Chapter 18 Answer guidance to end of chapter questions

1. Liam is a student living in London. He has recently bought a new laptop computer from ‘Student Supplies Ltd’ (SSL) an online retailer based in Bolton. The laptop was sold under SSL’s standard terms and conditions which state that the contract is concluded when the goods are shipped and that goods may only be returned for a refund if they are faulty under the Sale of Goods Act. They further state that refunds will only be given if goods are returned in their original packaging within five days of receipt and that the buyer must bear the cost of both the return and original shipping costs. The SSL website makes no reference to any right to cancel under distance-selling laws and indeed gives few details about SSL. There is no business address, company registration or tax details and the returns address is simply a PO Box.
   
   Liam has had the laptop for six weeks but now his sister Leona has given him her old laptop that she no longer needs. He has asked you if he can return the laptop and get his money   back from SSL.
   
   Advise Liam.

To answer this question I would expect the student to discuss in order:

1. Firstly to clearly identify this is a distance agreement in terms of the Consumer Protection (Distance Selling) Regulations. By regs. 7 and 8 the supplier of goods or services must supply a considerable amount of information before the contract is concluded, including the price of the goods or service including all taxes, any delivery costs, arrangements for payment and delivery, a description of the goods or service, the geographical address of the place of business of the supplier to which the consumer may address any complaints, and information about any after-sales services and guarantees. An examination of the relevant Regulations makes it clear that SSL has failed to supply all the relevant information.
2. To identify that the effect of this is to extend Liam’s period during which he may reject the goods by three months from the seven working days he would normally have under reg.10. As he has had the laptop for six weeks it appears he can still exercise his right to reject under the Regulations/Distance Selling Directive. In theory this means that yes he can return the laptop and get him money back.
3. The problem Liam has is the contract he agreed to said the goods had to be returned within five days. Can SSL enforce this? The answer would appear to be no for two reasons. (1) the term is not complaint with the Distance Selling Directive/ Consumer Protection (Distance Selling) Regulations; (2) is also seems to be in breach of the Unfair Terms in Consumer Contracts Regulations, in particular reg. 5. In Director General of Fair Trading v First National Bank Plc Lord Bingham stated that an unfair term is one which causes “a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer in a manner or to an extent which is contrary to the requirement of good faith. The requirement of significant imbalance is met if a term is so weighted in favour of the supplier as to tilt the parties’ rights and obligations under the contract significantly in his favour. This may be by the granting to the supplier of a beneficial option or discretion or power, or by the imposing on the consumer of a disadvantageous burden or risk or duty.”
4. Students should conclude by pointing out that the Consumer Rights Directive has already been passed and will soon be law in the UK. This has no effect on the advice given to Liam as his rights will actually be enhanced under the new regime and the advice would be the same.

2. The European Commission have claimed that ‘The level of consumer confidence in cross-border shopping is low. One of the causes of this phenomenon is the fragmentation of the Consumer Acquis. The fragmentation and the related uneven level of consumer protection make it difficult to conduct pan-European education campaigns on consumer rights and to carry out alternative dispute resolution mechanisms.’ Is this true?

This is a broad question asking students to examine the current state of consumer protection law in the EU. Students should point out there is a framework of provisions (particularly for distance transactions which include internet transactions) including the Consumer Rights Directive, and the Brussels and Rome Regulations. The main body of protection is found in the Consumer Rights Directive which gives to consumers extensive powers of rejection of goods and or services and a thorough list of information to be provided before or at conclusion of the contract.  There are however weaknesses, in particular the Consumer Rights Directive is really about information to be provided and a right to reject. There is little about quality of goods or services which in the UK is to be found in the Consumer Rights Act 2015, reflecting the fragmented nature of the consumer acquis. It is this that the Commission refers to in introducing the draft Online Sales Directive and draft Digital Content Directive.  Students may note that the purpose of the proposed directives is to the respective differences in contract law regulation between member states. According to the Commission, differences in contract law between member states generate additional transaction costs when concluding cross-border transactions that deter both consumers and businesses from engaging in such transactions. The Commission believes the existence of different domestic provisions governing the contractual rights of consumers generates uncertainty among them as to the extent of their rights when purchasing from another EU jurisdiction. This lack of legal certainty deters consumers from making cross-border purchases, in particular online. Consequently, consumers do not exploit the potential of having access to a wider choice of goods and digital content at more competitive prices. The proposed directives will harmonize consumer rights, creating a single set of rules providing the same level of consumer protection across the European Union.

3. Do you agree with the following statement? ‘Consumer protection measures for online purchases are actually of little value as the individual consumer is not likely to pursue an action for the small amounts of money involved. It would be much better to allow freedom for online retailers and consumers to contract as they see fit. Retailers would then pass on cost savings to the consumer and this would be a real and tangible, benefit.’

This is a broadly worded question. There is no specific right or wrong answer to this it is designed solely to have students consider whether a free market approach may ultimately be preferable to a regulated consumer protection approach. The answer should range across the materials and discussion in Chapter 18.