Videos: Part 4: Enforcing contracts: Video 2: Returning goods out of warranty

Introduction

An important trend in the development of consumer contract law has been the rise of statutory terms and rights, out of which the parties cannot contract.  These rights do not preclude the parties from agreeing on their own warranties, but they do restrict commercial sellers from offering a lower level of protection than the statute offers.  Statutory rights can enhance contractual warranties in two ways.  Firstly, they may cover matters that contractual warranties do not.  Secondly, their duration cannot be restricted to a narrow period of time in the same way as a contractual warranty can.

Retailers are required to honour statutory rights.  However, as the video below demonstrates, they do not always do so.  Watch the video below, and consider what it tells you about the strength and weaknesses of statutory terms and statutory remedies.   There is a second video which you will find under Comment 4 below, which invites you to compare the situation under English law with the situation under Australian law. 

Commentary

1. From a completely amoral perspective, retailers do not actually have very much of an incentive to immediately agree to repair or replace products under customers’ statutory rights.  As you will know from your study of the law of damages, the fact that a company only complies with its obligations reluctantly and under pressure does not in any way make it liable to pay more compensation.  Trying to put customers off from claiming under their statutory rights therefore makes sense from a certain ethics-free point of view, if the retailer doesn’t think there’s much risk of being caught or suffering adverse publicity.  Because most review sites only deal with the sale itself rather after sales service, the risk of adverse publicity is also somewhat lower.

2. An assumption underlying much of the law on contract is that self-interested parties should protect themselves.  This also applies to the law of remedies.  Consumers are expected to be assertive in insisting on their rights if retailers seek to avoid their obligations. Consumer protection law is a response to the fact that no consumer, no matter how assertive, can negotiate the terms on which they deal with businesses.  In contrast, consumers are in a position to be assertive when their rights are breached, and the law therefore generally expects them to protect themselves.  In English law, paternalism only goes so far. 

3. In theory, the CMA has the power to investigate and fine retailers if they are regularly acting in breach of consumer protection laws.  The CMA’s predecessors, the OFT and the DGFT, did in fact take action against retailers whose practices were in breach of the laws which preceded the Consumer Rights Act.  You have come across some of these cases in your readings in Part III.  However, they have limited resources, and face many demands on those resources.  Their focus is therefore on large-scale problems, rather than ensuring that each individual consumer is dealt with fairly.

4. An example from Australia, which takes a slightly different approach to consumer protection, illustrates how the law and regulatory action can create incentives for companies to develop a culture of respecting consumers’ statutory rights.  The Australian case arose out of the returns policy of a US-based company called Valve.  Valve runs a popular game distribution network called ‘Steam’, which is used around the world.  Until 2015, Steam did not permit consumers to return games they had bought, even though Australian law stated that consumers did have a right to return goods under certain circumstances.  In 2014, Valve was sued by Australian Competition and Consumer Commission, which is the government agency tasked with consumer protection in in Australia, on the basis that Valve’s policies violated the provisions of Australian Consumer Law, contained in Schedule 2 to the Australian Competition and Consumer Act 2010.   The video below summarises the nature of the issue:

5. The Federal Court of Australia upheld the complaint (See Australian Competition and Consumer Commission v Valve Corporation (No 3) [2016] FCA 196, upheld on appeal Valve Corporation v Australian Competition and Consumer Commission [2017] FCAFC 224).  Apart from holding that Valve was legally bound to allow consumers to return games when the Australian statue said they could, the Court also held that Valve had committed an actionable misrepresentation by telling that the consumers that they did not have the right to return their games when, in point of fact, they did.  The findings in relation to misrepresentation turned on statute, rather than common law, and specifically on the wording of ss. 18(1) and 29(1)(m) of the Australian Consumer Law which requires traders not to engage in certain types of misleading or deceptive conduct. 

6. Australian law thus not only grants consumers statutory rights, but also makes a retailer’s refusal to recognise that right a separate civil wrong. Compare this with the position at English law.  Would a similar statement by a retailer in England and Wales be an actionable misrepresentation, if it fails to inform consumers of their statutory rights?  Consider the position under common law as well as with reference to any applicable statutes.