This information answers some of the questions often raised by traders on civil law issues relating to the sale and supply of goods and services.

THE CONTRACT

When a customer purchases goods and services from you as a trader, you are both entering into a legally binding contract, which cannot be cancelled without both parties' agreement. (A few exceptions may exist, e.g. a when a credit agreement is signed off trade premises or a contract signed at home as a result of an unsolicited visit).

Legal obligations are placed on both parties. Some are as a result of express terms e.g. terms negotiated by the parties. Some are as a result of implied terms from legislation like the Sale of Goods Act 1979 (as amended).

Contracts can be both verbal and in writing. However, it is easier to prove what agreement has been reached when the contract is written.

BEFORE A CONTRACT IS MADE

If you own a shop you may display your goods in a window or shop display. By doing this you are inviting customers to make you an offer for such goods (called an invitation to treat). You can either accept the offer or you can refuse the offer. No one can force you to sell anything you don't want to. When payment is exchanged a contract is made.

If you say factual things (representations) about a product or service you provide before a contract is made which prove to be untrue, and if the customer has based their decision to buy the product or service on these representations then they may a have claim against you for misrepresentation.

THE LAW

The law provides that in every transaction for the sale and supply of goods (inc. hire purchase, hire, part exchange and under contracts for work and materials) certain terms are implied.

The Sale of Goods Act 1979 (as amended in 1994)
states that the person transferring or selling the goods must have the right to do so and the goods must:

Correspond with the description.
Many transactions involve a description of some kind. When goods are supplied and the customer relies on such a description the goods must be 'as described. If the description is false then a criminal offence may also have been committed.

Be of satisfactory quality
Goods must be of a standard that a reasonable person would regard as satisfactory (having regard to any description applied to them, the price and all other relevant circumstances). Aspects of quality that may be relevant depending on the circumstances could include:

• Fitness for all purposes for which the goods of the kind in question are commonly supplied;
• Appearance and finish;
• Freedom from minor defects;
• Safety;
• Durability.  
  Though other characteristics may also be relevant .

Be fit for the purpose
When a customer indicates (expressly) or when it is obvious (implied) e.g.(the purchase of ski boots), that the goods are wanted for a particular purpose, even if that is a purpose for which such goods are not usually supplied if a trader supplies them to meet that requirement, then the goods should be fit for that specified purpose. If as a trader you have doubts that such goods will be fit for such a purpose the customer must be made aware that he cannot rely on your skill/judgement.

Exceptions
A customer has no rights for those defects which are bought to his attention before the sale or if the customer examines the goods before purchase and any defects would have been readily noticeable.

A customer also has no rights if they damage the goods themselves or simply changed their mind about wanting the goods.

Also if a customer specifies the product he wants and doesn't rely on the trader's expertise or ignores the advice of the trader he will not have a claim if the item is not fit for the purpose.

A customer's remedy if any of the above implied terms of the Sale of Goods Act are breached.
A customer can reject the goods and receive a full refund providing they have not accepted the goods. They may also be entitled to compensation for any losses, which have been incurred Examples of acceptance are:  

• Telling you he has accepted them
• Altering the goods in some way
• Keeping the goods for a reasonable time.  (This  time period may vary depending on the nature of the goods)

However a customer is not considered to have accepted the goods if they allow you to repair them when first they are found to be faulty or if the customer signs an acceptance note without having had a reasonable opportunity to examine the goods fully first.

A customer must have a reasonable opportunity to examine the goods to check that they conform with the contract before they are deemed to have accepted the goods.

When goods have been considered to have been accepted the customer loses the right to reject them but may still have a claim for monetary compensation. (a trader can offer to repair the item or replace it or offer a credit note but the customer doesn't have to accept these alternatives).

If your customer is not dealing as a consumer (i.e. he is buying for his business) he may not reject goods if the breach of contract is very minor but will still be in a position to claim compensation.

The Supply of Goods and Services Act 1982 (as amended)
Any goods supplied under contracts governed by the above legislation must conform to the implied terms mentioned under the Sale of Goods Act. Any service provided must be carried out:

• With reasonable skill and care
• For a reasonable price (unless a price has been agreed)
• Within a reasonable time (unless time is made of the essence i.e. when a date has been agreed at the time the contract was made.)

Consumer Transactions (Restrictions on Statements) Order 1976
Makes it a criminal offence to restrict consumer's statutory rights by means of a notice, statement or documents e.g. a notice which states 'No Refunds'.

Misrepresentation Act 1967
A misrepresentation is a false statement of fact made by a party or their agent, which is intended to and does induce the other party to enter into a contract.

The party who has relied on the misrepresentation will have the remedy of rescinding the contract or in accordance with the Misrepresentation Act 1967 may be entitled to damages for non-fraudulent misrepresentation unless the representor can show he reasonably believed the representation to have been true.

The Unfair Contract Terms Act 1977
This legislation restricts a trader's ability to limit his liability.

A trader cannot limit or exclude liability for death or personal injury arising from his negligence.

Attempts to exclude or restrict liability for other loss /damage resulting from negligence (i.e. any breach of a contractual duty) must meet the test of reasonableness.

The test of reasonableness looks at whether an exclusion clause can be shown to be fair and reasonable considering the circumstances known to the parties when the contract was made. It considers the strength of the bargaining power of the parties at the time and other relevant circumstances. The trader seeking to rely on the exclusion clause is required to prove that such a clause is reasonable.

A trader cannot exclude a consumer's statutory rights but when dealing with another business a trader may be permitted to use such an exclusion clause provided it satisfies the test of reasonableness.

The Unfair Terms in Consumer Contracts Regulations 1994
These regulations which are only applicable to consumer contracts say that a consumer is not bound by a standard term (i.e. a term devised by a trader in advance, not a term negotiated with individual consumers) in a contract with a trader if that term is unfair.

(However, the main subject matter of the contract and the price agreed are excluded from these regulations as are certain mandatory terms).

The Consumer Protection Act (Part 1 Product Liability) 1987
People injured by defective products may have the right to sue for damages (monetary compensation.)

Product liability is the term given to the law affecting such rights.

Manufacturers/importers can also be liable under these Regulations.

The Contracts (Rights of Third Parties) Act 1999
Before this law was passed and came fully into force on 11 May 2000 only the buyer and the seller had rights in contract under 'privity of contract'. This legislation gives rights to anyone who was intended to benefit from the transaction.

For example if someone buys a gift for a friend and the gift proves to be faulty the recipient or the buyer of the gift can take action for breach of contract (however it must be obvious that the goods are to be for the benefit of a 3rd party.)

The Business Names Act 1985
You need to display (when appropriate) your business name in accordance with the Act with the relevant information shown at your place of business, on business letters and invoices and receipts. Link to Further information.

Torts (Interference with Goods) Act 1977 Section 12
Occasionally customers fail to collect their goods after having them repaired or forget to pick up dry-cleaning.

This section sets out what action you should take to get the goods collected and makes it clear what you can do if they are not.

It is sufficient to have a notice, which is easily visible to customers stating how long you will keep goods after repair and an intention to dispose of them after this date.

Any time period would need to be reasonable.

If no notice is displayed, you may need to send a registered letter to the customer specifying the goods are ready for collection and from where. It also should state the amount owing. Additional notification must also be given if you intend to sell or dispose of the goods after a certain date and how additional proceeds from the sale can be collected.

Link to FREQUENTLY ASKED QUESTIONS on these subjects

For further information do not hesitate to email the Trading Standards Section or telephone on (0191) 553 1661.

Environmental Health and Trading Standards
PO Box 107
Civic Centre
Sunderland
SR2 7DN