IIBMS – The sale of goods on the Internet

Case 5 : The sale of goods on the Internet IIBMS – The sale of goods on the Internet The sale of consumer goods on the Internet (particularly those between European member states) raises a number of legal issues. First, there is the issue of trust, with out which the consumer will not buy; they will need assurance that the seller is genuine, and that they will get the goods that they believe they have ordered. Second, there is the issue of consumer rights with respect to the goods in question: what rights exist and do they vary across Europe? Last, the issue of enforcement: what happens should anything go wrong? Information and trust Europe recognises the problems of doing business across the Internet or telephoneand it has attempted to address the main stumbling blocks via Directives. The Consumer Protection (Distance Selling) Regulations 2000 attempts to address the issues of trust in cross-border consumer sales, which may take place over the Internet (or telephone). In short, the consumer needs to know quite a bit of infor- mation, which they may otherwise have easy access to if they were buying face to face. Regulation 7 requires inter alia for the seller to identify themselves and an address must be provided if the goods are to be paid for in advance. Moreover, a full description of the goods and the final price (inclusive of any taxes) must also be provided. The seller must also inform the buyer of the right of cancellation available under Regulations 10-12, where the buyer has a right to cancel the contract for seven days starting on the day after the consumer receives the goods or services. Failure to inform the consumer of this right automatically extends the period to three months. The cost of returning goods is to be borne by the buyer, and the seller is entitled to deduct the costs directly flowing from recovery as a restocking fee. All of this places a considerable obligation on the seller; however, such data should stem many misunderstandings and so greatly assist consumer faith and confidence in non-face-to-face sales. Another concern for the consumer is fraud. The consumer who has paid by credit card will be protected by section 83 of the Consumer Credit Act 1974, under which a consumer/purchaser is not liable for the debt incurred, if it has been run up by a third party not acting as the agent of the buyer. The Distance Selling Regulations extend this to debit cards, and remove the ability of the card issuer to charge the consumer for the first £50 of loss (Regulation 21). Moreover, section 75 of the Consumer Credit Act 1974 also gives the consumer/buyer a like claim against the credit card company for any misrepresentation or breach of contract by the seller. This is extremely important in a distance selling transaction, where the seller may disappear. What quality and what rights? The next issue relates to the quality that may be expected from goods bought over the Internet. Clearly, if goods have been bought from abroad, the levels of quality required in other jurisdictions may vary. It is for this reason that Europe has attempted to standardise the issue of quality and consumer rights, with the Consumer Guarantees Directive (1999/44/EC), thus continuing the push to encour-age cross-border consumer purchases. The implementing Sale and Supply of Goods to Consumer Regulations 2002 came into force in 2003, which not only lays down minimum quality standards, but also provides a series of consumer remedies which will be common across Europe. The Regulations further amend the Sale of Goods Act 1979. The DTI, whose job it was to incorporate the Directive into domestic law (by way of delegated legislation) ensured that the pre-existing consumer rights were maintained, so as not to reduce the overall level of protection available to con- sumers. The Directive requires goods to be of ‘normal’ quality, or fit for any purpose made known by the seller. This has been taken to be the same as our pre- existing ‘reasonable quality’ and ‘fitness for purpose’ obligations owed under sections 14(2) and 14(3) of the Sale of Goods Act 1979. Moreover, the pre-existing remedy of the short-term right to reject is also retained. This right provides the buyer a short period of time to discover whether the goods are in conformity with the contract. In practice, it is usually a matter of weeks at most. After that time has elapsed, the consumer now has four new remedies that did not exist before, which are provided in two pairs. These are repair or replacement, or price reduction or rescission. The pre-existing law only gave the consumer a right to damages, which would rarely be exercised in practice. (However, the Small Claims Court would ensure a speedy and cheap means of redress for almost all claims brought.) Now there is a right to a repair or a replacement, so that the consumer is not left with an impractical action for damages over defective goods. The seller must also bear the cost of return of the goods for repair. So such costs must now be factored into any business sales plan. If neither of these remedies is suitable or auctioned within a ‘reasonable period of time’ then the consumer may rely on the second pair of  remedies. Price reduction permits the consumer to claim back a segment of the pur- chase price if the goods are still useable. It is effectively a discount for defective goods. Rescission permits the consumer to reject the goods, but does not get a full refund, as they would under the short-term right to reject. Here money is knocked off for ‘beneficial use’. This is akin to the pre-existing treatment for breaches of durability, where goods have not lasted as longas goods of that type ought reasonably be expected to last. The level of compensation would take account of the use that the consumer has (if any) been able to put the goods to

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