Legal Article - Business Law

Implied Terms in a Contract

It is essential, when selling and supplying goods to consumers, that the key regulations are met and adhered to. Within the motor retail trade there are several areas which need to be constantly considered prior to supplying vehicles to the public.

This area of Consumer Law is an important aspect within the day to day running of your business. To prevent legal cases and complaints arising it is necessary to ensure the vehicles you sell are suitable and safe and the way in which you advertise your business, products and services meet the requirements outlined within by the law.

For all transfers of goods to customers there are implied terms.

Does the Car Correspond with its Description?

Does the Car Correspond with its Description?

There is an overlap here with the other part of civil law regarding misrepresentation. If you are selling, say, a car any descriptions you use must be accurate. If you say something and don’t know that it is wrong the customer can still claim.

The same rules apply for those who sell car parts and accessories.

Satisfactory Quality: What Does it Mean?

Satisfactory Quality: What Does it Mean?

Under the law it is stated “goods are of satisfactory quality if they meet the standard that a reasonable person would regard as satisfactory taking account of any description of the goods, the price (if relevant) and all other relevant circumstances”.

and

quality includes their “state, condition, fitness for all the purposes for which the goods of the kind in question are commonly supplied, appearance and finish, freedom from minor defects, safety, durability”.

What can we understand from these definitions?

- Description is a factor. So if something is described as “shop soiled” or “ a demonstrator” then the item will not be as good as new. Some imperfections are to be expected.

- The price may be relevant. If you give some extra discount because, say, the tyres are legal and serviceable, but will need replacement shortly, then low tyre tread is not something to be complained of. If a discount is specifically given it is always wise to record on the Sales Invoice why it is being given.

- In some cases freedom from minor defects could be an issue e.g. paint imperfections on a new car, scuffs on wheel trims etc. The important point is to go back to the first part of the definition. Would a reasonable person class the car etc as satisfactory?

In an appeal case a 10-year-old Jaguar which had travelled 80,000 miles had a complete engine failure after 3 weeks and 2,300 miles from purchase. It was held in that case that the car was not of satisfactory quality nor fit for its purpose.

However in another case a car, that had travelled under half that mileage in total, and had completed only a further 800 miles before experiencing engine problems, was deemed to be fit for its purpose.

The extent of damage however would appear to be less. It was made clear by the Judge, that a purchaser of a second hand car had to expect problems to develop sooner or later.

The situation is of course different with respect to new cars. With a new car an appeal case has decided that comfort, ease of handling and pride in the car’s appearance are factors that should be considered.

There are situations where a retailer may wish to sell, say, a car or an accessory, with a particular defect and it is just not economical to repair it or the customer wants to buy it with the problem.

The law takes account of this by allowing sellers to specifically draw to the attention of the buyer particular defects.

So, if you make it clear (and we would suggest include it in writing on the sales documents) that, say, an alarm is not working, or the rear window only winds down half way, or there is a rattle from the exhaust etc then the customer has no claim against you for that fault.

Equally, if there is a defect which the basic “once over” by the customer should reveal e.g. a patch of rust on the wing, a split seat, a missing radio then the same rules apply. In all cases however we would recommend you put any defects down in writing. It will be worth its weight in gold when a dispute arises.

The customer is not obliged to examine the vehicle to any particular extent.

However, if a professional technical person examines the car e.g. AA, RAC etc then that person is acting as the agent of the customer and therefore the extent of defects expected to be revealed is much more.

If a car has been an insurance write-off (see the later section on Write Offs) then so long as it has been repaired satisfactorily and professionally there is generally no claim for a lack of satisfactory quality.

In the authors view this point may be challenged at some stage but at present this is the situation. There was one notable appeal case, which was a challenge to this point for very special circumstances.

A new car was being unloaded at the dockside and fell into the water. It was recovered, completely dried out and sold, although it was deemed to be an insurance write off. It was bought by an enthusiast of a somewhat limited model. 

 Although there was no visible deterioration at the time, the Court held that a car such as this one, should be seen as a form of investment and a purchaser would have in mind its eventual saleability and consideration must be given to the purchaser’s pride in owning a specialist car.

Anything that affects the value of a vehicle must be declared.

What is the Meaning of Fitness for Purpose?

What is the Meaning of Fitness for Purpose?

If the buyer makes known a particular purpose of which he/she is buying the goods e.g. “I want this car to tow a caravan” or “I need a special heavy duty battery for my caravan”, then the goods must satisfy that purpose.

Sellers should be cautious since in the example given the extra loading of the car might cause the gearbox to fail and the customer is relying solely on your judgement.

The cases for new and second hand cars generally follow the same conclusions as for “satisfactory quality”

Are there any Restrictions regarding the Right to Sell?

Are there any Restrictions regarding the Right to Sell?

There is an implied term that the seller has the right to sell and that there are no undisclosed charges or encumbrance with the goods.

Broadly speaking this means that the seller should own the goods being sold, or be authorised to sell on someone else’s part and there shouldn’t be any financial charges, or other security holdings with the vehicle.

What Happens if the Seller falls foul of the Implied Terms?

What Happens if the Seller falls foul of the Implied Terms?

The answer is – it all depends! If we are talking about a misdescription, a lack of quality or fitness then if the problem is complained of sufficiently early the customer can reject the goods and get their money back.

But what is “sufficiently early”. We need to look at case law again. It was held that for a new car 3 weeks was adequate time to check out a car and after that time the customer did not have the right to reject.

The car was not of satisfactory quality but as the garage had repaired the car then that was the lion’s share of any claim that could have been made. There may be an additional claim for inconvenience etc but little more.

There are other situations where the customer could be deemed to have accepted the car. This could be connected with any act, which suggests ownership has transferred from seller to buyer such as adapting the car in some way.

Simply because the customer has agreed to a repair does not by itself take away the right of rejection.

The Courts have tended to allow a longer period to reject when goods have been supplied on finance compared with straight cash sales.

If the customer has lost the right to reject the goods they are entitled to claim compensation. So if the car breaks down they are entitled to claim the cost of having it repaired BUT they are obliged to keep their expenditure to a minimum.

If the seller offers to repair then that is the least cost route and the customer cannot claim for the cost of repair elsewhere, unless there is some very good reason why that is the preferred option.

The customer is also entitled to claim for other reasonable loss and damage. So if they are put to the expense of taxis, loss of earning etc and this is directly related to the problem then they can claim.

Can A Seller Take Away a Customers Rights on Satisfactory Quality etc

Can a Seller take away a Customer’s Rights on Satisfactory Quality etc?

If you are selling in the course of your business and the customer is not buying into his/her business and the goods are those that are normally supplied for private use/consumption then you cannot take away a customer’s rights.

In fact if you use statements which do attempt to take away such rights then it is a criminal offence and you can be prosecuted. So statements such as “no refunds” or “refunds only given if goods are returned in original packaging” would be illegal.

Can You Sell a Car Sold as Seen

Can you Sell a Car ‘Sold as Seen’?

Many car dealers use this term on invoices but in relation to normal consumer sales it would be void by virtue of the Unfair Contract Terms Act and indeed would amount to a criminal offence.

As previously indicated the most that a dealer can do is simply to highlight on the order form/invoice the particular defects that were agreed between customer and dealer.

Is the Seller Liable if the Car is on Finance?

Is the Seller Liable if the Car is on Finance?

When you sell a car on HP or Conditional Sale the dealer is effectively selling the car to the finance company and they are allowing the customer to use the car while repayments are made, ownership eventually passing to the customer.

Under such agreements the Consumer Credit Act gives equal liability for implied terms of satisfactory quality etc to the seller and the finance company.

The finance company have a powerful position in that they can contractually tie in the seller to indemnify them if there is a problem. It does mean, however, that if the seller cannot settle the claim to the customer for whatever reason, then the finance company must.

 

Published: 10 Mar 2011

Comments

To ensure you are a real person signing up and to prevent automated signups (spamming) could we ask you to copy the letters and numbers shown below into the box.

(cAse SeNSItivE!)

There are no comments



Share this Article


Related Articles