Videos: Part 3: Regulating contracts: Video 1: Selling an extended warranty

Introduction

In modern chain stores, sales assistants very often have incentives to push certain types of ‘add-on’ products or services to you.  How far can they go in trying to convince you to buy those products or services?  How much information do they have to give you?  What happens if the information they give you about the service is incomplete, leaving out important points which can, however, be found elsewhere?

The video below deals with one such situation—specifically, the sale of an extended warranty.  Those of you who have bought electronics or home appliances in a physical store are likely to have been offered an extended warranty at some stage during the process.  In 2013, Curry’s extended warranty came in for criticism.  The warranty was sold under the brand ‘Whatever happens’.  In point of fact, however, it came with several exclusions.  Sales assistants rarely explained all these exclusions to customers.  Some customers who bought the warranty and tried to claim under it subsequently found that they were hit by one of these exclusions. 

Watch the video below, and work out whether a customer would have any remedy for Curry’s staff’s failure to fully explain all relevant exclusions.  Consider legal rules are relevant, and how will they apply to these facts.  The points under comment 1 will help you to do this if you find yourself struggling.  

Commentary

1. From a legal point of view, situations like this raise three distinct sets of legal issues: 

  1. Do the sales attendants’ actions amount to actionable misrepresentation?
  2. Was the exclusion clause validly incorporated into the contract?
  3. Is the exclusion clause enforceable under the Consumer Rights Act 2015?

2. On the issue of misrepresentation, it is important to keep in mind that

  1. The question of whether a statement was true or false is assessed objectively.  The fact that there was no intention to deceive is irrelevant.  Thus it is no defence for Curry’s to argue that their staff did not know that they were making misleading statements about the scope of the extended warranty.
  2. For a misrepresentation to be actionable, it must induce the contract by playing a ‘real and substantial part’ in the purchaser’s decision to buy the warranty.  Are there elements in the video which suggest that this requirement is fulfilled?

3. As far as incorporation is concerned, given that a purchaser of an extended warranty rarely expressly assents to the terms of the warranty, the question is whether the exclusion clause was incorporated by reference.  This raises issues of the time and adequacy of notice.  Were the terms available for the purchaser to read before the purchase (the answer to this question is almost certain to be ‘yes’)?  And was the purchaser’s attention adequately drawn to unusual or onerous clauses (the ‘red hand’ rule)?

4. On the question of the validity of the exclusion clause under the Consumer Rights Act 2015, the key provision is s. 62(4), under which clauses are not enforceable if they cause as significant imbalance in the parties’ positions and are contrary to good faith.  On good faith, a key question to ask is whether the dealings between the parties were fair and open.  The video suggests strongly that they were not.  The other question to consider is whether the clause tilts the balance in the contract in the supplier’s favour and against the consumer.  Consider this question with reference to cases like DGFT v First National Bank [2002] 1 AC 481 (HL) and OFT v Ashbourne Management Services [2011] EWHC 1237 (Ch).