprived of
remedies where defects (as opposed to wear and tear or consumer-
inflicted damage) arise after two years.

In particular, many high value consumer goods are intended to last
for more than two years (examples being cars, televisions/sound
equipment) and it is not clear why consumers should bear the risk of
any latent fault which is revealed after two years.

Further, imposing a cap on the period in which a consumer has a
remedy potentially disadvantages the consumer in comparison with a
non-consumer buyer, who does not suffer from this time bar.

6.66 Consumer Focus said:

In practice, it is not likely that consumers will pursue such claims as,
in most cases, faults will have appeared much earlier. However, there
will be cases with more complex products such as cars and consumer
durables with long life spans where faults will not manifest
themselves for some time. To prevent consumers asserting their
rights after two years would be most unfair. It would diminish the
importance of the durability aspect of the satisfactory quality standard
and would provide no incentive to manufacturers to improve the
quality of their products.

6.67 Which? were concerned that the proposed two-year cut-off would raise serious
environmental questions. They argued that if consumers could not expect goods
to last longer than two years then manufacturers would be more likely to produce
poor quality products with reduced life spans, which would encourage waste.

Arguments against the proposal

6.68 The Radio, Electrical and Television Retailers" Association were among the very
few respondents who objected to the proposal. They did so on the following
basis:

To have an entitlement to claim in a court of law that there was an
inherent fault in a product for up to six years is unreasonable and the
present statute of limitation of six years is too long and should be
reduced to two years.

Most faults with products appear within the first six to eighteen
months of use and certainly most inherent faults would be obvious
within this time span. Reducing the statutory limit to two years would
still provide adequate assurances for consumers.

6.69 We do not find the case for introducing a further time limit persuasive. The
arguments in favour of the time limits for general contractual claims continuing to
apply to consumer claims outweigh the arguments in favour of a two-year time
limit.

6.70 We recommend that the time limits for bringing a claim should continue to
be those applying to general contractual claims within England, Wales and
Scotland.

PART 7
CONSUMER EDUCATION

7.1 When we talked to stakeholders in the early stages of this project, many raised
the need for consumer and retailer education about the legal remedies available
for faulty goods. They felt that this should go hand in hand with our proposals for
simplification of the law. As Consumer Focus pointed out, it will be easier to
educate consumers if the law is less complex.

7.2 Stakeholders told us that the lack of knowledge resulted in unnecessary disputes.
It leads to consumers underestimating or over-estimating their legal rights, and
shop staff not knowing how to deal with consumers returning faulty goods.
Unnecessary disputes result in costs to the economy which could be avoided.

7.3 In January 2008, we commissioned FDS International Limited (FDS) to carry out
some research into consumers" perceptions of their legal rights when they buy
faulty goods.¹ FDS reported that the most striking finding was the extent to which
participants were unaware of their legal rights. This was illustrated by reactions to
the phrase "This does not affect your statutory rights". Participants were familiar
with the words, but almost universally unaware of what the words meant or what
their rights were. In some cases, the phrase had the effect of leading the
consumer to believe that they had fewer rights than they did. Those with some
understanding of their rights often had a flawed understanding of the extent of
those rights.

7.4 The Confederation of British Industry represented the views of the majority with
regard to the importance of consumer education when they wrote:

We agree with the Law Commissions" report that consumers may be
unaware of their legal rights and that more could be done to provide
consumer education. CBI regards consumer education as of
fundamental importance; indeed in our response to the BERR Call for
Evidence we stated that it was a "golden thread" running through the
various elements covered in the Consumer Law Review. It is our view
that good quality information targeted to the real needs of consumers
and education at the front end of transactions would help to align
consumer expectations with reality, highlighting responsibilities as
well as rights, and would reduce the likelihood of problems further
down the line.

7.5 Whilst everyone agrees about the necessity for education in this area, the more
difficult question is how it should be achieved. There is a wide range of views
about how it should be taken forward.

¹ The FDS Report is attached at Appendix A to the Consultation Paper on Consumer
Remedies for Faulty Goods (Law Com CP 188; Scot Law Com DP 139).

CURRENT CONSUMER EDUCATION INITIATIVES
7.6 Since publishing our Consultation Paper, we have met several people involved in
the development and provision of consumer education. We are particularly
grateful to Louise Baxter and Michele Shambrook of the Consumer Education
Liaison Group, and Sam Brew at the Office of Fair Trading (OFT).

7.7 We found that there is a very large number of consumer education initiatives
taking place.² Many of these are effective and work well. However, they tend to
be run by individual organisations operating independently, achieving success at
a local level only. The overall picture is somewhat fragmented and disjointed. It
became clear to us that central co-ordination would be beneficial, so that where
appropriate the most effective schemes could be publicised and rolled out
nationwide.

7.8 Consultees have told us about several initiatives which work well and, they
submit, should be promoted and expanded nationally. For example, the
University of Strathclyde Law Clinic wrote to us about their work on various local
programmes aimed at the most vulnerable members of society:

We have recently become involved in many programmes, for
example outreach clinics, in order to educate those who do not have
access to legal help and provision.

7.9 Other successful schemes operate on a wider scale, but consultees submitted
that the scale should be expanded. One example is the Young Consumers of the
Year Competition.³ This was designed to educate school children about
consumer rights and responsibilities and is run by the Trading Standards
Institute. The scheme involves local trading standards officers running the
programmes in schools. Currently, about half of the local education authorities in
the UK have schools which participate in this scheme.⁴

7.10 Similarly, the Consumer Challenge Quiz was developed by Birmingham Trading
Standards to deliver consumer education to children with learning difficulties in
special education schools. Approximately 200 schools have participated in that
scheme over the past year.⁵ In 2008, the scheme won a European Commission
award for the "Most Original Idea for a Consumer Campaign in Europe".
Commissioner Meglena Kuneva praised the scheme for its innovative approach
to helping vulnerable young people.

² In K Ritters (for the Trading Standards Institute), Consumer Education in the UK (May
2003), it was estimated that around 600 individual organisations in this country are
involved in consumer education.
³ See http://www.tradingstandards.gov.uk/events/events-youngconsumers.cfm.
⁴ Figures provided by the Consumer Education Liaison Group in July 2009.
⁵ Figures provided by the Consumer Education Liaison Group in July 2009.

7.11 Other examples are "Ask CEdRIC" and "Wiseguys", two consumer education
teaching resources developed by trading standards officers and teachers.⁶ They
contain teaching plans and materials and are used by teachers to deliver
consumer education as part of the national curriculum.

7.12 In recent years, the UK Government has identified the need to raise levels of
consumer knowledge, and the importance of the role it plays in the economy. In
2004, it argued that:

Empowered consumers are knowledgeable, confident, assertive and
self-reliant.

-¦ By demanding high standards from business, consumers help
promote vigorous, competitive markets.⁷

7.13 The Enterprise Act 2002 gave the OFT new powers to use consumer education
to support its work in making markets work well for consumers. Consequently,
the OFT conducted a consultation on consumer education, which resulted in the
publication of a strategy and framework for consumer education.⁸ The OFT
identified an important link between effective consumer education and levels of
numeracy and literacy:

The confidence and skills that consumer education aims to develop
depend on sound levels of numeracy and literacy.

-¦ To be most effective, consumer education initiatives must be
focused on clear priorities and targeted at those most in need. -¦ By
deciding priorities in this way, consumer education will bring real
benefits for vulnerable and socially excluded consumers by offering
the opportunity to gain valuable life skills.

-¦ There is also a tendency for work to target those consumers who
are easiest to reach, rather than those with the greatest need.⁹

7.14 As a result of this approach of targeting vulnerable and socially excluded
consumers, and further research, the OFT launched its "Skilled to go" programme
in 2008. It is a consumer education toolkit designed for use in further education
literacy and numeracy programmes in places such as colleges, workplaces and
prisons. It is aimed at 16-18 year olds and adults with lower levels of literacy and
numeracy. Since its launch, approximately half of further education institutions in
the UK have registered to access the resource.¹⁰

⁶ www.askcedric.org.uk and www.wiseguys.org.uk.
⁷ A strategy and framework for consumer education - a consultation paper, July 2004
OFT735, p 6.
⁸ A strategy and framework for consumer education - a consultation paper, July 2004
OFT735; and Consumer education: a strategy and framework, November 2004 OFT753.
⁹ Consumer education: a strategy and framework, November 2004 OFT753, pp 3, 4 and 5.
¹⁰ Figures provided by the Office of Fair Trading in February 2009.

THE UK GOVERNMENT's RECENT WHITE PAPER - THE CONSUMER
ADVOCATE

7.15 In its White Paper published in July 2009, the UK Government announced its
intention to appoint a Consumer Advocate to take the lead on consumer
education and information:

In a climate where consumers are under pressure it is important that
they are empowered to assert their needs clearly and make the best
purchasing decisions possible. It is also important to reduce the cost
to the economy of problems after sales have been made. Empowered
consumers are confident consumers. Yet too often the help that is
available is scattered and hard to find. -¦ A Consumer Advocate will
be appointed to bring a national profile to improving the co-ordination
of education and information campaigns.¹¹

7.16 The White Paper continues, under the heading of "Improving the effectiveness of
consumer education and information":

In the area of consumer education responses to the Consumer Law
Review gave much praise for the good work being done by a number
of different organisations but seemed to indicate a fragmentation
amongst providers. The Consumer Minister met representatives from
consumer organisations, business organisations, enforcers and
others involved in education on 8 May 2009 to discuss how best to
improve the effectiveness of consumer education and information
campaigns.

The consensus was that specific initiatives to raise consumer
awareness about rights and what to do when things go wrong are
best provided by a range of organisations in response to need.
However, there is a need for the Government to provide greater co-
ordination of all the different initiatives at both a strategic and national
level. The Government believes that this co-ordination can be best
delivered through the appointment of a new high-profile figure: a
Consumer Advocate.

-¦ The Advocate will have a particular responsibility to look after the
vulnerable. He/she will work with community groups and others to
deliver messages to the least confident consumers about how to
protect their interests.¹²

¹¹ A Better Deal for Consumers, July 2009, para 3.4.1.
¹² A Better Deal for Consumers, July 2009, para 3.4.2.

7.17 The UK Government also announced its intention to launch a new consumer
rights publicity campaign in order to raise awareness of key rights and the
availability of advice provided by Consumer Direct.¹³ The campaign will be
targeted at those consumers with the lowest levels of understanding of, and
confidence in asserting, their consumer rights. These are less well-educated
adults, and 16-24 year-olds within that group. The campaign will outline the most
important legal rights to enable consumers to be more confident shoppers. The
essence of these rights is that goods must fit the description given, be of
satisfactory quality and be fit for purpose. The UK Government's intention is to
work with retailers to convey these messages, complemented by a media
campaign.

7.18 The campaign will also improve awareness of consumer rights among
businesses which deal directly with consumers. In particular, the campaign will
attempt to improve small and medium businesses" understanding of consumers"
rights. The UK Government will also lead a wider programme of work to bring
together the main providers of consumer advice to enable closer integration of
the various channels of advice.¹⁴

7.19 We agree with the UK Government's findings on consumer education, as set out
in the White Paper. Consumer education is not a case of "one size fits all". It is
provided by a range of organisations in response to different needs. We welcome
the appointment of a Consumer Advocate to provide much needed co-ordination
and better integration of consumer education initiatives, information and advice;
we also welcome the new consumer rights campaign. In particular, we hope that
the Consumer Advocate will identify consumer education initiatives which work
well and consider whether they should be rolled out more widely, on a national
basis.

OUR CONSULTATION PAPER

7.20 In our Consultation Paper, we first asked consultees to comment on how the aim
of increasing awareness of consumer legal rights for faulty goods might be
achieved.

7.21 In particular, we asked whether there should be a summary of consumer legal
rights for faulty goods available at point of sale.

7.22 We then asked consultees whether they agree that notices displayed in shops
should:

(1) Use the expression "This does not reduce your legal rights" rather than
"This does not affect your statutory rights".

(2) Say how a consumer could obtain further information about their legal
rights.

¹³ A Better Deal for Consumers, July 2009, para 3.5.1.
¹⁴ A Better Deal for Consumers, July 2009, para 3.5.2.

OUR RECOMMENDATIONS

A summary of legal rights at point of sale

7.23 The majority of those who responded favoured a summary of consumer legal
rights being available at point of sale, in the form of notices or leaflets. Many
emphasised that such a summary would only be beneficial if it was succinct, easy
to understand and did not overload the consumer with information. The University
of Strathclyde Law Clinic wrote:

We would propose a leaflet which is available at points of sale, advice
centres and public buildings etc. This would only have to take the
form of a single, small, double-sided leaflet with details of the various
rights that a consumer has upon purchasing goods. As a Law Clinic,
we would welcome these.

A centrally produced information pack/leaflet could help alleviate
consumer misunderstandings on the rules of law which govern these
contracts. These could be distributed, not only by Law Clinics,
Centres, and Citizens Advice Bureaux, but also made available to
retailers to display in shops.

7.24 A few respondents were concerned about the burden that leaflets or notices
might place upon retailers if they had to be displayed in shops. In addition, the
Confederation of British Industry had reservations about point of sale education:

We are not convinced, however, that education at point of sale is the
most appropriate time or place for such information. We believe that
while there is a role for business in the whole area of consumer
education this particular element should be dealt with by independent
agencies rather than by retailers. It is anyway a complex area of law
and not necessarily one where it would be possible without running
the risk of being misleading, to put it in summary form.

7.25 Others suggested that information on consumer legal rights should also be
provided online, in local newspapers, in local authority newsletters, and in
television and radio campaigns. Consumer Focus added:

We are also attracted to the idea of a "shoppers rights card" - a credit
card-sized summary of the main SoGA rights, which shoppers can
keep in their purse or wallet, such as that produced by the Consumer
Council of Northern Ireland.

7.26 We understand that consumer education features in the national curriculum in its
own right.¹⁵ In meetings and in their responses, however, many consultees have
said that it needs to be incorporated more clearly into the curriculum. The British
Retail Consortium was among the numerous consultees that saw consumer
education in schools as key. They responded:

¹⁵ Consumer education: a strategy and framework, November 2004 OFT753, p 4.

Retailers do have a direct interest in consumer education
programmes as part of the general school "civics" curriculum because
accurate knowledge of rights leads to fewer disputes and also
reduces the need for staff training - a key factor when there is such a
high turnover of staff and many temporary employees - because new
employees will have some basic understanding of consumer rights
from their education.

7.27 We think that a summary of consumer legal rights for faulty goods should be
available at point of sale or in another similarly prominent position. Consumer
research has shown that some consumers would welcome this information,16 and
it will also help to raise awareness among shop staff. Such a summary should
not, however, be over-burdensome to consumers or retailers. The summary
should be simple and succinct, along the lines of the information on key
consumer rights in the UK Government's White Paper,17 or the "shoppers rights
card" developed by the Consumer Council for Northern Ireland. We think that the
content should be prepared by the Government, in consultation with consumer
groups and business groups.

7.28 We recommend that there should be a summary of consumer legal rights
for faulty goods available at point of sale or in a prominent position in
shops.

7.29 We recommend that the Consumer Advocate should consider whether the
most effective current consumer education initiatives should be promoted
and rolled out on a wider scale.

"This does not affect your statutory rights" and how to obtain further
information about legal rights

7.30 In our Consultation Paper we considered how the phrase "This does not affect
your statutory rights" might be clarified. We said that of the various possible
approaches, we favoured:

This does not reduce your legal rights.

For further information about your legal rights please contact [name
and contact details of Consumer Direct or other appropriate source of
information].

7.31 Most respondents agreed that the phrase "This does not affect your statutory
rights" was problematic and required clarification. As noted in paragraph 7.3, it is
not understood by consumers. Many respondents stressed that any change in
the wording would only be beneficial if such a change took place alongside a
simplification of the law, and/or was accompanied by information about
consumers' rights or how they could obtain such information.

¹⁶ The FDS Report is attached at Appendix A to the Consultation Paper on Consumer
Remedies for Faulty Goods (Law Com CP 188; Scot Law Com DP 139).
¹⁷ See above para 7.17.

7.32 Our proposal is consistent with the UK Government's plan to develop a campaign
to direct consumers to Consumer Direct as a source of online and telephone
advice and support on consumer issues.¹⁸

7.33 In response to our suggested wording, Consumer Focus said:

The FDS research seems to show that the new formulation would be
more effective, and it does seem to us that this phrase is likely to be
more meaningful to consumers.

7.34 We think that there is merit in the suggestion made by Louise Baxter of the
Consumer Education Liaison Group that "This does not reduce your consumer
rights" might be preferable to referring to "legal rights". This means that our
favoured wording would be:

This does not reduce your consumer rights.

For further information about your consumer rights please contact
Consumer Direct [contact details of Consumer Direct].

7.35 We also agree, however, with the suggestion of Consumer Focus that it would be
beneficial if further consumer research were undertaken to establish the best
wording.

7.36 The majority of respondents also agreed that information about how consumers
could find out about their rights should be available at point of sale. For example,
the City of London Law Society said:

We agree with the approach suggested by the Law Commission at
paragraph 8.128, that the wording of existing notices displayed in
shops should be clarified, and consumers should be directed to
sources of further information if needed (for example, phone number
of Consumer Direct could be advertised). We also agree that a
standardised summary sheet setting out in only a few bullet points an
accurate statement of consumer rights should be produced. Retailers
should be obliged to keep copies of the sheet at the point of sale so
that if the consumers request information, they can easily obtain
advice.

7.37 The University of Strathclyde Law Clinic also agreed:

The information available should be short; offering a website address
and a telephone number, for example, to keep things as simple as
possible. The website which they are led to should also reflect this
simplicity and direct people to online explanations of the disclaimer,
and/or online pdf copies of the leaflets mentioned above. Providing
both a telephone number and website would appeal to a broader
range of consumers-¦ .

¹⁸ A Better Deal for Consumers, July 2009, para 3.5.1.

7.38 We recommend that the Department for Business, Innovation and Skills
should give consideration to the clarification of the expression "This does
not affect your statutory rights", and its replacement with the phrase "This
does not reduce your consumer rights" together with an indication of how
consumers can obtain further information about their consumer rights, for
example by contacting Consumer Direct.

PART 8
LIST OF RECOMMENDATIONS
We make the following recommendations:

THE RIGHT TO REJECT
8.1 The right to reject should be retained as a short-term primary remedy. (3.35)

The 30-day normal period
8.2 The law should do more to clarify how long the right to reject lasts. We
recommend a normal period of 30 days in which the right to reject should be
exercised. This normal period could be extended or reduced in the limited
circumstances set out below. (3.65)

8.3 It should be open to the trader to argue that the right to reject should be
exercised in less than 30 days where the goods are of a type expected to perish
within 30 days; in these cases, a 30-day normal period would be incompatible
with the nature of the goods. (3.74)

8.4 Retailers should not be able to argue for a shorter period than 30 days where a
consumer seeks to reject for a fault which should have been discovered before
an inconsistent act. (3.82)

8.5 Where it is reasonably foreseeable by, or reasonably within the contemplation of,
both parties that a longer period will be needed to inspect the goods and to try
them out in practice, then a consumer should be able to argue for a period longer
than 30 days. (3.88)

8.6 Personal circumstances should not be able to extend the 30-day normal period.
(3.92)

8.7 A consumer should be able to argue for a period longer than 30 days where the
parties agreed to an extended period. (3.95)

The six-month reverse burden of proof
8.8 A consumer who exercises the right to reject should be entitled to a reverse
burden of proof that faults appearing within six months of delivery were present
when the goods were delivered. (3.97)

Minor defects
8.9 Legal protection for consumers who purchase goods with "minor" defects should
not be reduced with regard to the right to reject and also to the CSD. (3.110)

INTEGRATION OF THE CSD AND THE RIGHT TO REJECT

8.10 The right to reject and CSD remedies should be better integrated in a single
instrument, by use of the concept of rejection. (3.118)

8.11 The 30-day period should be suspended whilst repairs or negotiations about
repairs take place. Where a consumer discovers a fault within 30 days and seeks
to exercise the right to reject, but accepts the trader's offer of repair, or where
there are negotiations about the possibility of repair, the 30-day period should be
suspended. (3.125)

8.12 The provisions of section 30 of SoGA, which sets out remedies for consumers
where a retailer delivers the wrong quantity of goods, should be retained. (3.130)

8.13 The domestic law on damages should be retained. (4.24)

8.14 Guidance should be drafted and issued on the circumstances in which
consumers can claim damages to compensate them where they have purchased
goods which do not conform to contract. (4.25)

THE RIGHT TO REJECT IN OTHER SALES CONTRACTS

8.15 The 30-day normal period should apply to supply of goods contracts where
property is transferred (such as work and materials contracts and exchange and
barter). It should also apply to hire purchase contracts. (5.27)

8.16 The current law on the right to reject for hire contracts should be preserved.
(5.33)

REFORMING THE CONSUMER SALES DIRECTIVE

Clarifying when consumers may proceed to a second tier remedy

The number of repairs and replacements

8.17 The directive which replaces the CSD should state that after one failed repair or
replacement, the consumer is entitled to proceed to a second tier remedy. (6.21)

8.18 The directive which replaces the CSD should state that the consumer is entitled
to rescind the contract without affording the retailer the opportunity to repair or
replace where the product is essential, unless the retailer has reduced the
inconvenience to the consumer by, for example, offering a temporary
replacement. (6.26)

The process of repair and replacement

8.19 Once the proposed directive is finalised the Department for Business, Innovation
and Skills should give consideration to whether best practice guidance is needed
on the repair and replacement process. (6.32)

Dangerous goods and unreasonable behaviour

8.20 The CSD should be reformed to allow a consumer to proceed to a second tier
remedy when a product has actually proved to be dangerous or where the
consumer can show that the retailer has behaved so unreasonably as to
undermine trust between the parties. (6.39)

Rescission: the deduction for use

8.21 The "deduction for use" in the event of rescission should be abolished. (6.50)

The six-month reverse burden of proof

8.22 The six-month reverse burden of proof should be suspended while repairs are
being carried out and should resume after goods are redelivered following repair.
(6.58)

8.23 A further six-month reverse burden of proof should start after goods are
redelivered following replacement. (6.59)

Time limit for bringing a claim

8.24 The time limits for bringing a claim should continue to be those applying to
general contractual claims within England, Wales and Scotland. (6.70)

CONSUMER EDUCATION

8.25 There should be a summary of consumer legal rights for faulty goods available at
point of sale or in a prominent position in shops. (7.28)

8.26 The Consumer Advocate should consider whether the most effective current
consumer education initiatives should be promoted and rolled out on a wider
scale. (7.29)

8.27 The Department for Business, Innovation and Skills should give consideration to
the clarification of the expression "This does not affect your statutory rights", and
its replacement with the phrase "This does not reduce your consumer rights"
together with an indication of how a consumer can obtain further information
about their consumer rights, for example by contacting Consumer Direct. (7.38)

JAMES MUNBY JAMES DRUMMOND YOUNG
(Chairman, Law Commission) (Chairman, Scottish Law Commission)
ELIZABETH COOKE GEORGE GRETTON
DAVID HERTZELL PATRICK LAYDEN
JEREMY HORDER HECTOR MACQUEEN
KENNETH PARKER COLIN TYRE

MARK ORMEROD (Chief Executive) MALCOLM MCMILLAN (Chief Executive)
Law Commission Scottish Law Commission

28 September 2009

APPENDIX A
LIST OF RESPONDENTS

RETAILERS, MANUFACTURERS AND BUSINESS GROUPS

Association of Manufacturers of Domestic Appliances
British Retail Consortium
Cattles plc
The Committee of Scottish Clearing Bankers
The Confederation of British Industry
Direct Marketing Association
Finance and Leasing Association
G Haywood
Institute of Credit Management
The Radio, Electrical and Television Retailers" Association
Retail Motor Industry Federation
Sainsburys
S Waddell - Boori (UK) Ltd

LAWYERS, LEGAL ASSOCIATIONS AND THE JUDICIARY

Association of Her Majesty's District Judges
Bar Council
City of London Law Society
Council of Her Majesty's Circuit Judges
Faculty of Advocates
James E Petts
Judges of the Court of Session
Law Society
McCartney Stewart
University of Strathclyde Law Clinic

CONSUMERS, CONSUMER GROUPS AND CONSUMER REPRESENTATIVES

Grant Baisley
Birmingham City Council
Linda Cartwright
Citizens Advice
Consumer Focus
East of England Trading Standards
Robert Gilham
Vicky Gunther
Institute of Consumer Affairs
Local Authority Co-ordinators of Regulatory Services
Liz Miller
Mangala Murali
National Consumer Federation
Trading Standards Institute
Ms K Waddilove
Westminster Trading Standards
Which?

Professor John Adams, Notre Dame
Gillian Black and others, The University of Edinburgh
Professor Bridge, London School of Economics
Gordon Cameron, The University of Dundee
Professor J Dewhurst and Dr C Montagna, The University of Dundee
Professor Roy Goode, St John's College, Oxford
Professor Macleod, University of Liverpool
Professor CJ Miller, University of Birmingham
Deborah Parry
Dr Christine Riefa, Brunel University
Dr Christian Twigg-Flesner, The University of Hull
Willett, Morgan Taylor and Naidoo, De Montfort University

Office of Fair Trading

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