Consumer Guarantees: the EC's draft Directive

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Robert Bradgate, M.A.

Copyright © 1997 Robert Bradgate.
First Published in Web Journal of Current Legal Issues in association with Blackstone Press Ltd.

Summary

With the establishment of the Single Market, the European Community has at last begun to have an impact on some of the core areas of commercial and consumer law. The European Commission has published proposals for a directive on the sale of consumer goods and associated guarantees which, if adopted in its present form, will require further amendment to a central area of sale law which was the subject of domestic reform just two years ago. The purpose of this piece is to examine the proposals and to consider their likely impact should they be adopted.

Introduction

The European Community has been contemplating action "with a view to improving guarantee arrangements and after sales service" since 1975 (Council Resolution of 14.4.75 OJ C92 25.4.75 p 1). The Commission's original proposal for a Directive on unfair terms contained provisions to harmonise aspects of the law on this topic (OJ C243 28.9.1990 p 2) but the Council rejected that proposal and asked the Commission to produce separate proposals for harmonisation of the law on "consumer guarantees". In 1993, therefore, the Commission produced a Green Paper on Consumer Guarantees and After Sales Service (COM (93) 509), containing an analysis of the relevant law in member states, and proposals for harmonisation, but its proposals received a mixed reaction. In particular some UK commentators feared that their adoption might significantly weaken consumer protection in several respects (see, eg, Bradgate, 1995). Having undertaken extensive consultation (1) the Commission has significantly revised its proposals and published a draft Directive in September this year (COM (95) 520), which differs in a number of respects from the proposals in the Green Paper.

The proposals in the draft Directive.

Although, as the Green Paper revealed, there is already a significant degree of similarity between the laws on "consumer guarantees" of most member States, there are significant differences in some areas. The explanatory memorandum to the draft Directive (p 4) explains that harmonisation is therefore required in order to enable and encourage consumers to take advantage of the Single Market, the premise being that differences in consumer sales laws act as a deterrent to consumers who might otherwise shop abroad (2). Harmonisation in this area is said to be "a necessary complement to" the Directive on Unfair Terms in Consumer Contracts (Dir 93/13/EEC; OJ 1993 L95/29), the explanatory memorandum noting (at p 2) that "at present, a clause in a sales contract excluding the vendor's liability for any defects in the good [sic] sold is void as against the consumer, while the concrete rights that the consumer can rely on in such a case are somewhat different according to the state where the good was purchased". Nevertheless, the proposal is for a minimum harmonisation measure, permitting member States to create or retain more generous consumer protection measures, so that differences between consumer rights in different States will, inevitably, remain. The objective is to "guarantee a uniform minimal level of protection for consumers throughout the Union" (p 3).

A case could be made, in the name of the Single Market, for harmonising sales law generally, but that option was firmly rejected in the Green Paper. The draft is concerned only with sales of consumer goods but, whereas the Green Paper proposals - no doubt because of its concern with "commercial guarantees" and "after sales service" - would have applied only to "new" consumer durables, the draft Directive proposes that the new regime should apply to all consumer goods. This is a welcome change; defining "durable" goods would inevitably create fine and difficult distinctions at the margins. Domestic sales law makes no distinction between "durable" and other goods or between second hand and new goods.

The Green Paper proposed harmonisation of the law relating to both "the legal guarantee" which "derives directly from the law" and "produces effects which are laid down by law" and the "commercial guarantee" which is "offered on a voluntary basis by the producer or vendor of the good[s] or by any other person in the product distribution chain". The draft Directive abandons the terminology of "legal" and "commercial" guarantees (although it is proposed to continue to use it here as a convenient short-hand) and shows a distinct change of emphasis. Despite arguments that it would be better for the Commission to concentrate on harmonisation of commercial guarantees (Cranston (1995)), the focus of the draft is very much on the "legal guarantee", described as "the bedrock of consumer rights as regards the quality and conformity of the goods purchased", "designed to protect purchasers' confidence in the context of the contract of sale - their legitimate expectations concerning the product purchased" (p 4). Only one article (art 5) is concerned with the "commercial guarantee" simply requiring (i) that any guarantee offered by a seller or producer of a product must be legally binding according to its own terms and any associated advertising, and put the consumer "in a more advantageous position" than under the general rules of national law, and (ii) that its terms must be set out in writing and be freely available for consultation by the consumer before purchase. This is a minimal proposal - earlier proposals had considered the possibility of establishing a minimum content for guarantees, but that option is rejected in the interests of encouraging competition (p 7). Nevertheless, it is welcome. Not only would it establish beyond doubt the binding nature of guarantees - whose contractual effect is not clearly established in domestic law (3)- but, by requiring that guarantee terms be available for consultation prior to purchase, it would enable consumers to make informed purchasing decisions based upon all relevant information, including the terms of the guarantee, and encourage more effective competition between manufacturers and suppliers on guarantee terms.

The core provisions of the draft, however, are those concerned with the "legal guarantee". They would require that, where consumer goods are sold to a consumer, the goods should be in conformity with the contract, in default of which the consumer would be entitled to demand a refund, repair or replacement of the goods, or a reduction of the price. Contractual terms restricting the consumer's rights would be ineffective. The remainder of this piece will concentrate on these provisions and in particular, the comparison between them and the existing rules of domestic sales law.

The existing domestic law

Although the terminology of "legal" and "commercial" guarantees might be unfamiliar to English lawyers, the concepts are not. The "legal guarantee" is the seller's undertaking as to the quality (etc) of the goods, prescribed by law and which, in domestic law, derives from the terms implied into supply contracts by ss 13 - 15 of the Sale of Goods Act 1979 (SoGA)and related legislation;(4) the "commercial guarantee" is the "guarantee" or "warranty" offered by the manufacturer or retailer. The implied terms, as originally enacted in the SoGA 1893, required goods supplied to correspond with any description by which they were sold, to be of merchantable quality and reasonably fit for any purpose made known by the buyer to the seller, and, where sold by sample, to correspond with the sample. They are classified as "conditions", so that their breach not only entitles the buyer to claim damages, but also gives the buyer the option to reject the goods and treat the contract as repudiated. The right to reject is, however, lost if the buyer accepts the goods, and case law has demonstrated that the buyer may be deemed to have accepted the goods a very short time after delivery and, in some cases, before he could even discover the breach of contract. Neither the terms nor the buyer's remedies for their breach can be excluded or restricted by any contract term or notice.

Despite statutory amendments in 1967 and 1973 (5) and extension (in the interests of consumer protection) by judicial interpretation, the implied terms remained in more or less their original form for over a century, until 1994. However, by the early 1980's it was felt in some quarters that the implied terms, and in particular that in s 14(2) of the SoGA 1979, that goods should be of merchantable quality, were poorly suited to the needs and concerns of consumer buyers, especially of durable manufactured goods such as motor cars and electrical goods. The statutory definition of merchantable quality effectively required goods to be reasonably fit for their common purpose, but, it was argued, consumers often (quite legitimately) expected more than mere functional fitness for purpose. At the same time, there was concern that the rules on acceptance could operate to trip up the unwary buyer, who might lose the right to reject the goods inadvertently, sometimes without even knowing it was available, whilst many commentators - and, it is apparent, some judges - were concerned that the classification of the implied terms as conditions, breach of which entitled the buyer to reject the goods and treat the contract as repudiated, could enable the buyer to reject goods and escape a contract for some trivial breach,(6) where the real reason was often economic. In 1980, therefore, the Law Commission was invited to consider the substance of the implied terms themselves and the remedies for their breach.

The Commissions' 1987 report (Law Com No 160) recommended (i) replacement of the implied term that goods should be of merchantable quality with one that goods should be of "acceptable quality", and (ii) reform of the rules on rejection and acceptance to (a) restrict the right of non-consumer buyers to reject goods for minor breaches of contract and (b) clarify the law on acceptance inter alia, to prevent the buyer losing the right inadvertently or before he could have an opportunity to examine the goods, but their recommendations were not implemented until 1994 when the Sale and Supply of Goods Act was passed, amending the 1979 Act and coming into effect on January 3 1995.(7) So, by a nice coincidence, just as the European Commission was initiating action on consumer guarantees, the UK was finally reforming its domestic law on the subject. SoGA s 14(2) now requires that the goods supplied under the contract should be of satisfactory, rather than merchantable, quality (it being felt that "satisfactory quality" indicated a higher standard than the Law Commission's proposed requirement that goods should be of "acceptable quality"(8)), and a new s 14(2A) provides that "goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the other circumstances." To further illustrate the requirement, s 14(2B) contains a list of factors which are said to be aspects of quality and are therefore to be considered in assessing whether goods are of "satisfactory quality". The list, which was proposed by the Law Commission, is intended to take account of the concerns of consumers and therefore includes factors such as "appearance and finish", "freedom from minor defects", "safety" and "durability". In addition, in order to reverse the effect of decisions prior to the amendment that goods with more than one common purpose could be merchantable if they were reasonably fit for any one of those purposes (see Aswan Engineering Est. Ltd. v Lupdine [1987] 1 All ER 135), s 14(2B) makes clear that "fitness for all the purposes for which goods of the kind in question are commonly supplied" (emphasis added) is now an aspect of quality. Section 15A restricts the right of a non-consumer buyer to reject goods on the grounds of breach of condition where the breach is so slight that rejection would be unreasonable, and sections 35 and 35A amend the law on acceptance to make it less likely that buyers, and especially consumer buyers, will lose the right to reject before they are aware of it, or by acting reasonably by (for instance) agreeing to the seller's attempting to repair the goods, and to make the law more flexible, by introducing a right of "partial rejection", so that where only part of the goods are affected by a breach, the buyer is no longer required to reject all of them.

The draft Directive

Consumer Sales

Having rejected the option of general harmonisation the draft Directive has to define "consumer sales"and thus its sphere of application. The Green Paper canvassed two possible definitional approaches. The first, a "subjective" approach, would define the transaction according to the status of the parties; the second, "objective", approach, according to the type of goods supplied. The Green Paper seemed to favour an "objective" approach (p 84) and, indeed, the Parliament asked the Commission to produce a proposal using objective criteria to define its scope (Resolution A3-0284/94 at p 143).

Both subjective and objective approaches are used in existing domestic and EC legislation. The Unfair Terms Directive adopts a subjective approach; the Directive on General Product Safety (1992/59/EEC OJ L228/24) an objective one. The draft Directive has opted for a composite approach. It is said to apply to sales of consumer goods, but (although there is no express statement to this effect) since the key requirement that goods should be in conformity with the contract depends on the actions of the "seller" and "consumer" as defined, it is clear that it can only apply where consumer goods are sold by a seller acting in the course of his trade, business or profession, to a consumer.

A similar approach is taken in domestic law where, although the statutory implied terms apply to consumer and non-consumers sales alike, s 6 of the Unfair Contract Terms Act 1977 (UCTA) prohibits any exclusion or restriction of the terms where the buyer "deals as consumer" as defined and s 15A of the SoGA restricts the buyer's right to reject the goods where the buyer does not "deal as a consumer". The test of "dealing as a consumer" is the same in both cases, and a buyer of goods "deals as a consumer" if (i) he neither makes nor holds himself out as making the contract "in the course of a business"; (ii) the seller does make the contract in the course of a business and (iii) the goods supplied are of a type ordinarily supplied for private use or consumption (UCTA s 12).

The definitions of "consumer", "seller" and "consumer goods" in the draft are, however, subtly different from both their domestic counterparts and from the definitions used in other EC legislation, including the Unfair Terms Directive. This is particularly surprising given the statement that the draft is intended as an adjunct to the Unfair Terms Directive. Thus a "consumer" is a "natural person who, in the contracts covered by this Directive, is acting for purposes which are not directly related to his trade, business or profession" (art 1.2(a)). This is clearly narrower than the definition in domestic law, where a consumer is a person who is not acting in the course of a business and, according to the Court of Appeal (in R&B Customs Brokers Ltd v UDT Finance Ltd [1988] 1 All ER 847), a limited company can be a consumer; but it appears to be wider than the Unfair Terms Directive's definition of a consumer (art 2(b)) as a natural person who is acting "for purposes which are outside his trade, business or profession" (emphasis added): clearly a person can be acting for purposes which are not "directly related" to, even though he is not acting outside, his trade, business or profession.

Similarly the definition of "seller" as a person who sells consumer goods "in the course of his trade, business or profession" (art 1.2(c)), appears to require a closer connection with the business than "for purposes related to his trade, business or profession", the expression used in the Unfair Terms Directive (art 2(c)). It seems closer to the phrase "in the course of business" used in domestic legislation (UCTA s 12(1)(b)), which has been given a restrictive interpretation (e.g: in R&B Customs Brokers). Presumably, therefore, the draft Directive would apply to a sale of a computer by an electrical goods retailer but not to a sale of a second hand computer by a solicitor.

Finally, "consumer goods" are defined as "any goods, excluding buildings,(9) normally intended for final use or consumption" (art 1.2(b)). One might question the need for this additional, objective, requirement. Many goods are supplied for consumer and non-consumer use and commentators have pointed out the difficulties of applying the similar test in the UCTA (see Kidner (1987)). Certainly there are likely to be difficulties in applying the test at the margins, but the additional requirement does serve to limit the scope of the draft, excluding from its sphere of operation businesses dealing in goods not normally bought by consumers, who would not expect to be dealing with consumers. The definition in the draft is, however, problematic. It is difficult to conceive of a situation where goods bought by an individual in their private capacity would not be of a sort supplied for "final use", even if the actual buyer did not intend to make use of them. Goods bought for resale may be intended for final use eventually, albeit by someone other than the purchaser; and if the requirement is intended to be "final use by the consumer purchaser" one can see difficult problems, for instance, in the application of the proposals to goods normally sold to be given as gifts (which would not be intended for final use by the purchaser). The definition in the UCTA - private use - may be more restrictive and would be easier to apply.

Conformity with the contract

Article 2 of the draft establishes the core requirement that "consumer goods must be in conformity with the contract of sale" (art 2(1)). How is conformity to be judged? The Green Paper proposed that goods should be required to meet the consumer's "legitimate expectations", described as "a dynamic concept to be assessed taking all of the circumstances into account and, notably, the provisions of the contract, the presentation of the product, the price, the brand, the advertising or any information provided on the product, the nature of the product, its purpose, the laws and regulations concerning the product, and other features" (p 86). This appears to be substantively similar to the requirement of English law, reflected in the statutory implied terms and especially in the term in s 14(2) of SoGA, that goods should be of merchantable/satisfactory quality, which originated as a term implied at common law to reflect the ordinary, natural - one might say "legitimate" - expectations of sellers and buyers (see, e.g: Gardiner v Gray (1815) 4 Camp 144). However, the test could be criticised on a number of grounds and it seems that, although it was generally welcomed by consumer representatives, "professional circles" took "a dim view" of it (Explanatory Memorandum to the Draft Directive p 11). This is perhaps understandable. Any quality standard intended to be applied to goods generally must, of necessity, be somewhat open textured, but a "legitimate expectations" test, without more, would be impossibly vague and whilst it might be that, in time, case law would provide guidance on its meaning (see Weatherill (1994)), there might be a considerable delay before a significant body of case law developed. The test could, perhaps, have been rescued by adding an illustrative list of factors to be considered when assessing whether the test was satisfied (see Bradgate (1995) p 101, Howells and Weatherill, 1995, p 167), but the Commission has decided to abandon the legitimate expectations test altogether.

From an English law perspective the approach of the Green Paper was flawed in another respect. The "legitimate expectations" test concentrated solely on those issues which, in English law, would be covered by the "quality term" in s 14(2) of the Sale of Goods Act, largely disregarding matters which might be covered by ss 13 and 14(3). The difficulty with this approach was that it is often impossible to separate quality issues from those concerned with description and fitness for purpose. Moreover, the Green Paper, adopting the approach of some Civil Law jurisdictions, deliberately ignored questions of delivery and liability for non-delivery, but again, from an English standpoint, this is conceptually impossible, since the seller's implied undertakings about the goods qualify and define the duties to deliver and to accept and pay for the goods.

The draft Directive recognises these problems and observes that "in conformity with the most modern legal systems ... the traditional distinction in certain legal orders between the obligation to deliver and the legal guarantee covering hidden defects is abandoned and replaced by the new and shared concept of conformity of the goods with the contract" (p 11). Thus, taking art 35 of the Vienna Convention on Contracts for the International Sale of Goods (CISG) as its model, the draft (art 3.2) provides that

An English lawyer is likely to feel much more comfortable with this than with the "legitimate expectations" test. Paragraph (a) reflects ss 13 and 15 of the Sale of Goods Act; paragraphs (b) and (d) section 14(2) and paragraph (c) s 14(3). However, there are several tantalising differences between the provisions of the draft and their domestic law counterparts.

(1) Is the requirement in art 2(2)(a), that the goods correspond with the description "given by" the seller wider than that in s 13, which requires that, where goods are sold by description, they should correspond with the description by which they are sold and has therefore been held to apply only to descriptive words which define essential commercial characteristics of the goods (Ashington Piggeries Ltd v Christopher Hill [1972] AC 441)) and which could reasonably be expected to be relied on (Harlingdon & Leinster v Christopher Hull Fine Art Ltd. [1990] 1 All ER 737). Where goods are sold in packaging bearing a "description" applied by the manufacturer, is the description "given by the seller"? If not, art 2(2)(a) would offer significantly less protection to the consumer than does s 13. Most consumer goods are manufactured and the description by which they are sold is applied by the manufacturer, via advertising and packaging. Perhaps the seller would be held to have adopted, and therefore given, the manufacturer's description, but it is by no means clear that this approach is intended, since statements made by the manufacturer are expressly stated to be relevant to another aspect of conformity (art 2(d)), in which context the seller is able to disassociate himself from the statement in question.

(2) The wording of art 2(2)(b) is closely based on that of art 35(2)(a) of the CISG and seems broadly reminiscent of the quality requirement in s 14(2) of the SOGA. However, whereas s 14(2) (both before and after the 1994 amendments) has required goods to be reasonably fit for their common purpose, art 2(2)(b) (like the CISG art 35(2)) appears to impose an absolute requirement. Moreover, whereas s 14(2A) requires goods to be reasonably fit for the purpose(s) for which similar goods are commonly supplied, art 2(2)(b) requires them to be fit for the purposes for which goods of the same type are normally used, raising the possibility that where goods are commonly misused for purposes for which they are not supplied, they might comply with s 14(2) but not with art 2(b), although this result may, perhaps, be avoided by reading the words "normally used" as importing a normative element, requiring the use to be both "common" and also "proper". The most striking feature of art 2(2)(b), however, is its concentration on fitness for purpose, to the exclusion of all other factors. From a UK perspective this is especially so, given that the statutory quality term was amended in 1994 to reduce its emphasis on "fitness for purpose" in favour of other factors which are often important to consumers. Art. 2(2)(d) of the draft would impose an additional requirement that the "quality and performance" of the goods should be "satisfactory given the nature of the goods and the price paid and taking into account the public statements made about them by the seller, the producer or his representative", but this is still less detailed than the list of factors now contained in s 14(2B) of the SoGA, and one wonders if it sufficiently reflects the desire of consumers to receive goods free from annoying minor and/or cosmetic defects which drove the 1994 domestic legislation. In addition, art 3(2) of the draft Directive would allow the seller to avoid liability for the goods' lack of conformity with the public statements of the producer if he (i) did not know and could not reasonably know of the statement in question, (ii) corrected it at the time of sale, or (iii) shows that the buyer's decision to buy the goods could not have been influenced by the statement. The third limitation presumably means that the seller will not be liable for goods' failure to conform to advertising puffs. The first, however, could involve a significant erosion of the principle of strict vendor liability which normally applies in this area. A directive based on the present wording of the draft could therefore be seen as a retrograde step, reducing the level of consumer protection offered by sales law. It is submitted that, if it is felt that the requirement of fitness for normal purpose needs clarification to meet the needs of consumers, a more detailed list of factors to be considered when assessing the goods' conformity with the contract should be included (Euro C (1994) p 5).

(3) Art 2(c), requiring that the goods be fit for any particular purpose made known by the consumer to the seller, would appear to be more generous to the buyer than s 14(3) for, whereas s 14(3) does not apply where (a) the buyer does not rely on the seller or (b) where it would be unreasonable for him so to do, it seems that under art 2(c) actual reliance, regardless of its reasonableness, is all that is required. Significantly the relevant provision of the CISG (art 36(1)(b)), like s 14(3), does exclude the requirement of fitness where reliance would be unreasonable. In view of the draft Directive's express reliance on the CISG , the absence of such a restriction may therefore be significant, leading to the conclusion that any reliance, no matter how unreasonable, is sufficient to bring art 2(c) into play (although where reliance would be unreasonable - for instance where the consumer has a highly specific requirement and the seller disclaims expertise - a court might well take the view that as a matter of fact the buyer cannot have relied on the seller).

Defective installation of goods

The Green Paper considered the possibility of extending the legal guarantee rules to services relating to goods, such as repair, maintenance and installation. The draft Directive rejects this option on the grounds that the "complexity and diversity of services do not lend themselves to a simple extension to services of rules governing the sale of goods" (p 11). It is felt, however, that where goods are installed by the seller or "under his responsibility" the installation is so closely connected with the sale that it should be governed by the same rules and art 2.3 therefore provides that any lack of conformity resulting from incorrect installation is to be regarded as "equivalent to lack of conformity of the goods with the contract". Under existing domestic law a contract to supply and install goods will normally be construed as a contract for work and materials which contains an implied term that the work will be carried out with reasonable skill and care (Supply of Goods and Services Act 1982 s 13). Thus if a supplier supplies and installs a shower which fails to perform adequately as a result of defective installation, the supplier-installer will only be liable under domestic law if proved to have been negligent. Art 2(3) of the draft Directive would make the supplier strictly liable in such a case. Where the system fails to conform to the contract due to defective installation it will often be easy to prove negligence by the supplier. Moreover, a domestic court might find a term implied at common law requiring the supplier to achieve a particular result, and thus imposing strict liability (see, e.g: IBA v BICC Construction Ltd (1980) 14 BLR 9). Nevertheless, by putting strict liability for defective installation on a statutory footing the draft Directive would make a significant change to domestic law.

Time when conformity to be judged

The draft would require the goods to conform to the contract at the time of delivery to the consumer. In contrast it seems that in domestic law the goods must correspond to the terms of the contract at the time when risk passes from seller to buyer (Benjamin (1992) para 11-057). In many cases risk will pass when delivery takes place, but risk and delivery can be separated. For instance, if a consumer buys a specific second hand car and agrees to collect it the following day, property in the car, and the risk of damage to it, may pass to the consumer immediately(SoGA s 18r.1), but with delivery deferred until collection. Where goods are sold by mail order, risk may pass to the consumer when goods addressed to him are despatched in the post (SoGA s 18r.5). Effectively, therefore (although it does not put it in these terms) the draft Directive would vary the rule on passing of risk, so that the risk of non-conformity would be linked to delivery rather than the transfer of property. Even this is not clear, however, since it is not clear what the draft means by "delivery": for instance, where goods are sent to a consumer by independent carrier, the SoGA deems delivery to the carrier to be delivery to the consumer; the explanatory memorandum to the draft, however, suggests that "delivery" means actual, physical receipt of the goods (p 12), so that in many cases the draft would vary the existing domestic rule to the consumer's advantage.

Although conformity would be judged at the time of delivery, the buyer would be able to obtain redress for any lack of conformity which becomes manifest within two years of delivery (art 3.1), with a rebuttable presumption that any lack of conformity appearing within six months of delivery was present at delivery, unless that presumption was incompatible with the nature either of the goods or of the lack of conformity (art 3.3). As already noted, domestic law considers "durability" a factor of quality (SoGA s 14(2B))and in practice there may often be a de facto presumption that defects appearing within a reasonable time of the sale were present at the time of sale. However, the introduction of a genuine legal presumption would be of assistance to consumers, preventing the seller putting the consumer to the cost of proof.

Limits on the seller's liability

The laws of most member states (10) excuse the seller from liability for defects the buyer knew of at the time of the contract, and some, like the CISG, go further and excuse the seller from liability for defects of which the buyer should have been aware. In the UK the quality term in SoGA s 14(2) does not apply to matters specifically drawn to the buyer's attention before the contract was made or, where the buyer examines the goods, to defects which that examination ought to have revealed (SoGA s 14(2C)), whilst the requirement of reasonable reliance incorporated into the terms in ss 13 and 14(3) effectively imports a similar restriction there. The 1993 Green Paper contained no such limitation, on the grounds that a buyer who was aware of defects in the goods could have no legitimate expectation that the goods would be free of that defect, but it appeared that it would have imposed liability on the seller for defects of which the consumer was subjectively unaware even if he could have discovered them. Art 3.1 of the draft Directive, however, adopting the wording of the CISG (art. 35.3), provides that the seller is not to be liable for any lack of conformity of which the buyer knew, or could not have been unaware, at the time the contract was made. The carelessly ignorant consumer is therefore unprotected. However, subject to these qualifications contractual restrictions on the consumer's rights and remedies would be wholly ineffective, just as in domestic law (art. 6.1).

Remedies

Whereas the remedies scheme proposed in the Green Paper was criticised for giving too much power to the seller, that in the draft has been criticised by business interests as overly favouring the consumer, especially in comparison with domestic law (Phillips (1996)). However, it may be that the scheme is rather less different from existing domestic law - and less "consumer friendly" - than has been suggested. It proposes that a consumer who receives goods not in conformity with the contract should be able to choose between (a) repair, by the seller, without charge, and within a reasonable period; (b) replacement, where possible; (c) "an appropriate" reduction in the price; or (d) rescinding the contract - ie: rejecting the goods and demanding a refund - but that Member States should be entitled to restrict the availability of the remedies in the case of a "minor lack of conformity". Rescission and replacement would only be available for the first year after delivery, and all rights would be lost after two years. In addition, "in the interest of good faith in the relations between the contracting parties", the consumer would be required to notify the seller of the lack of conformity within one month of the date when he discovered it, or ought normally to have done so, in default of which he would lose all rights in respect of the lack of conformity (art 4).

Criticism of the draft Directive has focussed on the proposal that the consumer should have an absolute right to reject the goods for up to a year after delivery. This raises two questions: (a) should the consumer have an absolute right to a refund and (b) for how long should that right be available? Before considering these questions, however, it will be useful to consider the remedies available to the disappointed buyer under English law.

Remedies in English Law

The normally accepted view is that English law offers the buyer the rights to reject the goods and demand a refund, and/or to claim damages, but not to demand repair or replacement In fact, however, this analysis may be over simplistic: it seems that the buyer is entitled at least to request repair or replacement, while some commentators argue that the buyer does not have an automatic right to a refund. This second point will be examined below; the first, which goes to the range of remedies available in English law, needs consideration here.

In practice consumers will often accept attempts to repair or replace the goods rather than demand an immediate refund, and the SoGA now makes it clear that a buyer who accepts the seller's attempt to repair defective goods may nevertheless be entitled to reject them if the repair proves ineffective (s 35(6)), but the extent to which English law recognises a legal right for either seller or buyer to insist on repair or replacement is unclear. However, the right to reject goods for breach of condition under the SoGA is conceptually distinct from the right to terminate the contract (or, to use the language of the Act, treat the contract as repudiated) and it is therefore clear that the buyer may reject the goods without terminating the contract, effectively permitting the seller to attempt to cure his breach by repair or replacement. This does not give the buyer a specifically enforceable right to demand "cure", but such a right would amount, in effect, to a right to specific performance of the contract, which is generally an exceptional remedy in English law. In effect, therefore, English law gives the buyer a right to request cure, with a right to terminate the contract and/or demand damages as a default remedy if cure is refused or unsuccessful (Bradgate and White (1995)).

The buyer loses the right to reject, however, if, after having a reasonable opportunity to examine the goods, he accepts them, either expressly, or impliedly - by using or dealing with them in a manner "inconsistent with the seller's ownership"- or if he simply retains them beyond a reasonable time without rejecting them (SoGA s 35). What is a "reasonable" time for this purpose will vary from case to case, according to the nature of the goods and the circumstances of the case,(11) and in deciding whether a reasonable time has elapsed the court is now required to consider whether the buyer has had a reasonable opportunity to examine the goods to ascertain whether they are in conformity with the contract, but it seems that the right of rejection will still, nevertheless, normally be available for only a relatively short time after the goods are delivered, so that in many cases the right to reject will be lost simply by lapse of time, possibly even before defects manifest themselves (see Bernstein v Pamsons' Motors (Golders Green) Ltd. [1987] 2 All ER 220). Since acceptance bars rejection, which is both a necessary pre-cursor to the buyer's right to treat the contract as repudiated and the basis for any right to request repair or replacement which is available in English law, those rights are similarly available only for a short period.

English law does not recognise a right of price reduction as such. Instead it allows the buyer to claim damages (SoGA s 53(1)) and, where he has not yet paid the price, to set up any such claim in diminution or extinction of his obligation to pay the price (SoGA s 53(1)(a)). At first sight this appears, in effect, to be a right of price reduction. However, although the draft Directive does not indicate how the amount of any price reduction is to be calculated, a similar right is available under the CISG (art 50) and in many civil jurisdictions, where it is clear that it operates differently from the rule in s 53(1)(a). Strictly speaking s 53(1)(a) creates a procedural right, a self-help means of enforcing the substantive right to damages, whereas the true right of price reduction is a substantive right, conceptually separate from the right to damages.(12)

(a) Should the buyer have an absolute right to reject the goods and demand a refund in all cases?

If it is to provide an adequate level of consumer protection the law must provide consumers with effective remedies which are sufficiently clear and simple to be readily understood and asserted (bearing in mind that private law remedies must be capable of being invoked by the consumer without the aid either of the courts or, generally, legal advice). One of the great strengths of the SoGA has been its relative simplicity - many consumers understand that if they receive goods not of the correct quality they have an absolute right to reject them and demand a refund. However, the law must not impose excessive burdens on the seller, who is often just as much an innocent party as the consumer buyer. Rejection leaves the seller with the goods - defective and possibly used - on his hands; moreover, in many cases the seller may be unable to reject them himself, either because of restrictions in the contract between himself and his supplier, or because he is deemed to have accepted them, by selling them or simply by lapse of time. There is less danger of commercially opportunistic behaviour - in the sense of rejection of goods on the grounds of trivial defects motivated by economic factors such as market price movements - by consumers than by commercial buyers, but nevertheless it should be borne in mind that consumers may reject goods for ulterior motives - for instance, because they have reconsidered the wisdom of a purchase, or discovered a better alternative. Nevertheless, the balance of economic and bargaining power generally favours the seller and, since he may be able to pass liability back to his supplier and thus to the ultimate producer of the goods, who will normally be the person actually responsible for any defects, it is submitted that, in seeking a balance between consumer and seller, it is better for the law to err in favour of the consumer rather than the seller. The Green Paper proposed a range of remedies similar to that in the draft Directive, but with a right for the seller, in effect, to veto the consumer's chosen remedy and offer an alternative in several cases. This was rightly criticised as favouring sellers (see Bradgate, 1995 p 105; Howells and Weatherill, 1995 p. 168) to the detriment of consumers for whom the right to demand a refund is a potent bargaining counter in negotiating with sellers. The draft Directive, however, is said to have shifted the balance too far the other way.

Although the normally accepted view is that under domestic law a buyer who receives non-conforming goods has an unfettered right to reject them and demand a refund of the price, at least for a short period after delivery, some commentators (Goode, 1995, p 363, Beale p 9, Carter, 1991, p4) argue that even where the seller is in breach of condition the buyer is entitled to reject the goods but not to terminate the contract unless either (a) the time for delivery has expired or (b) the initial breach has destroyed his confidence in the seller's ability to perform.(13) However, even if accepted, this argument would often have little application to consumer cases where the time for delivery will normally have expired before the buyer rejects and/or it may be argued that the seller's initial breach has destroyed the buyer's confidence. It thus seems that generally a consumer will have an unfettered right to reject the goods and demand a refund although he may, if he wishes, reject the non-conforming goods but accept repair or replacement.

Should the buyer have an absolute right to a refund? Sellers are likely to want to be able to require the buyer to accept repair or replacement in lieu of a refund, so that the question becomes "Should the seller have a right to cure his breach of contract" or "who should control the choice of remedy?" Giving the buyer an absolute right to a refund can be justified on the grounds that it is a clear rule, simple to understand, which enhances the buyer's bargaining power when dealing with the seller, any qualification of which, for instance by introduction of a right for the seller to insist on cure, would seriously erode the buyer's position. The Law Commissions accepted this in 1987 and rejected the introduction of a right of seller cure into English law (Law Commission No 160, para 4.13). Similarly the draft Directive observes that the right to demand a refund "is a good way for consumers to exercise pressure to ensure that the product is repaired or exchanged at the earliest opportunity" (p 13). The right to demand a refund is sometimes criticised as permitting economically opportunistic behaviour but, even if one might doubt the draft Directive's optimistic statement that "There is no reason to fear that consumers will abuse this remedy", it is likely that consumers will not normally demand a refund (rather than repair or replacement) unless they have lost confidence in the seller or the product.

Rejection may be said to be unfair to the seller because it leaves him with goods which are not only defective, but also used and therefore depreciated in value. The draft Directive assumes that this will not be a problem, because "where a refund is not sought within a short period following sale, the amount reimbursed will normally be reduced so as to take into account the value of the use of the goods by the consumer"(p 13). This is in fact not the case in English law at present: in the one situation where a long term right of rejection does exist, the courts have repeatedly upheld the right of the buyer to a total refund, regardless of his use of the goods,(14) and the Law Commissions rejected suggestions that the buyer 's refund should be reduced on those grounds, partly on the basis that it would be too difficult to value the buyer's use (Law Commission No 160 para 6.4).(15) In fact in the case of consumer goods, which are often available for hire, and for which second hand market prices may provide an indication of depreciation costs, this objection is unconvincing, and English law might be improved by introducing a requirement for the buyer who obtains a refund to compensate the seller for his use of the goods. However, this is not a complete answer to the objection. In many cases the value of goods is significantly depreciated by the mere fact that they are used, and therefore second hand, regardless of the duration of the buyer's user. It is hard on the seller to require him to carry the cost of that depreciation; nevertheless, it is submitted that, on balance, unfairness to the seller is outweighed by the need to protect the bargaining position of consumers when dealing with recalcitrant sellers, bearing in mind always that most consumers and sellers will probably act reasonably: the law is likely to be important where one insists on behaving unreasonably and where it is the consumer who behaves unreasonably the seller has a substantially stronger bargaining position by virtue of the fact that he (generally) will already have received payment for the goods. The retention of an absolute right to demand a refund is therefore vital in the interests of consumer protection.

(b) For how long should the buyer's rights be available?

The draft Directive would allow the consumer to seek a refund or replacement for up to one year after delivery, and repair for up to two years. In English law, where all three rights depend on rejection, they are currently available for only a limited time, and sellers have argued that the draft Directive scheme would significantly prejudice their position. On closer examination, however, it appears that the proposals would probably have less impact than has been suggested. The rights to demand refund, replacement or repair under the draft Directive would be qualified by the rules on burden of proof of lack of conformity, and limitation, and by the flexibility of the quality and durability standard. For defects appearing more than six months after delivery the buyer would have no rights unless he could prove that the defect was present at delivery - which will often be difficult and expensive. Even during the first six months the presumption that the goods were defective at delivery would be rebuttable and wholly excluded in certain circumstances. The buyer who fails to notify his claim within one month of the date on which he detected, or ought normally to have detected, the lack of conformity would lose all rights. Finally, the draft Directive would permit member states to restrict the scope of the remedies "in the case of a minor lack of conformity"(art 3.4): in other words, it would be possible to restrict the availability of rights to reject in the case of minor defects.

In fact, even an unrestricted right of long term rejection would probably not impose significant burdens on sellers. Many sellers offer "warranties" giving long term rights to repair over and above their statutory obligations. Even where such rights are not offered, English law allows the buyer to bring a claim for damages for breach of contract for up to six years from the date of the breach - normally, in a sale case, the date of delivery. Where the goods are not in conformity with the contract, the basic measure is the difference between the actual value of the goods as delivered and the value the goods would have had had they conformed to the contract and in many cases of defective consumer goods will be the cost of repair. The seller may therefore have to bear the cost of repairs to defective goods for up to six years after sale.(16) Allowing the buyer to demand repair for up to two years after delivery would therefore involve no increase in the seller's liability; rather, by enabling him to effect repairs it would allow him to exercise a measure of control over them. The objection to long term rights to demand refund or replacement is that both leave the seller with defective and depreciated goods on his hands. However, if the goods are capable of repair, the seller can mitigate his loss by repairing them and selling them as second hand; and the problem of depreciation can be overcome if the buyer is required to make some payment for his use of the goods - bearing in mind, of course, that the buyer's use will, by definition, have been of defective goods.

In fact English law does already recognise a right of long term rejection in some cases. The rule of acceptance, which prevents rejection where goods are bought under a simple contract of sale, does not apply where goods are supplied under contracts of hire purchase or instalment conditonal sale, or indeed, any contract of supply other than an outright sale. In those cases the consumer who later discovers that the goods were defective at the time of delivery is entitled to treat the contract as repudiated on the grounds of breach of condition unless he has affirmed the contract, and he cannot be taken to have affirmed the contract until he has knowledge of the breach (Farnsworth Finance Facilities Ltd v Attryde [1970] 1 WLR 1053). Thus where a defect in goods becomes manifest some time after delivery, the rights of the English consumer depend on the nature of the contract under which he acquired them. If he bought them under a simple sale he will probably be held to have accepted them; but if he acquired them under any other form of contract he will be entitled to treat the contract as repudiated and put an end to it, in which case, he will be released from performance of any outstanding obligations under the contract but will not be entitled to a total refund of all sums paid prior to termination. Instead, in most cases, he will obtain damages which will take account of the value of his use of the (defective) goods (UCB Leasing Ltd v Holtom [1987] RTR 362). Thus in the case of supply contracts other than sale English law already recognises a right of long term rejection and partial refund taking account of the buyer's use of the goods, very much along the lines of the draft's proposals. Introduction of a long term right of rejection into the law of sale would therefore improve English law by removing the anomaly that the buyer's rights may vary according to fine and technical legal distinctions between the form of transactions whilst giving some substance to the recognition in the 1994 legislation that durability is an aspect of quality. Indeed, one might suggest that the proposals in the draft Directive would actually reduce the rights of the consumer who acquires goods under a hire purchase or other non-sale supply contract by limiting the availability of his right to terminate the contract to the period of one year.

Parties to the guarantee

The Green Paper proposed a guarantee which would run with the goods, so as to benefit third party donees and second hand purchasers, and which would be enforceable against the manufacturer of the goods as well as the seller. A similar scheme was considered by the DTI in 1992. Such a scheme could, however, raise some difficult questions (see Weatherill (1994)). The draft Directive has abandoned this line in favour of more conservative proposals that the guarantee would be enforceable only by the buyer of the goods against the retailer.(17) Whilst this is consistent with the logic of a contract based "guarantee", it is an unfortunate and retrograde step.

Seller liability

One may ask why, in a modern commercial environment, primary liability for the quality of consumer goods should fall on the final seller who, in most cases, is not their producer. In most cases the producer is the person ultimately responsible for any defects in the goods and who creates the demand for, and shapes consumer expectations, of goods through advertising. Would it not be more rational to place liability directly on the producer, who is, after all, directly liable for injuries and other losses caused by defective goods? (see Cranston (1995), Harvey and Parry (1996) p 100) Two justifications for seller liability can be offered. First, it provides the consumer with a readily identifiable target from whom to seek redress. Second, even if the final seller is not directly responsible for defects in the goods, liability for them can be passed back via the contractual marketing and distribution chain, by the seller seeking redress under his contract with his supplier and so on, until liability is passed back to the producer. In fact, however, it may not always be possible for liability to be passed back to the manufacturer in this way. First, as already noted, the final seller, and intermediate sellers in the distribution chain, may be held to have accepted the goods and thus be unable to reject them. Second, the liability chain may break down if any of the suppliers in it is insolvent, leaving liability, effectively, on that supplier's customer. Third, the law may permit contractual restrictions or exclusions of liability vis a vis buyers other than consumers; in the UK, for instance, the seller to the retailer can exclude or limit his liability for breach of contract and the exclusion will be valid and effective if reasonable. Even the argument that seller liability assists the consumer loses much of its force in the context of the Single Market. Where a consumer purchases goods from a retailer in another country it may be at least as easy, and possibly easier, for him to seek redress from the manufacturer, who will often be a large, readily identifiable, corporation with a presence in several Member States, rather than the retailer who may not have a presence in the consumer's home state. Manufacturer liability could be problematic where the manufacturer claimed that he was not responsible for the goods' non-conformity with the buyer's contract - for instance, because the buyer's claim is that the seller mis-described them, or because the goods have been damaged due to handling or storage after leaving the manufacturer. However, those are not insuperable difficulties, and could be overcome either by a scheme exempting the manufacturer from liability in such cases (the burden of proof being on the manufacturer) - as is the position in product liability law,(18) subject to retention of the consumer's existing rights against the retailer, or by imposing strict liability on the manufacturer, subject to a right for him to seek indemnity from any other person responsible for a lack of conformity, where appropriate.

The Green Paper canvassed the possibility of manufacturer liability, and no explanation is offered for not pursuing it. The draft Directive is, however, clearly a little uncomfortable with seller liability, conceding that the possibility of contract terms restricting the rights of the retail seller against his supplier "may ... create an injustice in that the entire liability for defects resulting from an act of commission or omission on the part of another party falls upon the final sellers" (p 14). It therefore contains two proposals to mitigate this injustice. First, as noted earlier, the retailer is permitted, in some circumstances, to avoid liability for the goods' lack of conformity with advertising and other "public statements made by the producer or his representative" - especially if he can show that he did not, and could not reasonably, know of the statement. This underlines the illogicality of seller liability: if it is not right to hold the seller strictly liable for statements of which he is unaware, why is it right to hold him liable for defects of which he is unaware? Most importantly, however, the draft proposes that where the final seller is liable to the consumer because of a lack of conformity "resulting from an act of commission or omission by the producer, a previous seller in the same chain of contracts or any other intermediary", he shall be entitled to pursue remedies against the person responsible "under the conditions laid down by national law" (art 3.5). The catch is in the last eight words: it seems that the retailer's rights are to depend on national law. If so, in the UK., at least, liability will continue to fall mainly on the retailer, because of the restrictions on the retailer's rights permitted by and contained in domestic law and described above. Moreover, the draft seems to envisage a direct action by the retailer against the person responsible for the lack of conformity, but in England the only claim available to the retailer is in contract, and therefore restricted by privity, for his claim for damages will be construed as one for purely economic loss for which no action will normally be available in tort, so that where the person responsible for the lack of conformity is not the retailer's supplier, no action against that person will lie in English law.

Conclusion

Despite the criticisms above, it is submitted that on their own terms the proposals in the draft Directive are a significant improvement on those in the 1993 Green Paper, striking a fairer balance between the interests of sellers and consumer buyers. The above analysis suggests that its main features are subtly, rather than substantially, different from English law and that their adoption would not significantly increase the burden on retailers. Certainly they are not the "consumer charter" they have been portrayed as by some business lobbies. Nevertheless, it is submitted that the draft is still flawed in a number of respects and that implementation of its proposals would cause some difficulties for English law.

First, although it is now recognised that questions of quality cannot be separated from other aspects of conformity or questions of delivery, the draft still seems not fully to appreciate the contractual matrix within which sales law operates. It ignores problems of non-delivery and liability for consequential losses caused by non-conforming goods.(19) Problems of risk are not fully dealt with; damages are wholly ignored, leaving a significant gap in the scope of the harmonisation. Whereas the Green Paper seemed to view the "legal guarantee" as something separate from the contract of sale, the draft Directive ultimately seems unsure whether it should operate as part of the contract of sale, or outside and additional to it.

Second, many of the provisions in the draft are vague or open textured, creating enormous potential for confusion, obfuscation and dispute which could be exploited by a seller to weaken the consumer's bargaining position or even to deny redress altogether. To some extent this is unavoidable; a quality standard applicable to a broad range of goods of different types and in different circumstances must, necessarily, be stated in general terms which may lack precise meaning. Too many, however, of the draft's provisions lack precision. Is the transaction a sale to a consumer "acting for purposes not directly related to his trade, business or profession" and of consumer goods "normally intended for final use or consumption"? Were the goods fit for the purpose for which "goods of the same type are normally used". Was it a case where, at the moment of sale the consumer "could not be unaware of" a lack of conformity or the seller could not reasonably know of statements about the goods made by the manufacturer. Is the presumption that defects appearing in the first six months after sale "incompatible with the nature of the goods or the lack of conformity"? When is a lack of conformity "minor", so that Member States may restrict consumer's remedies? Is it a case where the consumer "ought normally" to have detected the lack of conformity, and notified it to the seller, earlier than he did.

Third, the draft contains nothing on the mechanics of enforcement of the guarantee. To claim a refund, repair or replacement of defective goods, the consumer will have to return the goods to the seller; but - especially in the context of cross border consumer shopping - that may often be impractical or expensive. It is submitted that unless it expressly deals with such matters a directive on this subject will do nothing practical to assist cross-border shopping consumers.

From an English perspective, the effectiveness of a Directive on this subject would, to a large degree, depend on the manner of its implementation. The precedents are not encouraging. The recent tendency of the DTI has been to implement Directives by simply transposing their text into Regulations, adopted under the European Communities Act. The conceptual confusion of the draft Directive would make it difficult to adopt this route. Its contents would not fit happily as a patch on the Sale of Goods Act in substitution for the existing quality provisions, but could not be adopted as a complete corpus of consumer rights. On the other hand, to super-add the text of the draft Directive on top of the existing law would produce a remedies scheme complex almost to the point of incomprehensibility. The buyer would have an absolute right to reject the goods and demand a full refund, or repair or replacement, until the expiry of a "reasonable time" after delivery. Thereafter the buyer would have the right to demand a partial refund (taking account of his use of the goods) or replacement until the expiry of the first year; but that right would (perhaps) not be available in the case of minor defects. The buyer would have a right to demand repair or price reduction until the expiry of the second year, subject, again, to possible exclusion in the case of minor defects. The buyer would lose these rights unless he notified his claim to the seller within one month of its appearance, but a claim for damages under existing law would continue to be available, regardless of the date of the appearance of the defect, until the expiry of six years from the date of delivery. The burden of proof would shift according to whether the claim was under the directive or the existing law, and the date when the defect appeared. And, of course, the position would be totally different if the consumer acquired the goods under a contract other than sale.

It is submitted, however, that the proposals in the draft would do little of practical value to improve the position of cross-border shopping consumers, and whilst, in a purely domestic context they would improve the legal position of consumers in some respects, they would weaken it in others, introducing new uncertainty in return for no significant benefits. Curiously the draft's strength - recognition of the contractual nature of the existing "legal guarantee" - is also its weakness leading, particularly, to the perpetuation of enforceability limited by privity. A better solution, it is submitted, would be to adopt the logic of product liability law and give the consumer purchaser, and subsequent owners, of non-conforming goods rights directly enforceable against the manufacturer, additional to, and operating alongside, existing contractual rights: in effect, a mandatory minimum "guarantee". Such a solution, which was proposed by the DTI in 1992, would meet many of the objections outlined above. It would enhance consumer's legal rights and, in many cases, give them a more effective practical means of redress; it would avoid the problems of patching existing national contract laws and, above all, would place liability for product quality where it properly belongs in a modern economy, on the producer.

Bibliography

Atiyah, P S (1995) Sale of Goods, 9th ed (Adams, J N, ed) (London: Pitman Publishing)

Benjamin (1994) Benjamin's Sale of Goods, 4th ed (Guest, A G, ed) (London: Sweet & Maxwell)

Bradgate, J R (1995) Harmonisation of Legal Guarantees: A Common Law Perspective, 3 Consumer Law Journal 94.

Bradgate, J R, and White, F (1995) 'Rejection and Termination in Contracts for the Sale of Goods' in Birds, Bradgate and Villiers (eds) Termination of Contracts (Chichester: Wiley Chancery)

Bright, S and Bright, C (1995) Unfair Terms in Land Contracts: Copy Out or Cop Out? 111 Law Quarterly Review 655.

Cranston, R (1995) 'The Green Paper on Guarantees' 3 Consumer Law Journal 110.

Dean (1993) 'Unfair Contract Terms: the European Approach', 56 Modern Law Review 581.

DTI (1994): Transfer of Title: sections 21 to 26 of the Sale of Goods Act 1979.

Euro C (1994): ETUC Consumers' Unit/EURO C Position relating to The Green Paper of the European Commission on Guarantees for Consumer Goods and After Sales Service, EURo C Newsletter, June 1994.

European Commission (1994) Green Paper on Guarantees for Consumer Goods and After Sales Service.

Harvey, B and Parry, D (1996) The Law of Consumer Protection and Fair Trading (London: Butterworths)

Howells, G and Weatherill, S (1995) Consumer Protection Law (Aldershot: Dartmouth Publishing)

Kidner, R, (1987) 'The Unfair Contract Terms Act 1977 - Who Deals as Consumer?' 38 Northern Ireland Legal Quarterly 46 .

Law Commission Working Paper No 85 (1983) Sale and Supply of Goods (London: HMSO)

Law Commission No 121 (1983) Pecuniary Restitution on Breach of Contract (London: HMSO)

Law Reform Committee (1966), 12th Report: Transfer of Title to Chattels (London: HMSO) Cmnd 2958.

Phillips, R (1996) 'Retailers attack European move towards two year guarantees' Independent on Sunday, 29 October 1996.

Willett, C (1991) 'The Unacceptable Face of the Consumer Guarantees Bill' 54 Modern Law Review 552.

(1) Several events were organised to discuss the proposals, including conferences organised by the University of Utrecht and the Unit for Commercial Law Studies of the University of Sheffield, and the first European Consumer Forum, held in Brussels on 4 October 1994. Back to text.

(2) For criticism of this rationale see Bradgate (1995), Cranston (1995). A similar argument was advanced in the 1993 Green Paper, but with only minimal empirical evidence to support it, and no further evidence is offered to support the assertion in the draft Directive. Back to text.

(3) The explanatory memorandum describes the principle that the guarantee legally binds the guarantor as "self-evident", adding that "this does not imply any legal qualification in respect of the guarantee (contract, unilateral promise, etc) which could also vary depending on the person of the guarantor and national legal traditions. In order to resolve questions about the nature and extent of liability for non-performance of a guarantee the question of the legal basis of the guarantee would have to be addressed in any domestic legislation implementing a Directive on this topic. Back to text.

(4) Supply of Goods (Implied Terms) Act 1973 ss 9-11 (hire purchase); Supply of Goods and Services Act 1982 ss 3 - 5 (other supply contracts)

Back to text. (5).By the Misrepresentation Act 1967, which modified the law on rejection, and the Supply of Goods (Implied Terms) Act 1973, which introduced a statutory definition of "merchantable quality" and restrictions on the seller's right to exclude or restrict the implied terms. Back to text.

(6) This may explain the decision in Millars of Falkirk Ltd v Turpie (1976) SLT 76 Back to text.

(7) An attempt had been made to implement the proposals by a private members bill in 1992, but failed due to Government opposition: see Willett (1991) Back to text.

(8) It is by no means clear that this is the case. Atiyah (1995) argues that "the concept of satisfactory quality has even less genuine meaning than the concept of merchantable quality". The DTI apparently feared that a test of acceptability would, in effect, be circular, since the buyer would be able to refuse to accept goods if they were not of acceptable quality: see Howells and Weatherill (1995) p130, Harvey and Parry (1996) p89. Back to text.

(9) This definition casts interesting light on the scope of the Unfair Terms in Consumer Contracts Directive. There has been much debate about the application of that Directive to contracts relating to land, some commentators arguing that the Directive only applies to contracts relating to goods, and therefore does not apply to contracts relating to land (Chitty (1993)). Others have argued that "goods" in civilian jurisdictions can include "land" (see Dean (1993)) and the express exclusion of "land" from the definition of "goods" here rather suggests that the later approach is correct and that contracts relating to land are covered by the Unfair Terms Directive. See generally Bright and Bright (1995). Back to text.

(10) See p.26 of the Green Paper. The extent of the seller's liability differs in some member states: see Bradgate (1995) p101. Back to text.

(11) As Rougier J (in)famously put it in Bernstein v Pamsons Motors (Golders Green) Ltd [1987] 2 All ER 220 at p.230 "What is a reasonable time in relation to a bicycle will hardly suffice for a nuclear submarine". Back to text.

(12) The amount of the reduction is calculated differently under the two schemes. The English rule calculates the amount of the buyer's damages and allows him to deduct that amount from the price due; the CISG allows the buyer to reduce the price proportionately. In many cases the two systems will produce similar results, but they are conceptually different and may produce different results - for instance, where the buyer has made a particularly good or bad bargain. Back to text.

(13) The present writer has argued that this view ignores the language of the Sale of Goods Act, which says that breach of condition allows the buyer to treat the contract as repudiated, and that there is only very limited, and equivocal, support for it in case law: see Bradgate and White (1995). Back to text.

(14) It has been held that where the seller is in breach of the implied term in s.12 of the Sale of Goods Act that the buyer's right to a full refund cannot be lost by aceptance of the goods: see Rowland v Divall [1923] 2 KB 100. The rule was recently applied and extended in Barber v NWS Bank plc. [1996] 1 All ER 906. Back to text.

(15) The Law Commission (Law Com WP No 85 and Law Com 121) and the Law Reform Committee (1966) had previously favoured a requirement that the buyer should give credit for his use of the goods. The possibility was raised again by the DTI in 1994. Back to text.

(16) The Consumers' Association has expressed fears that a Directive based on the draft would actually weaken consumer protection, by undermining the Sale of Goods Act provisions: see Phillips (1996). Back to text.

(17). The draft does not explicitly say that the guarantee would be enforceable only by the buyer, but it seems to be implicit in the definitions of "consumer" and "seller" in art 1.2 that they should be parties to a contract, implying that parties other than the consumer buyer would not be able to enforce the guarantee. Back to text.

(19) The omission is deliberate: see p.6 of the draft. Significantly the second draft of the Directive on Unfair Terms in Consumer Contracts did cover liability for consequential losses caused by non-conforming goods: see OJ 1992 C73/7 art 6.1.
Back to text.

United Kingdom Journals

Consumer Guarantees: the EC's draft Directive

Robert Bradgate, M.A.

Summary

Contents

Introduction

The proposals in the draft Directive.

The existing domestic law

The draft Directive

Consumer Sales

Conformity with the contract

Defective installation of goods

Time when conformity to be judged

Limits on the seller's liability

Remedies

Remedies in English Law

(a) Should the buyer have an absolute right to reject the goods and demand a refund in all cases?

(b) For how long should the buyer's rights be available?

Parties to the guarantee

Seller liability

Conclusion

Bibliography

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