Feeling rejected

BENCHMARKS

District Judge Adam Taylor offers a consumer law update on the right to reject goods

In December 1999, Mr and Mrs Clegg ordered a new, 42-foot yacht from a Mr Andersson, trading as Nordic Marine, for 236,000.

When they took delivery the following August, Mr Andersson told them that the keel was too heavy.

Mr Clegg nevertheless sailed the yacht for seven or eight days, before returning it for modification.

Protracted correspondence followed before Mr Andersson informed the Cleggs on 14 February 2001 that the extra weight might endanger the rig and advised them to have 800 kgs of lead shaved off the keel.

Twenty days later, on 6 March, the Cleggs rejected the yacht.

Satisfactory quality

The starting point in advising anyone in the Cleggs' position is section 14 (as amended) of the Sale of Goods Act 1979 (SGA).

If the seller sells in the course of business, it is implied that the goods are of 'satisfactory quality'.

The seller cannot exclude this implied term if the buyer is a consumer (section 6 of the Unfair Contract Terms Act 1977).

'Satisfactory quality' includes not only fitness for purpose, safety and durability, but also appearance, finish and freedom from minor defects (section 14(2B) of the SGA).

In Clegg v Andersson [2003] EWCA Civ 230, the Court of Appeal concluded that the vessel was not of satisfactory quality.

The measure of damages for defective goods is the difference between their value as delivered and as specified (section 53(3) of the SGA).

The court will usually take the cost of repair as a guide.

The modification of the Cleggs' yacht would have taken about an hour and cost 1,680.

Mr Andersson offered to carry out the work.

But Mr and Mrs Clegg wanted their 236,000 back.

Could they reject the yacht?

A buyer loses the right to reject goods if he accepts them.

He is deemed to have accepted if he 'intimates' acceptance to the seller, acts inconsistently with the seller's ownership or keeps the goods for more than a reasonable time (section 35 of the SGA).

'The seller's ownership' means no more than his 'reversionary interest ...

arising from the contingency that the buyer may reject the goods' (Kwei Tek Chao v British Traders & Shippers [1954] 2 QB 459).

So what is a reasonable time? The question is one of fact (section 59 of the SGA).

Time taken to carry out repairs does not count (section 35(6)(a) of the SGA).

According to the Court of Appeal, it follows that time does not run against a buyer 'seeking information which the seller has agreed to supply which will enable the buyer to make a properly informed choice between acceptance, rejection or cure ...'.

Thus, time did not begin to run against the Cleggs until 14 February 2001.

Was the period of 20 days reasonable?

The leading case on this point used to be Bernstein v Pamson Motors [1987] 2 All ER 220.

Readers who have had to advise on rejection will recall Mr Justice Rougier's conclusion that what was reasonable depended on the time needed to inspect the goods, which depended in turn on their complexity: 'What is a reasonable time in relation to a bicycle would hardly suffice for a nuclear submarine'.

In Clegg, the court ruled that Bernstein is no longer good authority because it was decided before the amendment of the SGA by the Sale and Supply of Goods Act 1994.

In particular, the amended section 35(5) made it clear that whether or not the buyer had had a reasonable time in which to inspect was only one factor to be taken into account in deciding whether he had accepted goods.

Buyer beware

Section 14 of the SGA applies only to a business seller.

A buyer from a private seller is not protected, but mendacious claims - 'One careful owner', 'Very good condition', 'It's a good little bus', and the like - may constitute a misrepresentation and allow the buyer who relied on them to reject the defective goods and rescind the contract.

Unless a misrepresentation is fraudulent, the right to rescind is lost by laches (delay), so the buyer must act quickly.

The court is unlikely to allow him more time that would be reasonable under section 35.

Even if goods are sold as seen, the buyer may reject or recover damages if they do not match their description (section 13 of the SGA).

A useful case is Beale v Taylor [1967] 3 All ER 253, in which a buyer recovered damages when he discovered that a car that had been advertised as, and appeared to be, a Herald Convertible 1961 had in fact been welded together from two different models.

If a purchase is financed by a debtor-creditor-supplier agreement, the creditor will be liable for the seller's misrepresentation or breach of contract (section 75 of the Consumer Credit Act 1974) provided the goods cost more than 100 and not more than 30,000.

The creditor's liability is joint and several, so the buyer can sue him alone if the seller has disappeared or is impecunious.

Hire-purchase

The requirement of satisfactory quality is also implied into an agreement for hire-purchase (section 10 of the Supply of Goods (Implied Terms) Act 1973).

However, unlike a buyer, it seems that a hirer can return defective goods at any time, even if he pays instalments, after discovering the defect (Farnworth Finance v Attryde [1970] 1 WLR 1053).

Unless the goods were useless from the start, the hirer will have to pay instalments for the time he has kept them, but can recover damages (Yeoman Credit v Apps [1962] 2 QB 508) for loss of use, the cost of any repairs and the loss of an option to buy.

The Sale and Supply of Goods to Consumers Regulations 2002 (see [2003] Gazette, 20 February, 37) amend the SGA so that consumers who have bought defective goods after 30 March 2003 can insist on replacement or repair, or rescind the contract.

However, the regulations do not allow a buyer to insist on replacement if the cost would be disproportionate to that of repair or to rescind the contract without giving the seller a reasonable time to carry out repairs (regulation 5).

Did the Cleggs act reasonably in rejecting the yacht? That question, relevant under the new regulations, is, according to the vice-chancellor, irrelevant to the right to reject.

Provided he acts sufficiently quickly - how quickly being a question of fact in each case - a buyer can reject defective goods even if the seller offers damages or a cure.

District Judge Adam Taylor sits at Reigate County Court