A Trader's Guide to the Civil Law

Relating to the Sale and Supply of Goods and

Services
This document is a brief guide to the law and how it affects most trader and consumer
contracts. It attempts to answer some of the questions raised by traders on civil law issues
relating to the sale and supply of goods and services. Contracts that involve credit or finance in
any form are also subject to additional and unique legal requirements, obligations, rights and
liabilities not covered in this document.
The contract
When a customer purchases goods and/or services from you as a trader, you are both entering
into a legally binding contract. The contract consists of various implied terms that are laid down
by law. These terms cover issues such as quality, description and fitness for purpose. Express
terms can also be made part of the contract through mutual agreement or negotiation. An
example of such a term would be agreeing a specific delivery date. Failure to comply with the
terms of the contract is commonly referred to as being in breach of contract, and this normally
results in the wrongful party being liable to remedy the breach in some way. The remedy usually
takes the form of a refund, repair or other form of compensation, the amount and exact nature
of which will be dependant on the nature of the breach. In order for a term to be binding it must
clearly be part of the contract, be legal, and dependent on their exact nature may have to be
considered fair and reasonable. A contract does not have to be written, but where there are key
express terms it is best to detail these in writing so there can be no dispute later on.
When is the contract made?
By displaying or advertising your goods in a shop or catalogue etc you are stating to customers
that goods are available at the price indicated, this is legally referred to as giving an invitation
to treat. The customer will then request to buy the goods, referred to as making an offer, which
you can refuse or accept. Once you accept the offer and the customer makes a payment or
some other commitment to purchase, referred to as offering consideration, the contract is
made. You always have the right to refuse an offer and to not sell an item to a customer.
My rights as a trader when the customer changes their mind
The most common breach of contract by the consumer involves them changing their mind and
refusing to go ahead with a purchase having previously placed an order with you. Your remedy
in this case will depend upon the nature of the goods and/or service ordered.

For the majority of transactions, a lost sale cannot be recovered and therefore you are entitled
to claim loss of profit and any other reasonable costs incurred. However, if the goods and/or
service are considered to be unique and the specific item is sold to another customer, then you
have not lost a sale and cannot pursue for loss of profit, but you can still pursue for any extra
costs reasonably incurred.
It is under this principle that deposits are considered non-refundable should a customer simply
change their mind. You must bear in mind that if the deposit does not cover the loss of profit,
where applicable, and your reasonable costs, then you can claim the extra from the customer,
but where the deposit is in excess of the lost profit, where applicable, and your reasonable
costs, you must refund the balance to the customer.
The Sale of Goods Act 1979 (as amended)
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
customer 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 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). Quality is a general term to cover a number of specific areas which
amongst others could include:
* Appearance and finish;
* Freedom from minor defects;
* Safety;
* Durability.
Other characteristics may also be relevant dependent on individual circumstances.
* Be fit for the purpose.
When a customer indicates (expressly) that goods are wanted for a particular purpose,
or where it is obvious (implied) that goods are suitable for a particular purpose, and a
trader supplies them to meet that requirement, the goods should be fit for that specified
purpose.
A customer's remedy if any of the implied terms of the Sale of Goods Act are breached
A customer can reject the goods and receive a full refund providing that they have not accepted
the goods. They may also be entitled to compensation for any losses that have been incurred.
Examples of acceptance are as follows:
* Telling you they have accepted them.
* Altering the goods in some way.
* Keeping the goods for a reasonable time without complaining. (This time period may
vary depending on the nature of the goods.)
* Using the goods after complaining.

A customer is not considered to have accepted the goods if they have allowed you to attempt a
repair that has proved unsuccessful, or if they have signed an acceptance note without having
had a reasonable opportunity to examine the goods.
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 accepted the customer loses the right to reject them but may still have
a claim for some form of compensation. (See additional/alternative remedies)
If your customer is not dealing as a consumer (i.e. they are buying for his/her business), they
may not reject goods if the breach of contract is very minor but will still be in a position to claim
compensation.
Additional/alternative remedies
There are additional remedies where the customer is acting as a consumer (i.e. where they are
not buying for their business) and where the goods were defective at the time of delivery. In
these circumstances, the customer can 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.
Rescission means that the consumer returns the goods to you and you return his/her payment,
but it is not quite the same as rejection - for example, you can reduce the amount you repay to
allow for the use the customer has had of the goods if it is reasonable for you to do so.
If the defect occurs within six months of the customer taking delivery of the goods, it is
automatically assumed that the fault was there at the time of delivery unless you can prove
otherwise. If it is after six months, the customer has to prove the defect was there at the time of
delivery.
If the customer chooses the option of a repair, you must complete the repair in a reasonable
time and without significant inconvenience to the customer - if you fail to do this, the customer
can demand an alternative remedy. You must also pay all the relevant costs, e.g. labour,
postage, etc.
Exceptions
A customer has no rights for those defects that are brought to his/her attention before the sale,
or if the customer examines the goods before purchase and any defects should have been
readily noticeable.
A customer also has no rights if they damage the goods themselves or simply change their
mind about wanting the goods.
A customer has no rights if they choose the product themselves without relying on any express
or implied statement regarding fitness for purpose and then finds, rather than being faulty, the
item is simply unsuitable for the purpose they bought it.
A customer has no rights to claim against faults that appear through fair wear and tear.
You do not have to repair or replace the goods if to do so would be impossible (e.g. if the goods
are no longer available or if the item is not capable of being repaired).

You do not have to give the particular remedy requested by the customer if the cost of it would
be so high that it would be unreasonable to expect you to do as he/she ask instead of giving
one of the other remedies. For example, if an item is beyond economical repair and it would be
a lot cheaper to replace it, you can offer a replacement instead of a repair; or if you cannot
obtain more of the goods, you can offer a price reduction instead of a replacement.
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 1979 (as amended). 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
The Order makes it a criminal offence to restrict the consumer's statutory rights by means of a
notice, statement or documents, e.g. a notice that 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 another party to enter into a contract.
Dependent upon whether the misrepresentation was made falsely, negligently or innocently, the
party who has relied on the misrepresentation will be entitled to a remedy ranging from the
contract being rescinded to the payment of damages.
The Unfair Contract Terms Act 1977
This legislation restricts a trader's ability to rely on contract terms to limit liability otherwise
imposed by law.
A trader cannot limit or exclude liability for death or personal injury arising from his/her
negligence.
Attempts to exclude or restrict liability for other loss/damage resulting from negligence or breach
of contract etc 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 allowed to use such an exclusion clause provided it satisfies a reasonableness
test.
The Unfair Terms in Consumer Contracts Regulations 1999
These Regulations, which are only applicable 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. A standard term is

defined as one that is devised by a trader in advance to apply to all their contracts and not a
term negotiated with individual consumers. 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 1987 (Part 1 Product Liability)
This legislation gives people injured by defective products the right to sue for damages
(monetary compensation). All those in the supply chain from retailer to manufacturer may be
covered. See our leaflet entitled The Safety of Consumer Goods.
The Contracts (Rights of Third Parties) Act 1999
Before this law was passed and came fully into force on 11th 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 as long as it was made clear that the goods were to be given as a gift. to a third party.
The Business Names Act 1985
You need to display (when appropriate) business ownership details in accordance with the Act
with the relevant information shown at your place of business, on business letters, written
orders for goods or services, and invoices and receipts. See our leaflet entitled The Business
Names Act 1985.
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
that 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.
Common questions
Q. A customer doesn't produce a receipt; do I have to do anything even if the goods are faulty?
A. There is no legal requirement to provide or produce a receipt, a customer needs to be able 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 I refer the customer straight to them?
A. Remember your customer's statutory rights are with you, the trader. A guarantee offered by
the manufacturer is in addition to such rights. A customer can choose whether they pursue you
or the manufacturer. However, you in turn may have rights against your supplier.
Q. I sell sale goods or seconds; surely the customer doesn't have the same rights against me as
they would have if they had bought new or perfect goods?

A. The same rights apply whether the goods are in the sale or sold as seconds though such
considerations as price, age and easily identifiable defects would be taken into account.
Q. A customer comes back to me about faulty goods purchased seven years ago. Do I have to
do anything?
A. A customer has up to six years to make a claim against a trader for breach of contract.
Q. Someone asks me 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 I put a notice in my shop stating I don't give refunds in any circumstances?
A. It is illegal to try to exclude a customer's statutory rights. However, you can make it clear that
you don't offer a policy relating to the return of goods where the customer has changed their
mind about wanting the goods.
Q. A customer rings me to say that the TV she bought from me last week is defective but she
isn't prepared to return it back to my shop?
A. If the customer can prove that it is faulty and she hasn't accepted it, it is sufficient for her just
to give notice of rejection and allow you any reasonable opportunity to collect the TV.
Q. I take in goods for a service (i.e. dry-cleaning/TV repair) and the customer fails to collect
them. I cannot store them forever, what should I do?
A. It is advisable to have a notice up in the shop which is easily visible to your customers telling
them how long you are prepared to keep the goods and how you intend to dispose of the goods
after that time. Failing this, you will need to give notice to your customer in accordance with the
Torts (Interference with Goods Act) 1977.
Q. I give a customer a credit note and they cannot find anything they want? Do I have to then
offer a refund and for how long should the credit note run?
A. Once a credit note has been issued, even if it cannot be used, you don't have to offer a
refund. You can determine for how long you wish it to run but you should make it clear to the
customer, at the time of issue what that time period is.
Q. A customer insists on a replacement but the item is no longer manufactured and I have none
in stock?
A. You can offer the customer a repair, a reduction in the price or allow them to rescind the
contract.
Q. I cannot ascertain whether an item is faulty or whether it has failed due to misuse?
A. Within the first six months of purchase, the onus is on you to prove the fault, so you can
return it to the manufacturer for a second opinion. After six months, the onus is on the customer,
but it may still be considered reasonable for him/her to require you to send it back to the
manufacturer.
Q. A customer states a specific date for delivery of goods and I fail to deliver them on time; does the
customer have the right to cancel the contract
A. Yes, if the customer has made time of the essence and you have failed to comply, they can tr

For further guidance contact Walsall MBC Trading Standards Service at:
Challenge Building, Hatherton Road, Walsall, WS1 1YG.
Telephone (01922) 652216.
E-mail: Trading_Standards@walsall.gov.uk.
Web: www.walsall.gov.uk.
Text: ts walsall (message) 60003
This leaflet has been prepared for the guidance of traders by Walsall Metropolitan Borough Council in conjunction with the
Trading Standards Institute. It is not an authoritative interpretation of the law and is intended for guidance only.
Last reviewed/updated: December 2004