27/04/2010

Gordons retail update Consumer returns

Recent press coverage has suggested that under certain EU regulations, retailers are obliged to replace faulty goods sold to consumers for 2 years from the date of their sale. This press coverage is inaccurate. The regulations merely provide that consumers are entitled to bring claims relating to faulty goods for at least 2 years. This is not an extension of consumers’ rights under existing English law, which allows such claims for up to 6 years. (5 years in Scotland).

This article is intended to provide a basic overview of the legal background to consumer returns to help you understand your rights and obligations.

Your obligations in brief:

The following terms are implied into any contract for the sale of goods:

Goods must conform to their description

For example, a dish that is described as “ovenproof”, but shatters when used in an oven, has been mis-described and would not conform to the contract.

Goods must be of satisfactory quality

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

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

These include:

Age and Price

It would be unreasonable to expect a ten-year-old kettle to perform as well as a brand new kettle, just as it would be unreasonable to expect a £100 television to perform as well as a £1000 television.

Use

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

Public statements about the characteristics of goods

If a retailer claims that a games console can connect to the internet to allow online gaming, when in fact it cannot, the games console will be found to be of unsatisfactory quality.

If there is a breach what can the consumer do?

If retailer is in breach of the above implied terms or any other terms of the contract for sale the consumer may exercise following options:

Rejection

The consumer can reject the goods and obtain a full or partial refund provided that he/she complains within a reasonable time. A “reasonable time” will be determined by the circumstances but the consumer is under an implied obligation to check the goods on purchase.

Damages

The consumer can claim damages for the cost of repair or replacement of the goods, and he/she may also be able to claim compensation for damage caused by faulty goods.

Repair or replacement

The consumer can claim a repair or a replacement.

No exclusion of the implied terms

When retailer supplies to a consumer, the implied terms cannot be excluded from the supply contract. As a consequence of this and the desire to generate consumer goodwill, retailers typically offer various guarantees as standard, such as

  • supplier guarantees packaged with the goods; and/or
  • retailer “no quibbles” guarantees which allow the goods to be returned within a certain time period even if there is nothing wrong with them.

Supplier Guarantees

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

Retailer Guarantees

Retailer guarantees are more contentious as they generate goodwill for the retailer but are often funded by the supplier by way of express provisions in the supply contract which oblige the supplier to meet the retailers’ costs of providing them.

For example: if a consumer buys an expensive kettle from a retailer with a 1 year supplier guarantee, returns the kettle to the supplier after 18 months and the supplier rejects the claim on the basis that the kettle is outside of guarantee, the consumer may still be entitled to claim against the retailer that the kettle was not of satisfactory quality.

REMEMBER: Guarantees supplement rather than replace a consumer’s legal rights!

retail@gordons have expertise in advising retailers and suppliers on their contractual obligations and the commercial benefits of drafting robust supply chain contracts.  Our commercial approach and experience in the retail sector means we can offer clients proactive advice which will improve profit margins and save valuable time when negotiating contracts.  If you would like to discuss the issues outlines in this article please contact Andy Brian.