Law of Consumer Protection - Essay Example

Law of Consumer Protection Introduction The agreements between Vic and Funky Furniture and Friendly Finance all turn on the questions of contracts for the sale of goods, misrepresentation and the legal consequences of the sale of goods under a hire purchase agreement. The legal consequences of each of these elements determine the extent to which Vic may expect consumer protection and the measure of remedial action she can expect to take for the loss and damages incurred pursuant to each of these agreements. Vic will be advised in two parts. First the possibility of and consequences of misrepresentation will be evaluated and discussed. Then the consequences for recovering and claiming damages with respect to the sale of goods under a hire purchase agreement will be discussed. I. The Agreement with Funky Furniture A. Misrepresentation The first problem of note appears to be a case of misrepresentation. Keith, the sales agent with whom Vic and Gaynor negotiated the purchase of the sofa from Funky Furniture with, represented to the couple that the sofa would fit through the internal doors of their home. This concern appeared to be a pre-condition of the contract for the sale of the sofa. Having convinced the pair that the sofa would fit through the internal doors of their home, Vic and Gaynor decided to enter into a hire purchase agreement for the purchase of the sofa. Under the law of contract, misrepresentation arises in situations where there is a communication of false facts which have the effect of inducing the party who is receiving the false representation to enter into legal obligations.1 A Misrepresentation can be made either negligently, fraudulently or innocently. The extent of the applicable remedies in respect of misrepresentation will depend on the type of misrepresentation made.2 In a typical case where misrepresentation is substantiated, the innocent party can if he/she desires, rescind the contract and/or make a claim for concurrent damages.3 Vic is required to prove that she relied on Keith’s misrepresentation or that she was induced to enter into the contract because of Keith’s misrepresentation.4 If however, Vic relied on her own judgment with respect to the sofa being able to fit into the internal doors of her home she cannot claim that she relied on Keith’s misrepresentation.5 On the facts of the case for discussion however, it appears that Vic did not rely on her own judgment since she questioned whether or not the sofa would fit into the interior doors. It was only after Keith assured her that it would that she entered into the contract for the purchase of the sofa. It would therefore appear that, Keith’s assurance was the deciding factor for Vic. The inference is that absent Keith’s assurance, Vic would have likely looked for a smaller sofa of taken proper measurements to ensure that the sofa would be able to fit through the internal doors to her home. In Museprime Properties v Adhill Properties [1990] an objective test was applied and it was determined that if a misrepresentation of the facts is such that it would have influenced the reasonable man to act as the plaintiff did then the contract can be rescinded.6 This brings to mind, whether or not it would have been reasonable for Vic to rely on Keith’s representations. Assuming that Vic has seen both the sofa and her interior doors and Keith has only seen the sofa, it may be entirely unreasonable for Vic to rely on Keith’s representation. That said however, Keith is a sales agent for Funky Furniture and it can easily be presumed that he has had a number of experiences with unfounded perceptions that the sofa may not fit through specific doors, is familiar with the relative size of the sofa and standard door sizes and would be in a position to know from experience and vocation whether or not the sofa can fit through standard doors. There is nothing on the facts to suggest that Vic’s interior doors were abnormally small or large. Vic is not required to prove that Keith’s misrepresentation was the only factor that influenced her decision to purchase the sofa. In Edgington v Fitzmaurice (1885) 29 Ch D 459 it was held that a single misrepresentation which only partly influences the plaintiff is sufficient to substantiate a case for rescission and/or damages, provided the false statement was a material statement.7 It appears that Keith’s statement was fraudulently made since he either ought to have known or knew that the sofa could not have fit through the standard sized doors. He was reassuring, leaving no room for second-guessing which would indicate that he knew for fact that the sofa would fit through the internal doors. The fact that the sofa could not, tends to suggest that Keith’s assurance was fraudulently made since his representation was characterized by certainty. It is not possible to assume that a furniture sales agent would not know that it was possible that the sofa may not fit through a standard sized door. The fact is, Keith in his position as a furniture sales’ agent ought to have known that here was a possibility that the sofa would not fit through certain doors. The House of Lords defined fraudulent misrepresentation in Derek v Peek [1889] 14 AC 337 in the following terms: ..fraud is proved when it is shewn  that  a false representation has been made (1) knowingly,  or (2) without  belief  in  its truth, or (3) recklessly, careless whether it be true or false….To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth…Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial.8 At the very least, Keith was reckless and/or careless about the truth of his representation to Vic. It is not possible that he had a honest belief in his assurances, particularly since the sofa did not fit through the internal doors. Since fraud is difficult to prove,9 Vic is advised to proceed on the basis of negligent misstatement. By virtue of Section 2 (1) of the Misrepresentation Act 1967 in that the measurement for damages is the same as if the misrepresentation is made fraudulently. In this regard, Vic may claim damages and restitution so that she may return the sofa and receive money’s worth for the sofa that she traded in but was subsequently destroyed, and return of the funds advanced for the sofa. However, since she wishes to retain the sofa she will be advised to merely seek damages which in this case would amount to the reduced value of the sofa in light of the fact that it has developed cracks which may be related to the fact that it is kept in the halls since it cannot fit through the interior doors of her home. B. Sale of Goods under a Hire Purchase Agreement There is evidence that the quality of the sofa is questionable or that it was unfit for being housed in the hallway where it was deposited by Funky Furniture and left there once it was discovered that it could not fit through the internal doors of the house. In a typical case, the parties to a contract for the sale of goods usually make provision for the express terms and agreement with respect to the quality and fitness of the goods sold.10 However, in the absence of express terms, quality and fitness will be implied by virtue of the Sale of Goods Act 1979 as amended by the Sale and Supply of Goods Act 1994 as well as the Supply of Goods (Implied Terms) Act 1973 and the Supply of Goods and Services Act 1982. The 1973 and 1982 Act specifically cover hire purchase agreements.11 Consumer sales are specifically covered by standard requirements contained in the Sale of Goods Act 1979 as amended. The remedies available to the consumer are expanded by virtue of the Sale and Supply of Goods to Consumer Regulations 2002 which indorses EU Directive 1999. Cumulatively, each of these statutory provisions confers upon the supplier of goods a duty to provide warranties or conditions so that minor and major terms of contracts for the sale of goods are distinguished.12 In general, if a condition is breached the innocent party to the contract for the sale of goods can either repudiate the sales’ contract as well as make a claim in respect of damages. A breach of warranty however, will only entitle the wronged party to claim damages. By virtue of the Sale and Supply of Goods to Consumer Regulations 2002 consumers have the right to have goods either replaced or repaired by the supplier without costs when goods do not correspond with either the express or implied terms of the sales’ contract. However, if the cost of repairs are excessive, this remedy will not be available.13 In such a case the consumer is entitled to a price reduction or rescission altogether.14 However, Vic will not be able to claim repudiation because she ultimately accepted the sofa. By virtue of Section 11(4) of the Sale of Goods Act 1979, a buyer will lose the right to repudiate the contract once they accept the goods.15 Under Sections 35 and 35A of the Sale of Goods Act 1979 acceptance takes place once the purchaser conveys to the seller that he/she will retain the goods or upon delivery and once accorded a reasonable opportunity to inspect the goods to determine that the goods correspond to expectations, or conducts himself in a manner consistent with ownership the purchaser will lose the right to reject the goods.16 Vic did become aware of the right to cancellation on March 10 so she cannot after 8 months claim no to have been aware of that right. This does not appear to be a problem for Vic since she now wants to keep the sofa. In any event time constraints do not apply in the event a preexisting defect only comes to the purchaser’s attention at a later stage and is not immediately apparent. As Lord Denning noted in Guarantee Trust of Jersey Ltd v Gardiner [1973] 117 Sol J. 564: A person cannot be said to affirm a contract unless he has full knowledge of the breach and deliberately elects to go with it.17 The cracks appeared in the sofa on the same day that it was delivered however and this might well be related to the attempts made by the delivery personnel attempting to fit the sofa through the internal doors. In any event, Vic did communicate her intention to rescind the contract but was told that her sofa trade-in had been destroyed. The fact that she took no further action is likely indicative of her feeling that she had no alternative remedy and may have nothing to do with the fact that she decided to keep the sofa regardless of its cracks. Moreover, Vic did not become aware of the right to cancel until March 10th, two days after the cracks became visible and after delivery of the sofa. Therefore, she will not be deemed to have waived the right to reject the sofa during the two day interval between March 8 and 10. In any event it is obvious that Vic had made several attempts to get out of the agreement. The fact that she now wishes to keep the sofa changes everything and she might benefit from seeking remedies so that her obligations under the contract are reduced. This is important since she has now lost her job and missed her last monthly obligation to Friendly Finance. In other words Vic can make a claim pursuant to Section 14(3) of the Sale of Goods Act 1979 which provides that in any sale made during a business transaction it will automatically be implied that the goods supplied are reasonably fit for its intended purchase unless: The circumstances show that the buyer does not rely, or that it is unreasonable for him to rely on the skill and judgment of that seller.18 To start with Keith, an agent for the Funky Furniture was made aware of the intended purpose for which the sofa was purchased. It was purchased to be placed in Vic’s home’s interior. The sofa, despite, Keith’s assurances that the sofa could fit through the interior doors could not fit through those doors and was presumably left in the hallway. It would therefore follow that Vic has a valid claim under Section 14(3) of the 1979 Act. The fact that she tried to get out of the contract almost immediately will function to bar a claim that she waved the defects in the sofa by virtue of the passage of time. Further, the exception to Section 14(3) with respect to relying on the skill and judgment of the seller will not be a viable defence for Funky Furniture. It is certainly not unreasonable for Vic to rely on the skill and judgment of Funky Furniture via its agents. Since the vendor knew that the sofa was purchased to be placed in the interior of Vic’s hand the burden is Funky Furniture to prove that “there was no, or unreasonable reliance”.19 Vic may also rely on Section 14(2) of the Sale of Goods Act 1979 which provides that the goods sold be of satisfactory quality.20 While the fact that the sofa could not fit in the interior doors will not render it of satisfactory quality, the cracks that it developed on the date of delivery will render it of unsatisfactory quality. It was held in Jewson Ltd v Goyhan that Section 14(2) relates to the intrinsic value of the goods sold.21 The fact that the sofa was sold for at least 1,700 pounds leaves one to expect that it’s intrinsic value is such that it does not develop cracks on the date of delivery. Since the sofa was sold under a hire purchase agreement Vic does not acquire title to the sofa until the last installment is paid.22 Therefore, Vic will be required to collaborate with Friendly Finance and express her concerns about the quality of the sofa and her efforts to get out of the agreement. This is because Friendly Finance has the real title to the sofa under the hire purchase agreement. They may seek a partial refund with respect to the funds advanced on Vic’s behalf and as such may reduce the Vic’s monthly obligations. Moreover, a reduction of the purchase price may even off-set each of the previous 7 months payment so that Vic’s obligations may have already been discharged. Friendly furniture may wish to argue in defence of a price reduction claim that the sofa was damaged by the Vic’s son Thomas writing his name on one of the sofa’s pads. However, this argument will succeed since it is quite possible that Thomas would not have been able to write this name on the sofa’s pad had it been fitted with the protective covering within a month. Since Funky Furniture arranged for the coating to be installed one month later they will have to assume responsibility for any damages accruing prior to the installation of the protective coating. It is assumed that Thomas could not have written his name on the pads while the protective coating was covering the pad. If he did, then the protective coating is faulty and again Friendly Furniture will have to take responsibility for that defect as well. Conclusion The sofa was not fit for the purpose for which it was purchased on two grounds. First it could not fit into the interior doors so that it had to be kept in the hallway. Secondly, it developed cracks on the day that it was delivered. Vic made attempts to rescind the contract but those efforts failed and that right may be lost to her since she now wants to keep the sofa. However, since it is a hire purchase agreement, it is entirely up to Friendly Furniture whether or not they wish to keep that particular sofa as security, particularly since Vic has now lost her job and missed her last month’s installment. In all the circumstances, Vic may wish to negotiate with Friendly Finance for the refinancing of the sofa provided they are prepared to press Funky Furniture for a reduction of the initial purchase price. Bibliography Attwood v Small (1838) 6 CI & F 232. Derek v Peek [1889] 14 AC 337 Edgington v Fitzmaurice (1885) 29 Ch D 459. EU Directive 1999 Guarantee Trust of Jersey Ltd v Gardiner [1973] 117 Sol J. 564 Jewson Ltd. v Goyhan [2003] EWCA Civ 1930 Misrepresentation Act 1967 . Museprime Properties v Adhill Properties [1990] 2 ALL ER 196. Sale of Goods Act 1979 Sale and Supply of Goods Act 1994 Sale and Supply of Goods to Consumer Regulations 2002 Stone, R. (2009) Modern Law of Contract. Routledge Cavendish. Supply of Goods (Implied Terms) Act 1973 Supply of Goods and Services Act 1982 Whincup, M. (2009) Contract Law and Practice. Kluwer Law International. Read More