§ (1) Where a motor vehicle is let under a hire purchase agreement to which the principal Act applies the hirer shall not be entitled to reject the vehicle by reason only of a breach of either or both of the conditions implied by virtue of 726 section 8(1)(d) (as to merchantable quality) and section 8(2) (as to fitness for purpose) of the principle Act, unless—
- (a) he shall have given to the owner or to any person who conducted any antecedent negotiations, but is not the owner, an opportunity to rectify or cause to be rectified the defects in the vehicle giving rise to the breach of condition, and
- (b) the owner or person who conducted any antecedent negotiations, as the case may be, has not rectified the defects giving rise to the breach of condition, or caused them to be rectified, to the reasonable satisfaction of the hirer and within a reasonable period from the date on which the owner or person who conducted any antecedent negotiations received written notice that the vehicle was defective giving particulars sufficient to enable the matters complained of to be identified.
§ (2) Where it is shown that defects giving rise to breach of either of the conditions to which this section refers have arisen on more than one occasion the hirer shall be entitled to reject the vehicle for breach of condition if he shall have given to the owner or to any person who conducted any antecedent negotiations an opportunity to rectify or cause to be rectified the defects in the vehicle giving rise to the breach of condition on a number of occasions that is reason able having regard to the defects that have arisen.
§ (3) Nothing in this section shall affect the right of the hirer at any time to—
- (a) set up against the owner breach of the conditions to which this section refers in diminution or extinction of the hire purchase price; or
- (b) maintain an action against the owner for damages for breach of the conditions.—[Mr. Gresham Cooke.]
§ Brought up, and read the First time.
§ Mr. Gresham Cooke (Twickenham)
I beg to move, That the Clause be read a Second time.
I apologise, for the absence of my hon. Friend the Member for Wycombe (Mr. John Hall), who is abroad with the N.A.T.O. Parliamentarians.
The Principal Act says that the hirer can reject goods and rescind the contract if the goods are not of merchantable quality. Under the Bill that applies to motor vehicles up to £2,000. For the purpose of the argument I will deal only with new goods, and I have confined the Clause to motor vehicles. I agree that they are an example of other engineering goods, but they represent the principal type which will be affected. By Clause 11(5), the hirer can serve a notice on and hand back a motor vehicle to the agent, the dealer or the garage on rescision of the contract, if he is not satisfied with the merchantable quality.
727 "Merchantable quality" was introduced as a term in the Sale of Goods Act, 1893, when the common law was codified. That Act was based principally on experience with agricultural produce. It dealt with things like adulterated oats, Moroccan horse beans, and so on. I suggest that the nineteenth century Act was the product of a rural economy. Oats, beans and potatoes were either merchantable—that is, saleable—or not, and the issue was clear.
In our complicated industrial age, matters are not so clearly black or white. There have been very few cases about the merchantability of motor vehicles or mechanical products generally, because I believe the lawyers considered that the provisions of the Sale of Goods Act were so irrelevant to mechanical goods that the terms of the Act were excluded in conditions of sale.
I am advised that on the basis of decided cases, such as they are, and what was intended as to merchantability in the 1893 Act, it is very likely as the law stands that the purchaser of a defective vehicle would be able to establish that the vehicle was unmerchantable or unsaleable, but it is clear that the courts will wish, when they have an opportunity to do so, to give a purchaser rights in respect of defective goods, and it is reasonable for them to do so.
The problem that arises in the case of vehicles is that the only remedy for breach of the condition of merchantability is the right to rescind the contract and return the goods at once. Accordingly, if the courts were to go as far as was suggested by the Molony Committee in paragraph 442, which said in effect that—If an appliance…works imperfectly…it is small consolation to the purchaser to know that an expert can readily put it right"…and therefore he should be able to throw it back to the owner, the House might agree that that view might not be unreasonable in the case of small mechanical things, such as lighters or electric razors, which can be repaired, wrapped up again, and sold to someone else as new. However, I suggest that this creates economic nonsense in the case of complicated products such as motor 728 vehicles which, as soon as they run a few miles, become secondhand. The motor vehicle has very often in law been treated as in a special class.
Therefore, I have for the sake of simplicity related the Clause only to motor vehicles, but I suggest that it would be a useful general amendment to the law relating to large complicated mechanical consumer durables. I am trying to create conditions in which the courts could take a wide view of what was meant by lack of merchantability without permitting the arbitrary return of goods in unreasonable circumstances. In effect the Clause encourages the consumer to get the goods put right under the warranty policy offered to him and still allows him to reject the goods when the owner or dealer has failed to put the goods right in a reasonable manner.
I claim that my Clause follows common law tradition, because it is a codification of present practice and is in line with the way the Sale of Goods Act itself was built up in the last century. Incidentally, I am not taking away from the consumer the right to damages, if he wanted in his anger to go straight to the court first without going back to his dealer or giving the dealer the opportunity to put the vehicle right.
As to fitness for purpose, which is also mentioned in the Clause, it is appreciated that under the Bill, as under the Sale of Goods Act, that condition can be excluded by the owner or the seller. No one wants to make exclusions, and the object of including a reference to fitness for purpose is to provide safeguards for cases where fitness for purpose might be called in question as the result of defects, and thereby to create conditions in which it is less likely to be excluded from conditions of sale.
All I have said on these matters is equally relevant in the case of secondhand goods, although in the case of secondhand goods merchantability can be excluded under Clause 12.
I submit that if the new Clause were incorporated in the Bill the motor trade would be less likely to seek exclusion for special reasons, unfitness and so on. It would improve matters because I believe that the Clause would make the law more practical and would improve 729 it by creating conditions in which the courts would be able to give to consumers wider rights in respect of defective goods than they would have done if breach of the Clause necessitated the immediate return of the vehicle to the owner without seeking the intervention of the dealer or garage to rectify the defect.
§ Mr. Leonard Cleaver (Birmingham, Yardley)
One effect of the extension of the limit of application of the Hire-Purchase Act to £2,000 is to apply the warranties and conditions set out in Section 8 of that Act. These include, first, that the goods shall be of merchantable quality and, secondly, that the goods shall be fit for the purpose which they are required to serve.
The expressions "merchantable quality" and "fitness for purpose" are taken from the Sale of Goods Act, which was a summary of the case law relating to agricultural products and not drawn up to cope with the problems of the mechanical age, with the result that, where it would have been obvious what was of merchantable quality in the case of oats or meat, the same cannot be said of such things as motor cars.
There are plenty of trivial faults which can be put right by the turn of a spanner, but which, at the moment, could be regarded as rendering the vehicle unfit for its purpose and, therefore, might render the contract void. It may well be that the courts will determine by case law what is the definition of "merchantable quality" and "fitness for purpose", but the public should not be put to the necessity of going to court to settle things like that.
The new Clause provides that where a consumer has a defect in a vehicle which might be construed as rendering it unmerchantable or not fit for the purpose for which it was supplied, he will not necessarily have the right to rescind the contract and return the vehicle. To retain that right he must first give the dealer who supplied it, or the finance house, an opportunity to remedy the defect, and if that cannot be done, or not done within a reasonable period, he then has a right to return the vehicle.
730 This will not only prevent courts from ordering the return of vehicles in unreasonable circumstances, but will also allow them to develop concepts with regard to merchantable quality and fitness for purpose. This will cover consumers in respect of almost any defect without thereby having to order the return of a complete vehicle in other than reasonable circumstances.
It is important to note that the consumer can still sue for damages. The state in which modern mechanical products would be unfit or unmerchantable is far from clear. To give consumers the right to return the vehicle in respect of the majority of defects would seem to indicate that the courts would have to regard any defect, however trivial, as rendering the vehicle unfit or unmerchantable. Since this would require the court to order the return of the goods and recession of the contract, such a doctrine would create an impossible situation, which would ultimately result in an increase in price to consumers.
§ Mr. Weitzman
I hope that the Parliamentary Secretary will reject the Amendment, which represents a piece of special pleading on behalf of the motor trade, The Sale of Goods Act, to which reference has been made, codified the existing law. Why should we say that merchantability must be related only to certain specified things? If the hon. Member for Twickenham (Mr. Gresham Cooke) looks up the law on this matter he will find cases of merchantability of a more extensive type than those to which he referred.
By our common law, if goods are not merchantable or if they are not fit for the purpose for which they have been sold, there is right of rejection. If a person loses that right, what will happen if he is left with only the remedy of seeking damages? A person can say, "You sold me these goods. They are not fit for the purpose for which they are required and I reject them." He has a right to say that and I claim that there should be no special pleading on behalf of the motor trade, because the motor vehicle is in no more special position than any other article.
§ Mr. Graham Page
My hon. Friend the Member for Twickenham (Mr. Gresham Cooke) said that the Sale of 731 Goods Act was passed in 1893, that it had little to do with motor cars, and that there were few cases of motor cars under the Act. In fact, the leading case on the question of "fit for the purpose" is one which relates to a motor car, and it is quite an old case which all of us as law students learned in our youth.
It was the case in which the plaintiff had bought what he thought was a family car and was sold a sports car. He said that it was not fit for the purpose which he had made known to the vendor. The facts of that case are that the defendants, in the course of the case, informed the learned judge that the car was in the courtyard of the Law Courts, and they invited him to have a ride in it. The learned judge accepted that offer. He went to the courtyard and endeavoured to get into the sports car. He cracked his head on the roof of the car, he was driven at high speed down the Strand and at high speed back again, he cracked his head in getting out of the car, and he gave judgment for the plaintiff.
§ Mr. Gresham Cooke
That well-known case was an argument about the type of the car, not whether the car would run or not.
§ Mr. Page
That is just the point to which I was coming. How, in a case like that, could the vendor make the article fit for the purpose for which it was sold? I do not see how my hon. Friend's Clause would have effect in such cases. If perhaps there were defects in the car which could be remedied, well and good, but the normal case of "fit for the purpose" is when the purchaser has made known the purpose for which he wants the goods and has relied on the vendor. I do not think that in such a case there would be any scope for remedying that defect and, therefore, the Clause would be ineffective.
§ Mr. D. Price
As hon. Members who laboured through the whole of the passage of this Bill will know, this new Clause raises very important and far-reaching questions, with implications, incidentally, which go far beyond the field of hire purchase. These matters have not been raised before in earlier debates and this is the first time that we have had a 732 chance of discussing them. At the risk of detaining the House for a few minutes, I think that I ought to say a little about them.
Section 8 of the 1938 Act implies in hire-purchase agreements to which the Act applies certain conditions as to the goods. One is that the goods shall be of merchantable quality. Another is that they shall be reasonably fit for the particular purpose for which the hirer has made known that they are required. The first of these conditions can be excluded where the goods are second hand but cannot be excluded in relation to new goods, except in respect of specified defects, as provided for in Clause 12 of the Bill. The second condition, fitness for purpose, can be excluded in all cases. These conditions also appear, as my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) reminded us, in the Sale of Goods Act but not in precisely the same form. In particular, under the Sale of Goods Act, it is permissible to exclude the condition of merchantable quality even in relation to new goods, but this is not the case under Section 8 of the 1938 Act.
The Molony Committee considered the question of implied conditions and warranties in great detail and, in particular, it was concerned at the extent to which the consumer was being induced to sign away his rights in documents, such as manufacturers' guarantees, which he thought gave him fresh benefits but which in fact deprived him of his rights under the general law. The Molony Committee expressly stated its preference for the Hire Purchase Act in this matter, particularly because of the extent to which exclusion was prohibited, and it recommended this as the pattern to follow when the Sale of Goods Act was revised.
This new Clause is concerned principally not with new statutory provisions proposed in the Bill, but with existing provisions in the 1938 Act which, with the raising of the monetary ceiling, will be applicable to hire-purchase agreements for the generality of motor vehicles. My hon. Friend the Member for Twickenham said that if the new Clause were accepted we would be taking nothing away from the consumer, but I point out most respectfully that we would be taking away rights that have existed since 1938. It is true that they 733 existed only in the category from £300 down and we are extending the range—but in the band from zero to £300 we would be taking rights away.
We know that the Society of Motor Manufacturers and Traders has sent all of us who have followed the Bill closely a memorandum explaining why it thinks that motor vehicles raise special problems and call for special treatment but, given the background I have described, it will be apparent that the effect of the Bill will not be quite as novel or as inappropriate as the Society of Motor Manufacturers and Traders appears to suggest. The Society, indeed, made representations on precisely the same points to the Molony Committee, which dealt with those representations in its Report and came to conclusions with which we, when the Society again put the points to us, felt bound to agree.
The Molony Committee, in this part of its Report, was examining a broad problem of cases where consumers are dissatisfied with goods and where remedies in practice available to them are inadequate. I am sure that none of us wants to be unfair to those in the motor car industry—it is a great industry. They are very conscious—perhaps I might say increasingly conscious—of problems of this kind, and are anxious to do the right thing by their customers. But I think that it is also a fact that the extent to which it has been possible to exclude legal remedies has led their thinking on to wrong lines.
They have been in a position where, having excluded the general law, they offered certain benefits to their customers as an act of grace. It seems to me that, as a result, they rather regard themselves as entitled to decide for themselves questions of their liability for their goods, rather than for the question to be one, in the last resort at least, for the impartial decision of the courts. Again, it is, perhaps, because of the extent to which they have excluded rights at law that they seem to underestimate the ability of the courts to reach equitable conclusions in relation to individual cases. I can assure my hon. Friends that a court can be relied on to give short shrift to a frivolous claimant.
Before I come to the particular, there is one last general point. Motor 734 vehicles may be different, but they are not as different as all that. The conditions that Section 8 implies in hire-purchase agreements have been so implied in the past in relation to quite complex goods and, as far as I know, this has not, in practice, given rise to difficulties. The £300 limit certainly includes some quite complex motor cycles, and electronic equipment of various sorts, and I believe the courts are well able to take account of changing technology.
The new Clause deals with situations in which the implied conditions of merchantable quality or fitness for purpose have not been excluded in a hire-purchase agreement relating to a motor vehicles. The important case, in practice, is the condition of merchantable quality in relation to a new vehicle.
This Clause raises the question of how the concept of merchantable quality is to be applied in relation to motor vehicles. As drafted, the Clause proposes that where there is a breach of the condition, the hirer's normal right to rescind the agreement and reject the goods shall not be exerciseable until he has given the owner or dealer opportunities to rectify the defect or defects giving rise to the breach. But this is, to my mind, only a subordinate point.
The real question is, what defect or combination of defects will be held to sustain a claim that a vehicle is not of merchantable quality? It is obvious that this is not a straightforward matter. We all recognise that motor vehicles are complex things, made up of many components and mass produced but required to function with a high degree of efficiency. Some defects are, no doubt, inevitable. Further, in some instances, the same defect could be due to an inherent flaw or could be the result of misuse at the hands of the hirer. How is the cause to be determined?
These are certainly valid points which are particularly applicable in relation to motor vehicles, but not exclusively so. Nor are they insoluble. The Molony Committee, in paragraph 442 of its Report, considered this criticism of the criterion of merchantable quality and expressed confidence in the ability of the courts 735 to apply it in relation to complex articles. We agree with the Molony Committee.
In the case of complex articles such as motor vehicles, small defects tend to arise in the early days and can cause considerable annoyance. Within reason, this is something to be expected. But I do not think that, if hirers had the benefit of the condition of merchantable quality, they would try to reject vehicles as unmerchantable on account of minor defects. These minor defects are irritating, but in general the person who has a car on hire purchase wants to use it—that is a fairly reasonable presumption—and the delay and inconvenience involved in arguing with the dealer and the finance house would, I think, deter hirers from exercising their rights under the condition of merchantable quality except as a last resort.
It is true—and I admit this at once to my hon. Friend—that there are no decided cases to show how the concept of merchantable quality would be applied to motor vehicles. That, as I have said before, is because the motor industry has excluded the conditions implied by law. To that extent, the courts will be deciding cases in new fields. A wide range of factors will, no doubt, be taken into account, including the nature and importance of the defect or defects, and how easily it can or cannot be put right; and a hirer claiming that there had been a breach of condition would have to prove that the defect was inherent in the car and not caused by misuse on his part. We cannot be certain in advance of the effects on the motor industry of making this condition unexcludable, but we see no reason to doubt the ability of the courts to establish standards of merchantable quality.
The new Clause would give the trader one or more opportunities to repair defects before the hirer became entitled to reject the car. This, I feel sure, would only complicate the matter further and cause delays. What, for example, is a number of occasions that is reasonable in relation to the defects? In the event of dispute, the courts would have to decide on the facts of the case, so that the Amendment does not save reference to the courts. But it would complicate the situation since there would, 736 apparently, be two points to be decided: whether the defects constituted a breach, and whether the circumstances justified the hirer in rejecting the car.
In short, we believe that the effect of implying this condition in agreements concerning motor vehicles will be less grave than has been represented to us. But the hirer should have his full rights under the condition. If really serious defects became apparent in a vehicle sufficient to justify the hirer in rejecting it on the ground of breach of the condition, then he should be able to reject it without protracted and fruitless attempts to correct the trouble.
We believe with the Molony Committee that the hirer of a car, just like the present hirer of a motor cycle, should have the added protection of the implied condition of merchantable quality. We doubt whether the right to reject a car will often be invoked, but I do not doubt the ability of the courts to deal with cases of this kind which come before them, as with cases where the hirer is claiming damages. I think that the motor industry is unduly hesitant to see itself and its products subjected to the adjudication of the courts. It underestimates how strong its position will be and how unreal is the hypothesis of frivolous claims being brought against it and upheld by the courts. I would therefore invite the House to reject the new Clause.
§ Question put and negatived.