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Gov report urges total consumer contract law overhaul

Make three consumer sales laws into one simplified law

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A Government report has recommended a complete overhaul of consumer law which would bring together the disparate laws that currently govern the sale of goods and services to consumers.

Pointing out that three laws currently govern consumer sales contracts, the report recommends creating a single law as well as ensuring that it is written in simplified terms that laypeople can understand.

The report (222-page / 1.2MB PDF) was produced by the Department for Business, Innovation and Skills (BIS) by academics led by Professor Geraint Howells and Professor Christian Twigg-Flesner of Manchester and Hull universities respectively.

The report reads: "This Report was commissioned because there was a belief that consumer contract law could be simplified [and] streamlined by separating out into a coherent package the legal provisions affecting consumers, and rationalised by adopting more appropriate terminology."

"Our general conclusion is that consumer contract law would be improved if many of the provisions could be brought together in a single consumer contract law that so far as possible subjected all consumer supply contracts to the same rights and remedies."

"The rules should be informed by general principles reflecting the need for the contract to fulfil consumers' reasonable expectations. Simpler modern terminology should be used that is suited to the consumer context and understandable to consumers," it said.

Consumer protection laws usually operate by "implying" terms into consumer contracts. Those contracts should be read as though they contain the clauses contained in the laws, even if those clauses do not appear.

"Currently three statutes govern consumer supply contacts – Sale of Goods Act 1979 (SoGA), Supply of Goods (Implied Terms) Act 1973 (SoG(IT)A) and Supply of Goods and Services Act 1982 (SGSA)," said the report. "This complicates the law, but for little gain as many of the statutes imply the same terms. "There are differences in some issues, particularly as regards remedies, but these are often arbitrary. The laws could be consolidated into one statute to make them more accessible and coherent with exceptions being rationally justified. The law would also be simplified if restricted to consumer supply contracts."

In making its recommendations, the report's authors said that they have tried to use language that consumers themselves (or advisors who are not lawyers) will understand because consumers will not always be advised by a lawyer.

"Our approach has been to simplify the rules both in content and concept and at the same time include as many of the rules in the law as possible to promote transparency and access," the report said. "We think that there may be additional scope for using innovative drafting techniques – use of examples, guidance notes etc – to make the law more comprehensible to consumers and traders."

The report recognised that its proposals have to work in the context of other laws which touch on consumer sales contracts.

"Important questions also arise as to the link between this work and general sales law and general contract law. The latter is of course on the EU’s agenda because of the Draft Common Frame of Reference (DCFR)," it said. The DCFR is a proposal to improve the quality of EU law. "We foresee the present project as producing a free standing consumer contract law. This would, of course, sit on top of the general contract law and should, so far as possible, use concepts and principles that are coherent with the general law of contract."

"Likewise it should adopt the concepts of the DCFR wherever possible. However, consumer law does have its own rationales distinct from general contract law. There are already distinctions between business-to-business (B2B) and business-to-consumer (B2C) sales law. This is an opportunity to simplify the law by only having the consumer provisions in the statute," it said.

As well as the DCFR, the European Commission has produced a proposed Consumer Rights Directive which it hopes to pass.

This has proved controversial because initially it sought to fully harmonise consumer law across the EU. It did not contain provisions forcing EU member states to pass laws allowing consumers to have the same right to reject goods that UK consumers have.

UK consumer groups and law reform bodies have said that the Directive, as originally proposed, would actually erode the consumer rights of UK citizens. Full harmonisation was also opposed by the European Parliament, and the Commission admitted earlier this year that it had given up on that as a goal.

The BIS report acknowledged that the issue of the right to reject and the proposed Consumer Rights Directive are difficult.

It said that current EU law complicates the issue by providing for different remedies based on whether goods were hired or bought on hire purchase on the one hand, or sold on the other.

That EU law is also complicated because it says that once a good is "accepted", the right to remedies is lost.

"Neither maintaining the status quo nor simply adopting the European remedies seems to be a viable way forward," the report said. "Any solution would have to include the European remedies and the choice would then be between the sales or non-sale regime."

"Although it would mean restricting consumer rights (because of the acceptance rule), applying the sales regime to all supply contracts seems to be preferable, given that, in any event, the European remedies provide a long term right to reject; however the sales rules should themselves be modernised in order to remove uncertainties such as those surrounding the concept of acceptance.

"One consistent set of remedies for all supply of goods transactions should be adopted," the report said. "Whilst this might result in an adjustment to the current level of consumer protection, the greater simplicity and clarity achieved by such a move would be more beneficial in that it will simplify the law and reduce costs. The remedial scheme currently applicable to sales should be adopted for all supply transactions."

Copyright © 2010, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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