© 2011 itsa Ltd on behalf of the Trading Standards Institute.
This document is a guide to the rights and obligations that arise when a consumer buys goods from a trader. It answers questions which are commonly raised by traders about their obligations towards the individual consumer.
Contracts that involve credit or finance in any form are also subject to additional rules that are not covered in this document.
In the guide
What is a consumer?
Formation of a contract
The implied terms
Remedy for breach
Exceptions - when the consumer cannot make a claim
Other laws affecting consumer contracts
What is a consumer?
Under the Sale and Supply of Goods to Consumers Regulations 2002 a consumer is defined as being a 'natural person […] acting outside his trade, business or profession'.
Formation of a contract
When a consumer buys goods and/or services from a trader, both consumer and trader are seen to be entering into a binding contract. A contract may be defined as an agreement between two or more parties that is intended to be legally binding. The contract may include various express terms and implied terms. Express terms are those that are specifically agreed between both parties - for example, the price in most contracts or an agreed delivery date. Implied terms are those which are deemed to exist even if they have not been specifically agreed - they cover issues such as quality, description and fitness for purpose (usually referred to as consumer or statutory rights).
Failure to comply with the terms of the contract is referred to as a breach of contract, and the person committing the breach normally has to correct it in some way. In order for an express term to be binding it must clearly be part of the contract and be legal. Terms given to a consumer after the contract is made (for example, terms written only on the back of a receipt) are not part of the contract and they have no effect.
A contract does not have to be written down, but where there are key express terms it is advisable to detail these in writing so there can be no dispute later on.
HOW IS THE CONTRACT MADE?
The essential element in forming a contract is the agreement (consisting of an offer and acceptance) Two parties are required (such as the trader and the consumer). One of them (the offeror) makes an offer which the other (the offeree) accepts. An offer is an expression of willingness to contract made with the intention that it shall become binding on the offeror as soon as it is accepted by the offeree.
A genuine offer is different from an 'invitation to treat', were the trader is merely inviting offers which the consumer is free to accept or reject.
When a trader displays or advertises goods or services (for example, by displaying goods on a shelf in a shop alongside a price ticket) they are giving consumers what is referred to as an 'invitation to treat'. The consumer can then make an offer to buy the goods or services. At this point the trader is under no obligation to accept the offer - a contract is made if and when the trader accepts.
Sometimes, the process works the other way round - that is, the trader makes an offer to the consumer, and a contract is made when the consumer accepts the offer.
Under the contract, the consumer will agree to pay the trader a sum of money and/or to do something else in return for the goods or services the trader supplies. This commitment is known as the 'consideration' in the contract. If there is no consideration (that is, if a trader offers to supply goods or services completely free of any charge or other obligation) there is no contract at all.
WHAT HAPPENS WHEN THE CONSUMER CHANGES THEIR MIND?
Normally a consumer has no automatic right to change their mind and to cancel a contract. Therefore if this happens they are in breach of contract. However, there is an automatic right to cancel in some special cases, including most consumer contracts made at a distance (for example, mail order or Internet) or at a consumer's home (see our leaflets 'Selling at a distance (via the Internet, telephone, post etc.)' and 'A trader's guide to contracts concluded in consumers' homes or workplaces').
When the consumer cancels the contract wrongfully the trader may not be able to recover the lost sale and could be entitled to claim loss of profit and any other reasonable costs incurred.
The implied terms
The law provides that in every transaction for the sale and supply of goods (including hire purchase, hire, part exchange and contracts for work and materials) certain terms are implied.
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 consumer relies on such a description, the goods must be 'as described'. If the description is false, a criminal offence may also have been committed.
- Be of a satisfactory quality: Goods must be of a standard that a reasonable person would regard as satisfactory (taking into account any description applied to them, the price and all other relevant circumstances). Quality is a general term which covers a number of matters including:
- appearance and finish
- freedom from minor defects
In assessing quality, all relevant circumstances must be considered, including price and description. In consumer contracts, the manufacturer's advertising can also be taken into account.
- Be fit for the purpose: When a consumer indicates that goods are required for a particular purpose or where it is obvious that goods are intended for a particular purpose, and a trader supplies them to meet that requirement, the goods should be fit for that specified purpose.
Remedy for breach
A consumer can reject goods, providing that they have not accepted them (in the case of a contract of sale) or that they have not affirmed the contract (in other contracts where goods are transferred such as hire, hire purchase or contracts for work and materials). Acceptance and affirmation are defined below.
When a consumer rejects goods they can claim compensation for their losses. This will normally amount to a full refund, plus compensation for any foreseeable losses that have been incurred. These losses might include the cost of any property damage caused by the goods, compensation for personal injury and compensation for the additional cost of buying equivalent goods if they are more expensive elsewhere. The consumer is also released from all their outstanding obligations under the contract - for example, the outstanding instalments in a contract of hire purchase.
If a consumer is buying goods for business use, they cannot reject goods if the breach of contract is very minor, but they will still be in a position to claim compensation.
WHAT ARE ACCEPTANCE AND AFFIRMATION?
When acceptance or affirmation take place, the consumer loses the right to reject goods, although they may still retain a right to compensation or some other remedy.
Acceptance applies only in contracts for the sale of goods. Examples of acceptance are as follows:
- the consumer telling the trader that they have accepted the goods
- altering the goods in some way
- keeping the goods for more than a reasonable time without complaining (this time period may vary depending on the nature of the goods and is not strictly defined in law)
- using the goods after complaining
A consumer is not considered to have accepted the goods just because they let the trader attempt a repair or where they have merely signed an acceptance or delivery note. A consumer must have a reasonable opportunity to examine the goods to check that they conform with the contract before they are deemed to have accepted them.
Affirmation applies in other contracts for the transfer of goods, including hire, hire purchase and contracts for work and materials. Affirmation takes place when the consumer, knowing that there is a breach of contract, chooses to keep the goods and not to reject them. Affirmation can occur if the consumer becomes aware of a breach but fails to complain within a reasonable time.
REMEDIES WHERE THE CONSUMER CANNOT REJECT THE GOODS
When there is a breach of contract, but the consumer has lost their right to reject goods, they will be entitled to claim compensation from the trader. The amount of compensation will be the sum required to put right the breach. Usually, this will be the cost of repair or replacement - or a part refund plus compensation for any other losses suffered.
If a repair or replacement would put the breach right and the trader offers this, the consumer would normally be expected to accept it.
ADDITIONAL REMEDIES FOR CONSUMER BUYERS
Under the Sale and Supply of Goods to Consumers Regulations 2002, there are additional remedies where the buyer is acting as a consumer (see definition at the beginning of this document) in contracts for the sale or supply of goods (but not in contracts of hire and hire purchase). In these circumstances, the consumer may be able to demand any of the following:
- a repair or replacement
- a price reduction to an appropriate amount taking the defect into account
- rescission of the contract (that is, return of the goods, part or full refund, and compensation, if appropriate)
If the consumer chooses one of these remedies, and if the defect is discovered within six months of delivery to the consumer, it is automatically assumed that the fault was there at the time of delivery unless the trader can prove otherwise. If more than six months have passed, the consumer has to prove the defect was there at the time of delivery (even if it was not apparent at that time).
If the consumer chooses the option of a repair or replacement, the trader must do this within a reasonable time and without significant inconvenience to the consumer. The trader must also pay all the relevant costs - for example, labour, postage, etc.
Where a consumer demands a repair or replacement, but that remedy would be disproportionate, then the trader would be entitled to offer them one of the other remedies. For example, if a consumer demands a repair, but it would be cheaper to replace the item than to repair it, the trader could offer a replacement. The consumer can only require a price reduction or rescission where the cost of repair or replacement is disproportionate or where repair/replacement are not provided within a reasonable time. (Rescission is the mutual agreement between the trader and consumer to terminate the contract and restore position prior to the contract.)
Exceptions - when the consumer cannot make a claim
A consumer has no rights in respect of defects that are brought to their attention before the sale, or if the consumer examines the goods before purchase and any defects should have been obvious.
A consumer cannot claim for damage they cause or if they simply change their mind about wanting the goods.
Neither can a consumer claim if they choose the product themselves for a purpose which is neither obvious nor made known to the trader and they then find that the item is simply unsuitable for that purpose.
A consumer has no rights to claim for faults that appear as a result of fair wear and tear.
Other laws affecting consumer contracts
SUPPLY OF SERVICES
Any service you provide 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 an express term - in other words when a completion date has been agreed at the time the contract was made)
LOSS OR DAMAGE IN TRANSIT
If the trader arranges for goods to be delivered to a consumer, the goods remain at the trader's risk until delivery. Therefore it is the trader's responsibility to ensure that goods are not lost or damaged in transit and/or to take out appropriate insurance.
A misrepresentation is a false statement of fact made by a person or their agent that induces someone else to make a contract with them.
Dependent upon whether the misrepresentation was made fraudulently, negligently or innocently, the party who has relied on the misrepresentation will be entitled to a remedy that may include rescission, refund and/or compensation.
UNFAIR CONTRACT TERMS ACT 1977
This legislation restricts a trader's ability to use contract terms to limit their legal and contractual liabilities. A trader cannot limit or exclude liability for death or personal injury arising from his/her negligence.
In consumer contracts, traders cannot limit or exclude liability for breaches of the implied terms as to description, quality and fitness for purpose of goods. In addition, any attempt to mislead the consumer about their rights is an offence under the Consumer Protection from Unfair Trading Regulations 2008. (These Regulations cover traders' duties towards consumers in general - see our leaflet 'A guide to the Consumer Protection from Unfair Trading Regulations'.)
In business-to-business contracts, liability in respect of these implied terms can be limited, but only in so far as is reasonable, considering all of the circumstances under which the contract was made (see our leaflet 'A guide to the Business Protection from Misleading Marketing Regulations').
UNFAIR TERMS IN CONSUMER CONTRACTS REGULATIONS 1999
These regulations, which only apply to consumer contracts, say that a consumer is not bound by a standard term in a contract with a trader if that term is unfair. Examples of unfair terms would include the following:
- penalty clauses that allow the trader to claim more than their actual losses when a consumer breaches the contract
- terms that are unclear or unintelligible
- terms that exclude liability for breach of contract
- terms that deny the consumer their legal rights if they do not comply with formalities as to the time or manner of making the claim (for example, making a complaint in writing by recorded delivery)
- giving the trader the right of final decision in a dispute
The regulations do not apply to terms negotiated with individual consumers, nor do they apply to the core subject matter of the contract (such as the description of the goods/services, and the price).
CONSUMER PROTECTION ACT 1987 (PART 1)
This legislation allows a person to claim compensation if they are injured by a defective product. Depending on the circumstances, a claim might be made against anyone in the supply chain from manufacturer/importer to retailer.
Compensation can also be claimed under this Act for damage to personal property (but not damage to business property).
For more information, see our leaflet 'Unsafe goods - liability for damage or injury'.
CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999
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 (as long as it was made clear that the goods were to be given as a gift).
THE TRADER'S IDENTITY
The consumer needs to know or to be able to find out who they are dealing with. A trader's identity and address must be displayed at their place of business, on key business documents and on websites. This information must also be made available to consumers before a contract is made and whenever a consumer requests it. See our leaflet 'Companies and business names' .
If a trader fails to disclose that it is a limited company and there is then a breach of contract, the consumer may be able to claim against the directors of the business as individuals. If a trader fails to disclose that it is acting as an agent for someone else, then the consumer may be able to make any claim directly against that trader.
Occasionally, consumers fail to collect their goods after having them repaired or forget to pick up dry-cleaning.
Section 12 of the Torts (Interference with Goods) Act 1977 sets out what action a trader should take to get the goods collected and makes it clear what they can do if they are not.
It is sufficient to have a notice, which is easily visible to consumers, stating how long the trader will keep goods after repair and an intention to dispose of them after this date. The time period would need to be reasonable.
If no notice is displayed, the trader may need to send a registered letter to the consumer specifying that the goods are ready for collection and from where. The letter also should state the amount owing. Additional notification must also be given if the trader intends to sell or dispose of the goods after a certain date and how additional proceeds from the sale can be collected.
Q. A consumer doesn't produce a receipt - does the trader have to do anything even if the goods are faulty?
A. There is no legal requirement for the consumer to provide or produce a receipt. If the trader does not remember the consumer buying the item, they can ask the consumer to provide proof of purchase, but this can be a credit card voucher or cheque stub or anything that indicates when and where the item was bought.
Q. The manufacturer offers a guarantee - can the trader refer the consumer straight to that manufacturer?
A. Remember that the consumer's statutory rights are with the trader who sold the goods to them. The guarantee offered by the manufacturer is in addition to such rights. A consumer can choose whether they pursue the trader or the manufacturer. However, the trader in turn may have rights against his/her supplier.
Q. If a trader sells sale goods or seconds, surely the consumer doesn't have the same rights against the trader as they would if new or perfect goods had been purchased?
A. The same rights apply whether the goods are in the sale or sold as seconds. However, when assessing the level of quality which is satisfactory, considerations such as price, age and easily identifiable defects would be taken into account.
Q. A consumer comes back to the trader about faulty goods purchased seven years ago. Does the trader have to do anything?
A. A consumer cannot bring a claim to court more than six years after the breach of contract (usually the date of delivery, in a contract for sale of goods).
Q. Someone asks a trader for a quotation - how is this different to an estimate?
A. A quotation is normally a fixed price whilst an estimate is generally a rough guess of what the work would cost.
Q. Can a trader put a notice in their shop stating that refunds are not given in any circumstances?
A. It is illegal to try to exclude a consumer's statutory rights, so a 'no refunds' notice is not permitted. A trader may wish to go beyond what the law requires and offer an exchange or refund policy for consumers who change their mind. A trader can display a notice giving details of such a policy, but it is recommended that the trader seeks advice on the wording of the notice from their local trading standards service. See the business leaflet, 'Returns policies - a guide for retailers'.
Q. A consumer rings a trader to say that the TV they bought from that trader during the previous week is defective but they aren't prepared to return it to the shop. Can the trader insist that they return it?
A. If the consumer can prove that it is faulty and they haven't accepted it, it is sufficient for them just to give notice of rejection and allow the trader any reasonable opportunity to collect the TV. The consumer may be prepared to return the goods to the trader if the trader offers to cover the travel and parking expenses but they do not have to do so.
Q. A trader gives a consumer a credit note but they cannot find anything they want? Does the trader have to then offer a refund and for how long should the credit note run? Can a trader offer a credit note instead of a refund?
A. A trader needs to bear in mind the consumer's rights, so if they are returning goods that are faulty, misdescribed etc. then they may have a right to insist on a refund rather than credit note in the first place. A trader can offer consumers credit notes if they have no automatic right to a remedy (for example, if they have simply changed their mind after purchase). However, if a consumer has agreed to a credit note, even if it cannot be used, the trader doesn't have to offer a refund. The trader can determine an expiry date if he/she informs the consumer of this time period at the time of issue.
Q. A consumer insists on a replacement but the item is no longer manufactured and there is none in stock.
A. A trader can offer the consumer a repair, a reduction in the price or allow the consumer to rescind the contract. A repair will only be acceptable if this does not cause the consumer significant inconvenience.
Q. A trader cannot ascertain whether an item is faulty or whether it has failed due to misuse. What should they do?
A. If a consumer wishes to reject the goods, the onus is on them to prove that the item is faulty and that it has not been misused. If a consumer claims a repair or replacement (see 'Additional remedies for consumer buyers' above) within six months of delivery, the onus is on the trader to prove that the consumer is at fault. After six months, the onus falls back onto the consumer. In any case, if the trader cannot agree on the cause of the fault, the trader may wish to obtain a second opinion - for example, from the manufacturer or an independent expert. Where an independent expert is to be used the consumer and trader should ideally both agree to this in writing.
Q. A consumer states a specific date for delivery of goods and the trader fails to deliver them on time - does the consumer have the right to cancel the contract?
A. Yes - if the consumer has made 'time of the essence' and the trader has failed to comply, the consumer can treat this as breach of contract and cancel the contract.
This leaflet is not an authoritative interpretation of the law and is intended only for guidance. Any legislation referred to, while still current, may have been amended from the form in which it was originally enacted. Please contact us for further information.
Torts (Interference with Goods) Act 1977
Unfair Contract Terms Act 1977
Consumer Protection Act 1987
Contracts (Rights of Third Parties) Act 1999
Unfair Terms in Consumer Contracts Regulations 1999
Sale and Supply of Goods to Consumer Regulations 2002
Consumer Protection from Unfair Trading Regulations 2008
Last reviewed/updated: April 2012
© 2013 itsa Ltd on behalf of the Trading Standards Institute.