§ 3.2 p.m.
§ Order of the Day for the Second Reading read.
§ LORD COHEN OF BRIGHTON
My Lords, I beg to move that this Bill be now read a second time. It is with a certain amount of trepidation, as one who has only recently become a Member of your Lordships' House, that I rise to introduce a Private Member's Bill, but I do so because I think the time has come to focus the searchlight of publicity on a problem which has been in the minds of our legislators for a very considerable time and which, as I am sure your Lordships would agree, should now be dealt with.
The Bill which I am submitting deals, as its Title shows, with the sale of goods, but the main purpose is to protect the consumer against what are loosely called 398 "guarantees"—guarantees which minimise, and in some cases almost eliminate, the purchaser's Common Law rights. As your Lordships will realise, purchasers should have statutory rights under the Sale of Goods Act. It is rather clumsy to keep on repeating "Common Law" and "Statute Law", and therefore the device I shall use in this speech is to refer to the purchaser's existing rights at law.
I am sure it would interest your Lordships to be informed how I first came to be acquainted with this problem. About six months ago I purchased a small car for my daughter. On the second time when it was taken out the car started to overheat. My daughter was not an expert driver, and she took the car to an agent of the firm which manufactured the car. The agent looked at it and said, "You should drive it back to the town where you live, and there the main agents will doubtless deal with it." She drove it back. As I say, she was not an expert driver, and on the return journey the car overheated very badly, and when she arrived at the town the cylinders were scored because of the overheating.
The people at the garage said they were very sorry, but what was wrong was that the thermostat had not worked, and so the overheating had occurred. I said, What are you going to do?" They said, "We will supply a new thermostat and you will pay for its installation". I said to the firm, "That is not the question. Because the thermostat was faulty a very great deal of damage has been done." In fact, the damage done was to the extent of £84. The reply to me was: "Read your guarantee. We are responsible merely for replacing the thermostat which caused the difficulty."
I am not one of those people who take these difficulties lying down, and some very heated correspondence took place between the manufacturers and myself. I do not think—I am sure that your Lordships will appreciate this—that the normal person would have been so successful as I was, because as the result of the correspondence I got a new engine put in. I should be very sorry for any—I will not say less important person, but any member of the public who possibly might not be able to obtain publicity for a case like this, because he certainly would not have been so successful. 399 A normal person would have been faced with the cost of reinstating the engine at £80, or having a new engine because there had been a faulty part when the car was purchased.
My Lords, will the noble Lord tell the House the name of the manufacturers of this car, because I think it is in the public interest that we should know?
§ LORD COHEN OF BRIGHTON
My Lords, I should prefer not to do so; I do not think that it would be right. There are a number of motor manufacturers, and we (when I say "we" I mean the Consumer Council) can give you the names of motor manufacturers who are prepared to give guarantees which do not take away the rights of members of the public. There has been correspondence between the Consumer Council and other motor manufacturers to try to persuade them to come into line, and the Council have had a certain amount of success. For instance, Fords have come into line. But I think that it would be very unfair if I gave the name of the firm concerned in this case and there was a great deal of publicity against them. I am hoping that they will come into line.
My Lords, I am going to say this. Motor car guarantees do offer some benefits, and quite considerable benefits, to the consumer which in certain cases go beyond the limit of their legal rights. I refer to repair and maintenance facilities which are available locally in the United Kingdom, and to a more limited extent abroad. In practice it is, of course, a great benefit to be able to drop into a local agency and obtain service and spare parts without question or delay. Many manufacturers also run a voucher scheme whereby the motorist can be assured of periodic after-sales service at a fixed cost at any agency of that kind. In general, it has become accepted that the owner of a new car still under guarantee should obtain prompt service at any garage within the manufacturer's franchise.
It is also true—and this is very important—that at the same time the guarantee withdraws some of the purchaser's existing rights which, as I say, arise under the Sale of Goods Act; and so the purchaser having lost these rights, is thrown on the good will of the manufacturer. He gains 400 a little but he loses considerably more. The policy of the Consumer Council, and the policy which I am submitting to your Lordships, is that any guarantee should add to, and not subtract from, the purchaser's existing legal rights. That is done by a number of firms. They give guarantees which they specifically state are in addition to the purchaser's existing legal rights. What I am asking, and the Consumer Council has been fighting for it for some time, is that when guarantees are given, they should not take away rights but add to them.
Arising from these matters—that is, arising from the difficulty over the car to which I have referred—I obtained a report of the Consumer Council, I read the Report of the Molony Committee and I studied the recommendations therein. The Molony Committee was set up by a previous President of the Board of Trade, the Right Honourable F. J. Erroll, to deal with the whole question of consumers' rights. It reported—I want your Lordships to note this date—in April, 1962. A large number of recommendations were made by that Committee but, unfortunately, it appears that Parliamentary time has not been available to implement them, and the matter has been deferred for eventual comprehensive legislation.
Having said that, however, I should add that it is not the case that the whole of the Report has been deferred. Steps have been taken to deal with two of the matters raised in it. I refer to the passing of the Hire-Purchase Act 1965, and the action taken regarding advertising, and I accept at once that the rest of the recommendations may await comprehensive legislation. Yet I realise that it may be some time—indeed, some considerable time—before the promised comprehensive legislation becomes the law of the land. Having said that, there is one glaring example of what almost might be called a malpractice, which could be dealt with very simply, and this is the purport of my Bill.
As I have indicated a little earlier, when purchases are made, there is a growing practice of giving what are loosely called guarantees—guarantees which take away the purchasers' existing rights. I have referred to the car trade, but the problem arises with a very large number of articles. In Section 14 of the 401 Sale of Goods Act 1893, there is the implied condition that goods should be of a merchantable quality for the purposes for which they are bought, so that the purchaser can be assured that the article he buys will do the job for which he has purchased it. Unfortunately, with the growth of trade, this practice of giving guarantees has crept in, unknown to the ordinary purchaser.
Arising from this case of the car trade, I said to my wife, "If you have a guarantee when you buy any article, do you sign it?" She said that she did. I asked, Do you read the small print on the back of the guarantee when you sign and accept it?" She replied, "No". I will guarantee to your Lordships that 90 per cent. of the ladies of this country who accept guarantees gaily sign the form accepting the restriction of the rights which they should have under the Sale of Goods Act, without reading the words on the back of the guarantees. The extraordinary thing is this. Under the 1965 Act, which arose from the Molony Committee Report, for the purchaser of an article under hire purchase up to a cost of £2,000, no guarantee, no matter how the guarantee is worded, can in any way reduce the right to which the purchaser is entitled by law. But if he buys for cash, his rights can be taken away. What we have done in this Bill is to follow for the cash purchaser the same principle that applies to the purchaser by hire purchase. We have based the Bill on the 1965 Hire-Purchase Act: almost word for word, we have said that the purchaser by cash should have the same rights as the purchaser who borrows. Surely that is reasonable and sensible. I cannot understand how there can be any question or query on whether this is the proper thing.
I do not want to speak for too long, but I have here an interesting case which highlights the position very strongly. Mr. Aubrey Diamond, a member of the Council of the Consumers' Association, who has helped with the provisions of this Bill, wrote an article in the Law Guardian in which he gave the factual story of the managing director of one of our largest electrical appliance manufacturers, who had purchased a new car. It was not a success, for in the first month the gearbox broke down. Clearly it was faulty from the time it was made, and he 402 took it back to the supplier. He contemplated a claim for the loss of use of the car, but in due course the gear box was replaced under the manufacturers' warrant. Then came the blow: he received a substantial bill for labour charges. He exploded, but he was told that he had not read the guarantee, from which it was clear that he had to pay the labour charges. And he had to pay.
He went straight back to his own electrical firm and asked to see their form of guarantee—and lo and behold!, the form of guarantee had exactly the same words as those of the motor car guarantee of which he complained. There is a happy ending to this story, because it led to the revision of the guarantee of one of our largest electrical companies, and, arising from this case, the British Electrical Appliance Manufacturers' Association have recommended to members that they should use guarantees which do not take away existing rights. This question has been highlighted both by the Consumer Council and by an exciting article in the Sunday Times.
In asking your Lordships to accept this simple Bill, I am well aware that it is the Government's eventual intention to introduce comprehensive legislation, but I am afraid the emphasis is on "eventual", and because of the pressure on Parliamentary time it may be some years before purchasers have that protection which should be enshrined in the law of the land. For many years lawyers have appreciated the unfortunate implications of these alleged "guarantees" from the buyer's point of view. It was nearly thirty years ago that Parliament first moved against this practice, in the Hire-Purchase Act 1938. It seems to me, as it seems to the Consumer Council, that the time is long overdue when the simple proposal in this Bill should become the law of the land.
I should like to thank the Consumer Council, and in particular Mr. Aubrey Diamond and the noble Baroness, Lady Elliot of Harwood, very warmly for the great assistance they have given me in the preparation of this Bill. I am well aware that the answer of the Government may be that the Molony Report recommended comprehensive legislation and that they are moving in that direction. I accept that. But there is no reason why we 403 should not immediately add this protection to the consumer. It has been done for the consumer under hire purchase. Why should we not take the further step of giving the same protection to consumers by cash? These small words on the backs of guarantees are a growing evil. I feel that your Lordships, who have been so progressive on a number of matters in the last few months, will wish to see consumers protected in the manner proposed in this Bill.
§ Moved, That the Bill be now read 2a.—(Lord Cohen of Brighton.)
§ 3.29 p.m.
§ LORD DRUMALBYN
My Lords, I am sure that the whole House would wish to express its gratitude to the noble Lord, Lord Cohen of Brighton, for having brought forward this matter, and to congratulate him on the way in which he has done so on this first occasion on which he has introduced a Bill into your Lordships' House. I would, at the outset, express full support for the purpose of the Bill. I would also, if I may, congratulate the noble Lord on his courage in venturing into a field which is perhaps more complicated than he was aware of in introducing his Bill.
I have no illusions about my own lack of expertise in this field. Indeed, it is one in which the Committee on Consumer Production, including its distinguished Chairman, Mr. J. T. Molony, Q.C., expressed doubt as to their own interpretation of the law as it was then, and still is, apart from the changes effected by the Hire-Purchase Act 1964. The Molony Committee expressed clearly theirwish to assimilate the law of sale and hire-purchasein favour of the consumer, and that is plainly what the noble Lord desires; that is, to bring the standard of protection for consumers afforded by the Sale of Goods Act up to that contained in the Hire-Purchase Act in this field.
The Molony Committee laid down three propositions (it is paragraph 431 of the Report) which they described as fundamental. The first was:the retail purchaser should not be exposed to 'contracting-out' ".The second was:the law should be the same on sale and hire-purchase".404 And, thirdly:the law should be the same in England and Scotland"—and in case my noble friend Lord Brecon is here, I should add, presumably, Wales. Taking the last point first, I think that perhaps the noble Lord has followed the text of the Hire-Purchase Act 1965 a little too closely in copying the last line of that Act and excluding Scotland from the scope of his Bill. That is not in accordance with the Molony Committee's recommendation, and I suggest that it would be a mistake. Hire-purchase legislation was consolidated last year, not only in an English Act, but also in a Scottish Act along similar lines.
As I see it, the main provision in the noble Lord's Bill is the one which is contained in Clause 3(1), to which he himself referred, and which says:Except as provided by this Act, the conditions and warranties specified in sections 12. 13, 14 and 15 of the Sale of Goods Act 1893 shall be implied in a contract of sale of goods notwithstanding any agreement to the contrary.For my part, I would agree with the noble Lord that the most important element in this subsection is the prevention of contracting-out of subsection (2) of Section 14 of the Sale of Goods Act, which deals with merchantable quality. I would willingly agree with a Bill which provided for this; that is, to ensure that, in the great majority of cases, the consumer will get an article of merchantable quality where the article is new, provided that the article was "bought by description. "It would not, however, cover those contracts of sale where the seller does not normally deal in goods of that description. In this respect, the Bill does not go so far as the Molony Committee wanted, and it might be possible to put this right at a later stage.
Nor does it cover those cases where the buyer has examined the goods and has not spotted a defect which the examination ought to have revealed. The Molony Committee said that they would not wish that provision to be altered; and I agree with them. I also agree that the seller should not be allowed to contract out of the provisions in sections 12, 13 and 15, dealing with title to sell, quiet possession, freedom from encumbrance and correspondence with sample. However, I should like to ask the noble and learned Lord 405 the Lord Chancellor whether, as regards correspondence with sample, there is any overlap in the Bill, or even contradiction with other legislation; for example, as regards seed and other agricultural and horticultural products. Here again, this is something which could be put right in Committee.
For all these purposes, and particularly to ensure the merchantable quality of brand new goods, I have no doubt that this would prove a useful measure. What I hope the noble and learned Lord the Lord Chancellor will tell us is how it will fit in with the Trade Descriptions Bill, which we all hope to see again soon, in the matter of "description". It might prove confusing if the considerations applying in civil actions under this Bill were different from those applying in prosecutions for misdescription under a revised Merchandise Marks Act.
Then there is the question of guarantees. It is one of the curiosities of the Bill that, on the face of it, it does not emerge that this is the main purpose which the noble Lord has in mind; but it is a purpose, I can assure him, with which I have the utmost sympathy. I think it is still recognised that, on the one hand, not all contracting-out is concerned with guarantees, and, on the other hand, there are perhaps certain types of guarantees where the manufacturer's right of recourse against a retailer is purported to be taken away—and one always has to say "purported to be taken away". There may be some cases where it is really to the advantage of the consumer that that should be so. It may well be that the manufacturer is better able to fulfil the responsibilities that he assumes than the retailer. In fact, some manufacturers make it a condition of their guarantee (as, indeed, I think is the case even with the Government themselves in dealing with certain supplies; for example, to war pensioners) that nobody tinkers about with the goods; it must be the manufacturer himself who deals with them. There are those points. I do not think it is absolutely clear that contracting-out of the conditions of the Sale of Goods Act should be banned altogether. Nor do I think that the Bill actually does that.
Where I think the Bill may fall short of the expectations expressed about it is in regard to "fitness for purpose". 406 Under Section 14(1) of the Sale of Goods Act, the circumstances in which there is an implied condition that the goods are fit for the purpose for which the buyer requires them are somewhat restricted. Not only must the goods be of a description which it is the seller's normal business to supply, but the buyer must also make known to the seller the purpose for which he requires the goods in such a way as to show that he relies on the seller's skill or judgment; and where the goods are sold under a patent or other trade name, there is no implied condition as to its fitness for purpose at all.
As the Molony Committee pointed out, sellers are generally pretty cautious—and this means retailers generally, of course—about expressing an opinion in response to a direct question whether an article is fit for the purpose for which the customer requires it; and rightly so, for it is not easy for a seller to know exactly what are the purposes the customer has in mind, and the customer rarely expresses them as fully and as clearly as he may wish, or imagine he has done. In this respect, the consumer is more likely to be protected by revised Merchandise Marks legislation than by this Bill, in that the purpose for which the goods are designed will generally be made known in advertising. But that protection will not extend to redress for the consumer, at least if the new Bill is on the same lines as the Bill introduced last Session. The first of the Molony Committee's fundamental propositions was thatthe retail purchaser should not be exposed to contracting-out'".By and large, they regarded the trader as well able to look after himself. But the Bill does not apply only to sales by retail. It covers any contract of sale in which the total purchase price is under £2,000, except where the buyer is a body corporate. In this the noble Lord has again followed the Hire-Purchase Acts rather than the Molony recommendation and the pattern of the Trade Descriptions Bill. The effect is that many traders, including not only partnerships but a great many retailers, would be treated when buying in the same way as consumers. Quite apart from that, it is not self-evident that £2,000 is the right limit to apply in this Bill or, indeed, 407 that there should be any limit at all so far as consumers are concerned. The limit of £2,000 in the Hire-Purchase Acts was influenced by the kind of car likely to be bought on hire-purchase. It may be it would cause much more trouble to draw a distinction between cars of different values in the case of contracts for sale by retail. If there is to be a limit on value for consumer protection, I am not sure that £2,000 is not rather too high.
I have only one other question to ask. The Molony Committee recommended that contracting out should be permitted not only in the sales of second-hand and imperfect goods but in sales by auction. I do not think the noble Lord referred to that part of his Bill which enabled those selling second-hand or imperfect goods to contract out of the conditions of Sections 12 to 15 of the Sale of Goods Act, provided that the contract is in writing and that due notice is given to the purchaser. I would ask the noble Lord, Lord Cohen of Brighton, to tell us, when he comes to wind up the debate, whether the Bill is intended to cover sales by auction. If so, is he satisfied that in contracts for sales by auction it would be possible to comply with subsections (2) and (3) of Clause 3? Those are the subsections which deal with second-hand purchases or purchases of goods containing a defect. Clearly it would be neither practicable nor just to make it impossible for the seller by auction to contract out of any of the conditions and warranties in Sections 12 to 15 of the Sale of Goods Act, certainly where second-hand or defective goods are being offered.
No doubt, if this Bill commends itself to your Lordships in principle, there will be a number of drafting Amendments to consider in Committee, but I shall not trouble your Lordships with them now. Apart from the question of principle it seems to me there are really only two questions. First, does the Bill go quite far enough, and in some cases, perhaps, does it go a little too far? Second, does it fit in to the framework of forthcoming legislation on merchandise marks and sale of goods? I think noble Lords would agree that it would be a mistake to pass a Bill of this kind which did not fit in with the framework which is envisaged. 408 If the Bill does fit in with the framework it seems to me there is no problem; we can amend the Bill in those respects in which it does not go far enough or in which it goes too far. If, on the other hand, it does not, or if the Government have not yet decided on the framework of the future sale of goods legislation, I would suggest that your Lordships will wish to consider whether it is worth while at this stage to proceed with the Bill. But so far as that is concerned, I shall look forward to hearing what guidance the noble and learned Lord the Lord Chancellor has to give to your Lordships.
§ 3.42 p.m.
§ BARONESS ELLIOT OF HARWOOD
My Lords, I rise with great pleasure to support the Bill which the noble Lord, Lord Cohen of Brighton, is putting before the House. He said a number of kind things about the help which he has had from my Council, both from members of it and from the staff, and for that I am duly grateful to him. I hope that together in this alliance, one on each side of the House, we may be doing something which will really be of service and help to the consumer. We are on a difficult subject, but it is one in which we are most anxious to try to assist in the rather tangled and difficult situation which exists at the present time. The noble Lord, Lord Cohen of Brighton, has made a compelling speech about the need for the Bill and we, in the Consumer Council, have collected evidence to build up the case for the Bill which, of course, we put at the disposal of the noble Lord when he was drafting his Bill.
The Sale of Goods Act 1893consolidated the legal rights and duties of buyers and sellers of goods. In those days the law was chiefly fashioned for men bargaining as equals as merchants or in the market place. It could not have been foreseen at that time that the Act would become perhaps the most important safeguard for the ordinary shopper in the normal, everyday running of a modern consumer economy. As the noble Lord has said, we are dealing chiefly with those sections of the Act which afford implied conditions and warranties for the goods purchased. The great flaw in the Act which has now declared itself to every eye is that the seller is quite free 409 to exclude himself from these provisions. More modern hire-purchase legislation has put this to rights, but in the field of cash purchases the old anomaly persists.
During the passage of the Trading Stamps Bill in your Lordships' House in 1964 I introduced an Amendment that the Sale of Goods Act protection should apply in the case of a transaction where stamps were exchanged for goods in accordance with the arrangements made by the stamp trading companies. In reply to my proposal, the noble Lord, Lord Drumalbyn, who at that time was sitting on the other side of the House and was a Minister at the Board of Trade, made the following remark:I think it would probably be almost the most difficult point to legislate on in advance of the consideration of the Merchandise Marks Act and the Sale of Goods Act, which are at present being considered by the Government. I would doubt whether it would be possible for us to include anything of this character in the present Bill. But I congratulate my noble friend on drawing attention to this difficulty, which I am sure is one we shall have to solve in the long run."—[OFFICIAL REPORT, Vol. 259, col. 418; 25/6/64]Then the noble Lord, Lord Drumalbyn, repeated his assurance that the problem raised in my Amendment would beconsidered in connection with the consideration of the Sale of Goods Act as a whole.It is perhaps worth mentioning that those assurances were given almost exactly two years ago, and as a result of those assurances which I was given by the noble Lord when he was on the Government Front Bench, I withdrew my Amendment.
Again, we discussed the matter in a House of Lords debate on the Protection of Consumers (Trade Descriptions) Bill, which the present Government brought in and which I so bitterly regret they have dropped at the present time. In this Bill a member of my Council, the noble Lord, Lord Peddie, mentioned that Section 17 of the Merchandise Marks Act 1887 allows the seller to contract out of an implied warranty.
We argued that in the new Bill this right to contract out should be prohibited. I should like to give the House one example of the kind of guarantee that does a disservice to shoppers, to amplify those cases mentioned by the noble Lord, Lord Cohen of Brighton, in his speech. 410 It is given with Marconiphone radio and television sets. I would make it clear that this is no reflection on the products of this company, which are well known and are an established brand. This guarantee excludes the buyer's rights under the Sale of Goods Act, and indeed goes beyond this. The many exclusions of the supplier's liability are too numerous to mention here, but they include no liability for valves or cathode ray tubes, nor for labour costs for repairs; the dealer's delivery costs are not included, nor a variety of other matters. It ends with a rather extraordinary but perhaps minor provision which declares that the guarantee is effective only in this country and that if the article is taken out of the country the guarantee becomes void. One can only wonder if people who holiday abroad with their transistor sets realise this.
This particular guarantee is discussed in an article in the monthly periodical, which my Council produces, called Focus. This is the kind of guarantee which sweeps aside virtually all the buyers' natural rights in the small print, and at the same time describes itself as a "guarantee". It offers little in return, and what it does offer the company would be required to do in any case—and more besides—if the provisions of the Sale of Goods Act had not been carefully excluded. This is, indeed, sailing under false colours. It is clearly dishonest to call such a restrictive document a "guarantee". One wonders, indeed, whether it is not the manufacturer who is guaranteeing himself against any possible claim by the buyer.
It is unfortunate that the word "guarantee" has gained so much currency. I say this because this Bill will, of course, prohibit exclusion clauses from all contracts for the sale of goods, where goods are bought from someone who trades in those goods. The fact that these "guarantees" or "warranties" are so often handed out with articles has obscured in many people's minds that the law confers adequate rights on the buyer quite apart from any document he may receive from the seller. The retailer who stamps his bill on the back with exclusions of liability for the goods he sells will be wasting his time, just as much as the manufacturer who puts exclusion clauses in his guarantee, if this Bill becomes law. 411 There has also been confusion as to whether a manufacturer's guarantee can bind the buyer; and this is indeed a lawyer's playground, no doubt because the circumstances vary with each case. I am sure the noble and learned Lord, the Lord Chancellor will give us some enlightenment on these matters. What is perfectly clear is that this Bill will govern whoever is the seller in law, and the Bill ensures that the buyer will get his remedy from that seller. Guarantees, whoever may continue to provide them, will then be able only to add to and not detract from the buyer's rights, which will be safeguarded by this new Bill.
This is only one sector of the field in which guarantees flourish; yet there are millions of radio and television sets in use in this country. The noble Lord has indicated all kinds of things which are sold throughout the country on the same terms. The extent to which people are deprived of their natural rights in the market place by means of these documents adds up to a formidable abuse. I will give just one further example, from the survey which was conducted by my Council, to illustrate a further point. Here is a man who bought a new car and within a few weeks it showed a number of faults which went far beyond those minor defects which one has come to expect in a new car. He took the matter to his local chief inspector of weights and measures, who wrote to the manufacturers on his behalf pointing out that the car might well be found to be not of "merchantable quality". The makers replied that, as the chief inspector had read their warranty, he would appreciate that they were unable (and this is the word they used) to replace the vehicle. Although the makers had gone some way towards satisfying the customer in this case, there is clear proof that manufacturers do invoke their guarantees against customers, and it seems that their freedom from liability has become an accepted fact of life to them.
One hopes it is not too old-fashioned to suggest that when one pays many hundreds of pounds for an article the seller is under a duty to see that the object one is buying works. No amount of talk about the special difficulties involved in complicated machinery can obscure the fact that one has paid a 412 price for such a piece of complicated machinery and one expects it to work.
We know that the Law Commission is labouring over the reform of the whole of the Sale of Goods Act; Lord Cohen of Brighton's Bill is concerned only with Sections 13 and 14, which deal with implied conditions and warranties. It is fairly clear that the results of the Law Commission's work will not be translated into effect for many months, or even perhaps years; meanwhile the present harm done to consumers will not be stopped. There is no reason, in my opinion, why Lord Cohen of Brighton's limited Bill should not step in meantime to clear up the field of guarantees and standard contracts, even if this only runs for a year or two and is overridden by a completely reformed Act. Here I would agree with the noble Lord, Lord Drumalbyn. I hope this Bill will apply to Scotland as well as England.
Consumers have suffered very much in a real sense from chronic delays in putting matters to right. We have been put off both by the previous Government and other Governments, and I hope noble Lords will agree that if these delays have caused a good deal of impatience it has been justified impatience, as I have tried to show in my speech. I hope very much that the Government will no longer willingly allow the present unsatisfactory state of affairs to continue indefinitely. It will be a real boon to consumers who buy goods for cash to feel that they have been given the same necessary protection as Parliament has given to those who acquire goods on hire-purchase. It is a rational and necessary step, and I urge on the Government, and on the noble and learned Lord the Lord Chancellor, to accept this small but very important Bill.
§ 3.55 p.m.
§ BARONESS BURTON OF COVENTRY
My Lords, as the House knows, this Bill gives effect to the main recommendations of the Molony Committee, Chapters 11 and 12. I should like, if I may, first of all to offer my congratulations to my noble friend Lord Cohen of Brighton both for the way he introduced this Bill and for what he said. I do not know how wise it is to say that I am in agreement with the noble Lord, Lord Drumalbyn, as he sits on the opposite Benches, when he said he was in 413 entire agreement with the principle, because this is my own feeling. I am well aware, as are the rest of your Lordships, that when one says one is in entire agreement with the principle, it usually means one has certain reservations. My noble friend knows I have a reservation and I will come to that at the end, if I may.
I expect the noble Lord, Lord Cohen of Brighton, knows, going back to the year of the publication of the Molony Committee's Report which was 1962, that we had a debate on the Report in your Lordships' House on November 14, 1962. If I would not be thought disrespectful, I should like to shorten the name of the Report of the Committee quite simply to "Molony", to save tedious repetition. If I may go back to November, 1962, and to the section dealing with guarantees—and I am sure those of your Lordships who are not particularly interested in Molony must be very wearied by constant quotations from the Report—obviously Molony can he progressive or otherwise according to what he is advocating or to what we who are speaking think. In common with the rest of us, I think certain of his recommendations were progressive and I think certain were defeatist, and I think that on guarantees Molony was completely and utterly defeatist. That is why I welcome very much what my noble friend, Lord Cohen of Brighton, has said this afternoon. Concerning the actual words on guarantees and the harm these can do, I think Molony left nothing to be desired because he said—and I quote:Most important of all the manufacturer may make himself the sole judge of whether or not there is a defect and whether or not it was inherent. The effect is to deny the purchaser any enforceable claim to have a defect made good free of cost.And the Report went on to say that the purchaser has spent good money for an article which has broken down for reasons which, if divulged at all, are shrouded in such a technical fog that he can neither understand nor verify them and which have arisen in the course of careful and reasonable use.
Obviously I am sure my noble friend and all your Lordships here to-day would take no exception to that description. What I took exception to in November, 1962, and take exception to to-day, and what I think my noble friend ought to 414 take exception to, is that Molony did nothing about it. Molony was utterly and completely defeatist. He did not give us any recommendation which would have dealt with this particular matter.
This present Bill is the Sale of Goods Bill 1966, and it comes almost exactly four years after the Report of the Molony Committee. If we go back further than four years, if we go back some seventy years, to 1893, to the Sale of Goods Act, I think it is very interesting that the Molony Report said that, with very limited exceptions, representations which had been made to them were to the effect that this Act of some seventy years ago provided the consumer with a fair and rational system of legal rights upon which to base a legitimate claim for redress. The limited exceptions to this will be found in paragraph 395 of the Report.
I think this was true. Unfortunately, what I believe was true also, and what I think it still true to-day, is that we consumers are too little aware of our legal rights. In addition to that, the difficulty, the cost and the uncertainty of enforcing them by court action deter us from making the attempt. I would also think that we are deterred from making the attempt whether or not the merchandise cost a lot of money. I do not know whether my noble and learned friend the Lord Chancellor will have anything to say on this when he comes to reply. I am sure he knows that we laymen have a feeling that to go to law can be quite expensive, whether or not we are right. If he can help us on that matter, I think every shopper in the country will be most grateful.
As my noble friend said, the Molony Committee received a great deal of evidence concerning exclusion clauses. Having read the Report fairly thoroughly, what I think is interesting is that all this evidence was critical. Nobody spoke up in favour of these exclusion clauses. As Lord Cohen of Brighton has indicated, this criticism was directed chiefly at the guarantee cards customarily issued by manufacturers of mechanical and electrical appliances of all types, and strong exception was taken to the practice adopted by many trades of excluding, or, as Lord Drumalbyn said, of purporting to exclude, the statutory conditions and warranties.
415 On this particular aspect the Molony Report was quite categorical, and at paragraph 396 stated:The common purpose of all these arrangements is to deny to the consumer his statutory rights in place thereof to entitle him to 'service' for a limited period or to the repair or replacement of defective parts, usually subject to the proviso that he pays the labour charges and the cost of carriage".Molony was in no doubt as to the opinion on this particular matter.
This brings us to quite a difficult problem: how far can the consumer be protected? Indeed, how far should the consumer be protected? I suggest that a shopper should be able to rely on the shopkeeper or the seller to the extent that articles sold by hint are fit for purpose and are of reasonable quality. I say "reasonable quality" because, whilst I should not expect that the cheaper version should be of the same quality as the more expensive version, I should expect all versions to be fit for purpose. I should have thought there was no argument about that at all. Hence, I would suggest that any consumer anywhere, buying any goods at all, has an inalienable right to two things: merchantable quality and fitness for purpose. I think that that proposition would be acceptable to all sides of your Lordships' House.
Molony suggested that their recommendations on this particular aspect should be made to apply to the consumer trade only—it is recommendation 103 at page 307. But they had great difficulty in suggesting any suitable definition of "the consumer trade", as indeed the House will see, if your Lordships look at paragraphs 432 and 465 to 470. In Clause 1(1) of the Bill which we are discussing today this particular difficulty is, as it seems to me, circumvented by providing that the Bill shall not apply to any sale in which the buyer is a body corporate. I am not too knowledgeable on this particular aspect, but I believe that this could give rise to anomalies. One example cited to me, and on which my noble friend might care to comment at a later stage, or on which the noble and learned Lord might give us his opinion, is the case in which one shopkeeper happens to have formed his business into a company, and another carrying on an identical business still runs it in his individual capacity. It has been 416 suggested to me that apparently the former will have no claim against his suppliers although he will be liable to claims by his customers, but the latter will be able to claim against his suppliers. However, as we all know, anomalies can always be found, and it seems to me that this Bill, as put forward by my noble friend, probably provides a more satisfactory demarcation line than any suggested in the Molony Report.
As the House will know, at the time when the Molony Committee reported, in July, 1962, the Hire-Purchase Act 1938 prevented contracting-out of some, but not all, of the conditions and warranties covered by the present Bill. Since then, the Hire-Purchase Act 1964, the relevant provisions of which now appear as Sections 17 to 19 of the Hire-Purchase Act 1965, has made it impossible in the case of hire purchase to contract out of any of these conditions or warranties. Therefore, what my noble friend is trying to do with this particular Bill is to bring the law of sale into line with the law of hire purchase.
My main criticism of the Bill is that its provisions ought really to be left over until a general review of the Sale of Goods Act has been completed. In referring to the Sale of Goods Act 1893 at the beginning of my remarks, I said that it was noticeable that both the Molony Committee and those making representations to it had felt that it was a good Act. In fact, the Report goes on to say that this Act has given clarity and certainty to the law affecting transactions of everyday occurrence. But there is another side, as one would expect, when one realises that we have moved from 1893 to 1966. At paragraph 473 Molony states, referring to this Act of 1893:It has precluded the judicial development that has advanced most branches of the law since Victorian days. While the law has stood still new selling methods have been introduced and an infinity of new types of complex goods have appeared on the market. The modern retail purchaser may find himself in his perplexity and ignorance at grave disadvantage".Hence, I suggest that the need for review is recognised.
I support what my noble friend is trying to do. What I should particularly like is for the noble and learned Lord the Lord Chancellor, when he comes to reply, to say that the Government had it in his individual capacity. It has been 417 in a comprehensive way. If my noble friend succeeds in pushing the noble and learned Lord in that direction—if any such push is needed, and I hasten to say that I do not think it is—I shall be more delighted than I am now that he has introduced this Bill. I am glad to support the work that he is trying to do.
§ 4.9 p.m.
§ LORD CHORLEY
My Lords, I should like to associate myself warmly with everything that has been said about these exclusion clauses, and I particularly find myself in close agreement with the speech of the noble Baroness, Lady Burton of Coventry. I entirely agree with what she said about the Molony Report on this problem. Indeed, I do not think it is any sort of secret that I wrote that part of Law Reform—Now in which the Molony Report on this particular point was heavily criticised—at least, I should like to think that I criticised it heavily. And when I listened to the speeches of my noble friend and of the noble Baroness, Lady Elliot of Harwood, I found that they are strongly of the same view. But, having said that, I think it would be a great mistake if this Bill were to be passed at the present time. There is another Bill in relation to misrepresentations, which is in much the same field as this one; and I was much in agreement with what was said about it by two of the noble and learned Lords on the Cross Benches who are members of the Appellate Tribunal of this House.
It seems to have been overlooked, in connection with these recent Bills, that only a year ago we set up the most important body ever to be set up, the Law Commission, a body which is specifically dealing with this very point. This was referred to by the noble Baroness, Lady Elliot of Harwood, in her speech. I do not agree with her that it would be a good thing to alter the law for two years in regard to this particular matter. That would create chaos. Contracts last for a long time, and it would he quite absurd, in my respectful submission, to alter the law in this way in respect of an enormously wide range of some of the most important contracts to the ordinary citizen. That would inevitably lead to chaos. How are you going to deal with contracts made this year which are to operate over five years if you alter the law for only two 418 years? Would it not be very much better to wait for the Law Commissions' views on this matter? I imagine that they have a brilliant Parliamentary draftsman working with them, and I expect that they will produce this in the form of a Bill.
The noble Lord, Lord Drumalbyn, made some very pertinent criticisms of the Bill which is before the House to-day. Those criticisms ought to be examined very carefully before we alter the law on this important matter. I agree with everything that has been said about the importance of getting this matter into order as quickly as possible, but the really important thing is that it should be got into order and should not be dealt with, so to speak, in mouthfuls.
I do not know whether the noble and learned Lord the Lord Chancellor has been in communication with the Law Commission on this question: I should be interested to know their views about it. It may be that the noble and learned Lord, who has power under the Act to give them directions in respect of particular matters, would indicate to them that in his view, and in the view of your Lordships' House, this matter is of such urgent importance that they might give it A.1 priority and possibly produce a Bill within the next Parliamentary Session which can be gone into thoroughly, so that the whole matter may be effectively cleared up. I hope that something of that kind will be possible, because I have been in on this business, as a law reformer, as an officer of the Haldane Society, and as a member of the Society of Labour Lawyers, for many years. It would be most unfortunate if we were merely to nibble at this important problem in the way proposed by this Bill, when we can get it properly and effectively cleared up by the Law Commission, a body which was established only a year ago for the purpose of dealing with just this sort of problem.
§ 4.15 p.m.
§ THE LORD CHANCELLOR
My Lords, the Government welcome the opportunity afforded by my noble friend Lord Cohen of Brighton's Bill to discuss the very important question of exclusion clauses in contracts for the sale of goods. There is no doubt that, as the Molony Committee said, in the 12th Chapter of their final Report, exclusion clauses in contracts for the sale of consumer goods 419 cause considerable dissatisfaction and sometimes result in the purchaser unwittingly giving up valuable rights under the Sale of Goods Act in exchange for a manufacturer's guarantee which in practice may not be of much assistance to him.
As we lawyers all know, from cases we have had to deal with, there are, unfortunately, manufacturers who deliver a beautiful-looking guarantee when the main, if not the sole, object is to take away from the purchaser of the goods rights which he would have had if he had not accepted the guarantee. The Government, therefore, are not out of sympathy with Lord Cohen of Brighton's aim. Consumer protection is a matter to which they have attached considerable importance, as is shown by the fact that last Session they introduced a very extensive Protection of Consumers (Trade Descriptions) Bill, which would have not only greatly enlarged the field covered by the existing merchandise marks legislation, but also introduced some completely new protections for the consumer—for example, extension of the legislation to cover services, and new powers to require the compulsory labelling of goods. This extension was recommended by the Molony Committee, who thought that it should be given priority over the sale of goods. They carefully considered the question of priority as to which ought to be dealt with first, trade descriptions or sale of goods, and they recommended that trade descriptions should be dealt with first. The Government have accepted that advice and intend to introduce a Bill dealing with trade descriptions, like the one which was before the House when the last Parliament was dissolved.
If I may respectfully say so, I thought that the noble Baroness, Lady Elliot of Harwood, was perhaps a little hard in saying that the Bill had been dropped. It was being strenuously pursued in this House when there came a General Election. The Government have not dropped the Bill at all; they are certainly pursuing it. The exact date for its introduction must, of course, depend on the state of the Parliamentary programme. But however sympathetic they may be to the object of the Bill, they take the same view as the noble Baroness, Lady Burton of Coventry, and the noble Lord, 420 Lord Chorley: that having properly and advantageously brought out into the open the serious questions arising from exclusion clauses in contracts for the sale of goods, it would be better if my noble friend Lord Cohen of Brighton did not attempt to put his Bill on the Statute Book at this stage.
As has already been pointed out by, among others, the noble Lord, Lord Drumalbyn, whose knowledge and experience in this field are so extensive, the whole question of exclusion clauses covers a much wider field than the sale of goods, and it is important that, so far as possible, any restrictive legislation should follow uniform and consistent principles. It is a field in which piecemeal legislation should be kept to a minimum, and with the agreement of Ministers concerned the Law Commission and the Scottish Law Commission have now set up a Joint Working Party whose terms of reference are as follows:To consider what restraint, if any, should be imposed on the freedom to rely upon contractual conditions exempting from, or restricting, liability for negligence or any other liability which would otherwise be incurred, having regard in particular to the protection of consumers of goods or users of services".The subject of my noble friend Lord Cohen of Brighton's Bill falls fairly and squarely within the terms of reference of the Law Commission's Working Party.
When the noble Lord first informed the Ministers that he had in mind to introduce this Bill the Law Commissioners were consulted about its possible repercussions on their operations, and both law Commissions have said that it would be embarrassing to them if their possible conclusions should be prejudiced by legislation on a narrow front. Therefore, the Government hope that, having obtained a Second Reading for the Bill, my noble friend will think it right not to pursue it further. He is, if I may say so, attempting to implement one part of the Molony Committee's recommendations on the sale of goods, but what his Bill is doing is to implement one part without touching the recommendations which went to the positive obligations arising out of a contract of sale. For example, it does not remove the limitation on the circumstances in which merchantability is implied. If Molony is to be implemented, these should be tackled before, or at least at 421 the same time as, the recommendations dealing with the exclusion of liability.
Apart from these considerations of principle, there are a number of respects in which the noble Lord's Bill could not, on its merits, be commended to the House. The first has already been adverted to by the noble Lord, Lord Drumalbyn, and I think by another Member of your Lordships' House—namely, that the Molony recommendations, as appears from paragraph 435, were aimed at consumer sales. The Molony Committee suggested, in paragraph 437, that in this respect the law should be the same for consumer sales as it is for hire-purchase contracts, and that is what my noble friend's Bill seeks to do. But it does so not only for consumer sales but for all sales below £2,000, and whereas £2,000 may be a rough and ready limit so far as consumer hire-purchase contracts are concerned, to distinguish them from commercial ones, it is on the face of it a much less suitable criterion for the sale of goods.
There must be a great many commercial sales of goods made between traders for articles worth very much less than £2,000. Nor would it altogether meet the case if the £2,000 limit were simply lowered, because then one would cut out a great many genuine consumer sales, and, after all, the middle range of motor vehicles. There is also, of course, the question of the body corporate, to which the noble Baroness, Lady Burton of Coventry, referred. In fact, the problem of finding a satisfactory definition of "consumer sales" is difficult and will need a great deal of consideration.
Then, secondly, as the noble Lord, Lord Drumalbyn, pointed out, the Bill does not have any application to Scotland. The Molony Committee, in paragraph 438, recommended that no distinction should be made between the law of Scotland and the law of England in this respect. The Sale of Goods Act is, of course, an Act which applies to Scotland, but the Bill amends only the law of England and its application to Scotland would require much further consideration.
Thirdly, there are, perhaps, lesser points on which the Bill departs from the Molony recommendations. For example, the Molony Committee, in paragraph 453, 422 recommended that in certain conditions contracting out should be freely permissible where the sale in question is a sale by auction. This recommendation may require further examination, but the Bill makes no special provision for auctions.
Fourthly, Clause 3 of the Bill does not fully reproduce the Molony recommendations concerning contracting out of the implied condition of the merchantability of second-hand goods. As appears from paragraph 446 of the Report, the Molony Committee took into account the fact that consumer sales of second-hand goods are not usually in writing; yet under Clause 3 the right to exclude liability for a breach of this condition is confined to contracts in writing.
In a sense, some of these are, perhaps, Committee points, but as the noble Lord, Lord Drumalbyn, said, this is a very complex field and I think that these points are sufficient to show that, if the Government thought that the moment was opportune to legislate in this restricted field, this Bill would have to be radically amended. However, quite apart from any consideration of detail, the Government's opinion is that their proper course would be to show their sympathy with my noble friend's objects by recommending to the House that the Bill should be given a Second Reading, but at the same time to advise my noble friend not to proceed further with the Bill. In substance, of course, this advice is the same as the two principal grounds already given by the noble Baroness. Lady Burton of Coventry, and the noble Lord, Lord Drumalbyn—namely, in the first place, that it is not desirable, if it can be avoided, to prejudice the operations of the Law Commission's Working Party; and, in the second place, that when the Molony recommendations on the Sale of Goods Act are implemented, they should all be dealt with at the same time.
Might I add just two other points? I know that my noble friend Lord Cohen of Brighton is nothing if not a realistic man, and I would venture to remind him that there are now, I think, 28 Private Members' Bills already in the queue in another place, of which not more than about five, I suppose, can possibly reach the Statute Book this Session. It would, of course, he possible—and a course which might commend itself greatly to some Members 423 of your Lordship's House—for the Government to devote this Session entirely to Private Members' Bills, but I am afraid that that is not a course which any Government are likely to take.
Secondly, may I say that I think the composition of the Law Commission's Working Party shows how many interests have to be considered, and what practical matters have to be taken into account. The joint chairmen will be Lord Kil brandon, who is the chairman of the Scottish Law Commission, and Mr. Andrew Martin of the English Law Commission, and there are included representatives of the Scottish Office, the Confederation of British Industry, the Faculty of Advocates, the Law Society of Scotland, the Board of Trade, the Association of British Chambers of Commerce, the Treasury Procurement Policy Committee, the Bar Council and the Law Society, and also I am very glad to say, Mr. Gordon Borrie of the Consumer Council and Mrs. Beryl Diamond of the Consumer Council.
May I say, in conclusion, how much the Government appreciate, and we all appreciate, the work which for so long has been done in this field by the Consumer Council? Due to their efforts, I think, large numbers of reputable manufacturers have already given up the kind of clause to which we so much object, and I hope that the discussion which has taken place in your Lordships' House this day may contribute to that end.
My Lords, before the noble and learned Lord resumes his seat on the Woolsack, may I say that I am not at all clear what happens if you contract out of a guarantee, or attempt to contract out of it. I listened very carefully to try to get some elucidation of that point. But if you can merely contract out of one of these so-called guarantees, will this not to some extent solve the problem?
§ THE LORD CHANCELLOR
My Lords, normally, as for example in the motor trade, the guarantee does not form any part of the contract. You sign a contract with the dealer and then the manufacturer sends you the guarantee. The thing to do is to send it back.
§ 4.27 p.m.
§ LORD COHEN OF BRIGHTON
My Lords, may I just add to that reply, that 424 there are certain motor manufacturers who will not supply your car unless you accept the guarantee, which is most unfortunate?
I want to thank your Lordships, and particularly the noble and learned Lord the Lord Chancellor, for the kindly and courteous way in which you have dealt with this matter this afternoon. Obviously, I am not a lawyer, nor am I particularly skilled in the legal profession, but it seems quite clear to me that, basically, your Lordships agree with the principle of the Bill The question is: is it wise to press for the Bill to be proceeded with now, or shall we accept the Second Reading on the understanding—and I hope it is on the understanding—that as soon as possible we shall have this comprehensive legislation?
As your Lordships know, I have had assistance and a great deal of help from the Consumer Council, and what I should like to do this afternoon, if your Lordships agree, is to accept the position and the Second Reading, and then have an opportunity of discussing the matter with the Consumer Council, who, as the noble and learned Lord has said, have two members on the Working Party which is going to deal with this matter.
There are a number of points with which I should like to deal, and a number of arguments which have been put forward and which I believe I could blow sky-high. But that would be just nonsense and would get us nowhere, and, obviously, if the Bill were to go forward, most of the matters could be dealt with by Amendments in Committee. But if we are quite sure that this evil—and I think it is an evil—and the general problem of consumer protection are really going to be tackled despite the very heavy programme of legislation which, as we all know, faces the Government—and, after all, this was first mooted in 1938 when Ellen Wilkinson had a go at it—and if we can be assured that what we have heard this afternoon will really light a spark that will get the thing going, so that this matter of consumer protection can be dealt with at a reasonably early date, then I feel that this debate will have been of great value.
I should therefore like to accept the courteous suggestion of the noble and learned Lord the Lord Chancellor. Mind 425 you, I felt very nervous indeed when I knew that I was coming up against the noble and learned Lord, because I had heard of his prowess in this House before and have listened to Members being very kindly and very generously but very efficiently dealt with, and I knew that I should be the loser in any fight with him. Nevertheless, I think we have voiced the need for the matter to be dealt with, and I hope that the debate will have the effect of setting the Government on the road towards dealing with this and the other points concerning consumer protection. Therefore, my Lords, I suggest, if your Lordships agree, that we give this Bill a Second Reading, and then I shall have an opportunity of discussing the matter with the Consumer Council.
§ On Question. Bill read 2a, and committed to a Committee of the Whole House.