Consumer Guarantees Bill

HL Deb 19 June 1990 vol 520 cc800-19

7.42 p.m.

Baroness Ewart-Biggs

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee. —(Baroness Ewart-Biggs.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD HAYTER in the Chair.]

The Deputy Chairman of Committees (Lord Hayter)

I should point out that Amendment No. 1 is not correctly printed on the Marshalled List but that it is on the supplementary list.

Lord Williams of Elvel moved Amendment No. 1: Before Clause 1, insert the following new Clause—

("Part I The Consumer Guarantee

For the purposes of this Act, a Consumer Guarantee is a guarantee whose minimum terms, as regards any product in relation to which it is given, are as follows—

1. (a) the guarantor will repair, or procure the repair of, any defect in the product unless the defect was caused by—
1. (i) misuse of the product by a consumer;
2. (ii) failure to maintain or service the product reasonably; or
3. (iii) an act or default of any person (not being the guarantor or a servant or agent of the guarantor), or a cause independent of human control, occuring after the product has left the control of the guarantor.
2. (b) if the product is defective, the guarantor will either—
   1. (i) provide the consumer with the use of a comparable replacement product; or
   2. (ii) compensate the consumer for any reasonable expenses and inconvenience arising from any loss of the use of the product,
   if the guarantor does not repair the product within four relevant days (or in the case of a motor vehicle, two relevant days).
3. (c) in exchange for the product, the guarantor will either—
   1. (i) pay the consumer a refund consisting of the sum paid for the product on its supply to the consumer and any related part exchange allowance; or
   2. (ii) provide the consumer with an equivalent replacement product,
   if the number of relevant days applying to the product (whether in respect of the same defect or two or more different defects) during any one twelve month period of the Consumer Guarantee exceeds twenty-one.
4. (d) the guarantor will provide these remedies free of charge, for a period of at least twelve months beginning with the date on which the product was first supplied to a consumer within the terms of the guarantee.
5. (e) the guarantor will be responsible for collecting the product from the consumer and returning it (or a replacement) to the consumer.
6. (f) the product shall be at the guarantor's risk from the time when he or his nominee receives notice in accordance with section 1(j) below until the time when—
1. (i) the product is returned repaired to the consumer, or
2. (ii) the consumer receives an equivalent replacement product, as the case may be.
7. (g) when making a refund or providing a replacement product under subsection (c) above, the guarantor may make a charge for use of the product, subject to the following conditions—
1. (i) the charge must be reasonable having regard to the nature of the product and all other relevant circumstances;
2. (ii) except in the case of a motor vehicle, the charge may be made only in relation to a Consumer Guarantee given for more than the minimum period of twelve months, and must be directly attributable to any use of the product after that period and not before;
3. (iii) in the case of a motor vehicle, the charge may relate to any use of the motor vehicle after the first six months of the Consumer Guarantee or after the first 6,000 miles of use.
8. (h) when making a refund or providing a replacement product under subsection (c) above, the guarantor may make a reasonable charge for any significant physical damage to the product other than damage resulting from fair wear and tear.
9. (i) if the consumer shows that the product was under or awaiting repair by or on behalf of the guarantor for any period of time, the period of the guarantee will be extended by that period of time.
10. (j) the consumer may notify a defect orally or in writing, and may do so either to the guarantor, or to any person the guarantor may nominate.
11. (k) "relevant" days applying to a product are days after the date of notification of a defect in the product up to and including the day on which the product is made available to the consumer after repair, not counting—

1. (i) any day lost for the purposes of repair as a result of the unreasonable behaviour of the consumer; and
802
2. (ii) any Sunday, Christmas Day, Good Friday or a day which is a bank holiday under the Banking and Financial Dealings Act 1971 in the part of the United Kingdom where the product is to be made available to the consumer after repair.")

The noble Lord said: I move this amendment in the words as printed on the supplementary list. It may be for the convenience of the Committee if I speak also to Amendments Nos. 2, 3, 4, 5, 11, 13 and 14, all of which are consequential on Amendment No. 1.

The noble Baroness, Lady Oppenheim-Barnes, and I both said on Second Reading that we were unhappy that the Bill had come to this Chamber with a Long Title which mentioned consumer guarantees but that in the text of the Bill as drafted there is no reference to consumer guarantees. Therefore, I move this amendment, supported by the noble Baroness, Lady Oppenheim-Barnes—alas, she is not able to be here because, as many noble Lords will know, she has had an operation—in order to put a consumer guarantee back into the Consumer Guarantees Bill.

The amendments to which I am speaking attempt to meet the objections raised by various government spokesmen when the Bill was discussed in another place. Perhaps I may recapitulate on the purpose of a consumer guarantee. It is designed to encourage non-price competition. The Committee may be aware that competition can take two forms—price competition and non-price competition. Price competition is easy to define. It is a question of whether goods are sold at price X, price X minus one or price X plus one. Non-price competition is rather more difficult to define. Nevertheless, the Committee will be aware that non-price competition can be just about as important as price competition. Non-price competition can be on after sales service. It can be on guarantees, as we shall discuss, or on quality.

This consumer guarantee, as I put it forward, is optional. I wish to stress that. There is no compulsion on any business to provide the guarantee contained in the amendments. It is a method of providing to the consumer a guarantee, if the producer of the product wishes to do so, which will give him confidence, in purchasing the product, that, if it is defective he can have recourse to a proper method of either repayment or replacement of the product.

Amendment No. 1 spells out the minimum terms of the guarantee if it is offered. Again, I emphasise that there is no compulsion on anyone or any business to offer the guarantee. Indeed, better terms may be offered by some producers. Alternatively, businesses may offer no guarantee at all. However, at least the consumer will understand that the guarantee, if it is offered, has the specifics which are spelt out in this rather long and, I am afraid, rather detailed clause which I have put before the Committee.

Amendment No. 2 is, I believe, unexceptional. It simply implies that product guarantees must be in writing rather than verbally, by implication, or any other form. Amendment No. 3 relates to the enforceability of guarantees. This is a somewhat complicated question and I do not want to weary the Committee in the dinner break for too long, but clearly a guarantee has no effect unless it is enforceable. The amendment that I, together with the noble Baroness, put forward seeks to provide a method of enforceability which I believe will be acceptable to the Committee.

Amendment No. 4 recognises that the terms of the consumer guarantee may well have to be varied as time goes by. We do not know—perhaps we cannot know—what the effect of this will be and how it will operate in practice. Therefore, instead of requiring primary legislation to vary the terms of the guarantee—for example, modifying the minimum terms, determining the charge or requiring certain symbols or logos to be put in place if a guarantee is offered—Amendment No. 4 seeks to give the Secretary of State powers to make regulations to that effect. Noble Lords will no doubt regard those powers as being unexceptional under normal parliamentary procedure.

Amendment No. 5 is the definitions clause. I draw the Committee's attention particularly to the definition of "product" which has the same meaning as in Part I of the Consumer Protection Act 1987". As the Committee will remember from when we debated it as a Bill, that Act introduces the notion of product liability. It was introduced as a result of a European Community directive. The product that was defined by that part of the Act seemed to us to be the same animal, if I may describe it as such, as that which we shall be dealing with in terms of the guarantee that I have put forward today. The matter is very complicated. I do not want to weary the Committee with a full description of what is a product under Part I of the Consumer Protection Act. I am sure that all Members of the Committee will have looked at that definition. Therefore, I can pass on from there.

Amendments Nos. 11, 13 and 14 are consequential on the main amendments about consumer guarantees. They simply spell out some of the drafting amendments that will have to be made to the Bill were the Committee to accept the major amendments. In sum, these amendments deal with the question of competition. It would be wrong if I tried to present them as being in some way evidence of consumerism. They are not. They are designed to make sure that a person who buys a product has the opportunity to know whether a product carries a guarantee; in other words, whether or not there is a quality guarantee. It is as simple as that.

Before I leave these amendments, perhaps I may reply to some of the points made by the Retail Consortium which, in general, is supportive of the guarantee, but there are one or two points on which it has some doubts. The first point is the time limit in paragraph (b) in the new clause. The Retail Consortium believes that the best guarantee that business is able to offer is one where if a new product is defective the consumer has no rights at all during the first fortnight that the product is in for repair. That view was rejected in Committee in another place.

The next problem is that of who collects the product which is referred to in paragraph (e) of the new clause. That provision did not originally figure in the Bill presented to another place by my honourable friend Mr. Martyn Jones. Nevertheless, it was accepted by the Standing Committee in another place. We believe it is a sensible way to set about things.

Paragraph 1(f) of the new clause deals with the product at the guarantor's risk. Again, that was an amendment accepted by the Standing Committee in another place. I hope that the Committee will feel that what I call the slightly minor objections of the Retail Consortium can be answered in that manner. Nonetheless, I claim for the series of amendments no God-given right in drafting. If the Government were prepared to take these amendments away and, if necessary, re-draft them or consider how they might be more felicitously phrased, then I am sure that both I and the noble Baroness, Lady Oppenheim-Barnes, will have no objection at all.

It is time that the Committee decided whether or not the Consumer Guarantees Bill should have a consumer guarantee in it. It is in that spirit and, I hope, with the support from all sides of the Committee, that I move this amendment.

Lord Mottistone

I am advised by the British Radio and Electronic Equipment Manufacturers' Association, the CBI and the Retail Consortium. I take a somewhat different view of what it has said to me from that which the noble Lord, Lord Williams, said was conveyed to him. I hope very much that this move to reinstate parts of the Bill that were taken out in another place will not be proceeded with.

The amendments proposed by the noble Lord, Lord Williams, and my noble friend Lady Oppenheim-Barnes, would reintroduce the consumer guarantee provisions that were withdrawn by the Bill's promoter in another place though with some modifications. There appears to be no attempt to reintroduce the list of specified goods to which the consumer guarantee applied and which was present in the Bill as originally published.

It has been argued by the noble Lord, Lord Williams, that the offer of a consumer guarantee is therefore entirely voluntary and that there is no obligation on any producer of goods to offer the precise terms set out in these amendments. If that is the case, which the noble Lord, Lord Williams, has told us it is, then why bother to set out in legislation such detailed terms? In my view, these modifications do not alter my view that, voluntary or not, these provisions are unworkable and unenforceable. They would give rise to unnecessary conflict between consumers, retailers and manufacturers.

In that connection the Retail Consortium says that it fears that the terms of the consumer guarantees, as contained in these amendments, may be so onerous and impracticable that they will be offered by very few retailers or producers. The consumer guarantee would then risk confusing the customer who may have heard of it but does not see it offered. I think that the view of the Retail Consortium is essentially against these amendments as they stand whatever it may think about the consumer guarantee theory in general.

It is my firm belief that there should be fundamental statutory protection for consumers that applies to all products regardless of their type or character. There is already a basis in law for that protection in the Sale of Goods Act 1979 which the Consumer Guarantees Bill, in its present form, sensibly seeks to amend. The Bill implements recommendations made by the Law Commission on the sale and supply of goods. I do not think that anybody is questioning the parts of the Bill which are not being amended with the amendments that we are discussing.

In seeking to reintroduce the consumer guarantee provisions originally in the Bill, the amendments now before this Committee would overturn important Law Commission recommendations and conflict with the provisions of the Sale of Goods Act 1979. They would establish what amounts to a new, long-term right to reject goods and a rigid statutory framework for a specific form of consumer guarantee without proper regard for well-established relationships between manufacturers, suppliers, retailers and consumers.

In addition, the amendments take no account of the inevitability of harmonisation of consumer guarantee provisions within the EC. It would seem that the government amendments before us will meet the noble Lord's first reason for introducing these amendments and, indeed, his closing reason; namely, that because the Bill is called a Consumer Guarantees Bill, it should contain consumer guarantees. As I see it, the government amendments will remove that title. The main purpose of his amendments is met if the Committee accepts the government amendments. I hope that the noble Lord. Lord Williams, will not proceed with the amendment and that having aired the subject, he will feel that is sufficient for the day.

Lord Meston

I support these amendments. They take the law beyond that which is applied to the sale of goods. For example, they give protection to people who are given goods rather than having bought them. As the noble Lord, Lord Williams, has said, they introduce a voluntary scheme which should raise standards. I recognise these amendments as a well-meant modified version of what caused the Bill to founder in another place. I assume from government Amendment No. 8 that the Government are against these proposals. My only concern is about the practical politics of these proposals.

In producing the original Bill, the National Consumer Council incorporated the draft Bill of the Law Commission relating to the sale of goods. I would hate to see them lost. I would hate to see both the baby and the bathwater disappear. The proposals from the Law Commission have been around for a long time and will benefit the consumer and the non-consumer alike. The consumer guarantee and the law on the sale of goods are not mutually exclusive. With respect to the noble Lord, Lord Mottistone, I disagree that they are in conflict; indeed, they complement each other. For that reason I support the amendments. I hope that the Government have thought again.

8 p.m.

Baroness Ewart-Biggs

I am grateful to my noble friend Lord Williams for presenting the amendments so clearly. I very much regret the absence of the noble Baroness, Lady Oppenheim-Barnes. I am sure that we all wish her a very good recovery from her rather serious back operation. However, the noble Baroness made clear her intentions in her Second Reading speech. Those intentions have been clearly reflected in the amendments before us and in the explanation given by my noble friend Lord Williams.

The points made by my noble friend and by the noble Lord, Lord Meston, were very powerful. My noble friend made it clear that, although the changes would meet the concerns expressed by the Government both in this Chamber and in another place, nevertheless they would bring back the spirit of the original Bill which set out to produce guarantees for consumers. He also made the important point that there would be no compulsion on companies, which was a point of real concern to the Government. There is little doubt that the amendments would produce safeguards and protection which would be welcomed by many consumers. I am sorry that the noble Lord, Lord Mottistone, was so clearly opposed to them. He said that he is advised by the Retail Consortium. He felt that there was no necessity for any greater protection for consumers.

The original Bill received an enormous amount of support from the public. In a poll conducted by the National Consumer Council 90 per cent. of those who were asked whether they would like protection against the ill-effects of buying shoddy goods said that they would like to have a consumer guarantee. The amendments do not reinstate the provisions of the original Bill but bring back the idea that has so much support from the public that people who buy shoddy goods should have some protection. That is of enormous importance. I urge the Committee to accept the amendment.

Viscount Ullswater

I regret the tabling of these amendments, which are a stripped down form of provisions which have already been rejected in another place. The sponsor of the Bill himself tabled the amendments to delete those parts of the Bill which related to consumer guarantees. I believed that he did so in a constructive spirit. I thought that, although he was understandably disappointed not to have the support of that House for the whole of his Bill, his view and that of his fellow Members of another place was that the remaining provisions, enacting the proposals of the Law Commissions, were of real value in themselves, representing as they do an extension to the rights of consumers. I was therefore profoundly disappointed by the tabling of these amendments which, if they are accepted, will serve to frustrate the progress of these reforms. Their sponsors should be well aware that they will not command the support of the Government in another place.

These new provisions would raise many fundamental issues of policy as well as basic legal and technical drafting points. The number of amendments proposed to this Private Member's Bill in another place showed the difficulty in resolving against a tight time schedule the complex problems which arise.

The consumer's central concern is that a purchased product should be of a satisfactory standard and that, if it is not, he should be able to get satisfaction from someone. These cut-down provisions propose a statutory framework which offers him different remedies in different circumstances against different defendants in the manufacturing and supply chain. We would need to be persuaded of the wisdom of that appoach. The Government consider the Sale of Goods Act to be the proper framework for these issues. It covers all products and all consumer transactions and the consumer's rights do not depend on the presence or absence of a guarantee. Amendment to the Act as proposed in the Bill which is before us for consideration is the best way forward.

The core of the Government's objection to the former provisions on consumer guarantees was that they created a long-term right of rejection through the refund and replacement remedies in paragraph (c) of this first clause. Our concerns about this approach are on record. By providing, in effect, for full refunds for used goods it does not strike a balance between consumer and producer or supplier interests and it creates commercial uncertainties which would be reflected in higher prices. I acknowledge that the sponsors of this approach have sought to find a compromise with the Government in the amendments which have now been tabled. In particular, we welcome the fact that the provisions now before us no longer contain an obligation to state whether a consumer guarantee is given with certain products. However, the provisions still contain many significant defects and we remain sceptical about the merits of the approach as a whole.

Coming on to the detail of the first of the proposed new clauses, subsections (1)(g) and (1)(h) attempt to redress some of the imbalance in the long-term right of rejection approach. Paragraph (h) allows deductions for physical damage other than fair wear and tear. Paragraph (g) permits a reasonable charge in some circumstances for use but, other than in the case of motor vehicles, no charge can be made for the first year of the guarantee. In the case of motor vehicles, a charge may be made after the first six months or after the first 6,000 miles.

These provisions further expose the problems inherent in this approach. How would such deductions be calculated? What is to happen when there is a dispute between the consumer and the guarantor about whether the proposed charge is reasonable or whether there has been significant physical damage or, indeed, whether the damage has resulted from fair wear and tear? Faced with a large deduction for use or damage, the consumer could be left with the unenviable choice between a defective product that the guarantor cannot or will not repair and a partial refund which is too small to allow him to buy a replacement. This would dilute the additional benefits, over and above his sale of goods rights, that the consumer guarantee is intended to bring.

The proposed paragraphs (b) and (c) deal with the provision of replacement products in some circumstances. Paragraph (b) refers to a comparable replacement product and paragraph (c) refers to an equivalent replacement product. What is, or may be, a comparable replacement product, and how does it differ from an equivalent replacement product? That is quite unclear and this would inevitably lead to disputes and ultimately to a considerable amount of litigation. For example, if a new car is purchased and a defect becomes apparent after six months and the defect is not repaired in the specified period, is a seven-month old car which is bigger than the defective car to be regarded as a comparable replacement? Or is only a six-month old car of the same model as the defective one and with a similar mileage to be regarded as a comparable replacement? Is an equivalent replacement product more or less like the product it is replacing than is a comparable replacement product? Those questions are unanswered.

Statutory provision for a long-term right of rejection and the creation of new refund and repair remedies becomes very complicated in the case where goods are bought under finance agreements. This leads to complex situations involving three or sometimes four parties, and the unpicking of such transactions creates particular difficulties. The provision of refunds presents the problem about how to strike a fair balance between the claims and interests of the consumer, the finance company and the manufacturer. This is particularly true in situations where the balance outstanding on the finance agreement exceeds the original purchase price. Under certain finance agreements, title to the goods remains with the finance company and there are practical problems in devising mechanisms to ensure that the finance company's interests are protected. The provision of replacements also creates bureaucratic problems for the finance company, although these are arguably of a less fundamental nature.

The proposals on consumer guarantees considered in another place attempted to address that issue although, as we made clear, the Government considered that the provisions were defective. Nonetheless, resolution of these problems is essential to the approach on consumer guarantees which some Members of this Chamber have advocated. A considerable number of consumer durables are purchased under finance agreements. I am therefore not reassured by the fact that the present amendments remain silent on this difficult issue.

These provisions would create a dilemma for consumers who would have to choose whether to pursue their Sale of Goods Act rights against the trader or their rights under a consumer guarantee against the manufacturer. They also raise a number of fundamental legal issues such as the relationship between the consumer's rights under the Sale of Goods Act and those under the consumer guarantee. For example, the circumstances in which his exercise of rights under one regime cause him to lose, wholly or in part, his rights under the other are not addressed. Subsection (4) of the proposed new clause appears to envisage that the consumer would retain all his rights under the Sale of Goods Act even when he exercises his rights under the consumer guarantee, but it surely cannot be intended that he should be able to recover in full under both regimes.

I have one further point to make on Amendment No. 3, which relates to general provisions on product guarantees. It is not entirely clear what subsection (1) of the proposed new clause means. However, it appears to go further than to provide that a guarantee should be enforceable against the guarantor. It seems to be intended to provide that all guarantees with terms less than the minimum terms of a consumer guarantee would be enforceable against the producer and supplier jointly, even if offered by only one of them. Oddly, that would appear to require the buyer to proceed against both parties rather than allowing him to choose between one or the other. Whether or not that was the intended effect, it is an important departure from the general provisions on guarantees under the Consumer Guarantees Bill as previously drafted. Further, it is a point upon which there has been no public consultation.

I do not wish to detain Members of the Committee by commenting in detail on each of the remaining proposed new clauses which have been put forward in this group. They deal with the Secretary of State's powers to make regulations and with other definitions. However, because of the fundamental objections to which I have already referred, the Government cannot support this group of amendments.

8.15 p.m.

Lord Williams of Elvel

I am most grateful to all noble Lords who have taken part in the debate. I am sorry that the Government feel unable to accept the consumer guarantee because I was led to believe that in another place they looked with some favour upon such a guarantee. Nevertheless, if that is their position, they will have to demonstrate it.

So far as concerns the points made by the noble Lord, Lord Mottistone, if we are to have a consumer guarantee it seems to me that it would be better to spell it out. The noble Lord said that perhaps it was so complicated that no one would adopt it. However, if we are to have such a guarantee it should be specified and put into statute.

In regard to the long-term right of rejection, there is no question of the consumer guarantee overturning the Sale of Goods Act. Moreover, it does not conflict, as the noble Lord, Lord Mottistone, said, with any Law Commission recommendations. The noble Viscount, Lord Ullswater, said that it was somehow rejected in another place. However, 108 Members of that place endorsed the concept on Second Reading. I do not regard that as being rejection. The amendments which were moved in another place by my honourable friend Mr. Martyn Jones were designed to meet some of the objections which the Government put forward at that time.

I was very disappointed with this evening's debate. I must tell the noble Viscount that we thought—perhaps, in our innocence—that the Government might accept some modified version of what Members of another place on all sides, and Members of this Chamber on all sides, believe is a sensible move forward. The noble Viscount has come out flatly against it. Therefore, I suppose that the payroll vote will simply march into the Lobby to express the view against it. However, they will have to march into the Lobby because we shall not let the matter rest. As I said on Second Reading, I believe that this is a matter of great importance upon which Members of this Chamber will wish to divide. I therefore propose to divide the Committee on the issue.

Lord Mottistone

Before the noble Lord sits down, will he agree with me that it is our invariable experience in this place that if we take a Private Member's Bill through—and I have been doing this for a long time, including the time when my party was in opposition—the best thing that can happen to it is that it is not amended in any way. This means that it does not have to be returned to another place. However, this Bill will have to be amended because of Amendment No. 8, and the other government amendments, and that is the minimum amendment required.

It has been my experience that whenever we send a Bill back to another place which has been amended in any substantial way—and this one will be—and the Government does not support the amendments, it has no chance at all. If the noble Lord seeks to put his amendments into the Bill now, he will destroy the sale of goods part of the Bill because that will go out as the baby with the bath water of the consumer guarantee. Therefore, in view of what my noble friend on the Front Bench said, will he not consider withdrawing his amendments at this stage so as to give the sale of goods part of the Bill a chance to live? He could then return to the matter later with the intoduction of a Private Member's Bill in this Chamber, or another place, which could bring forward the consumer guarantee feature, which I am sure he would like to see implemented, rather than include it in this particular Bill.

Lord Williams of Elvel

With the greatest respect to the noble Lord, Lord Mottistone, I must say that I do not see why a Private Member's Bill entitled "Consumer Guarantees Bill" should not have a consumer guarantee within it. If the Government decide to sabotage the Bill, that is a matter for them. It is not for Members of this Chamber or of another place. It is for the Government to say that they will not let it through. The noble Viscount has been quite clear on the matter. He said that the Government will oppose it. That is the Government's problem; it is not a problem for this Chamber.

On Question, amendment agreed to.

Lord Williams of Elvel moved Amendments Nos. 2 to 5: Before Clause 1, insert the following new clause:

("Product guarantees to be in writing

. Where any producer or supplier has given (by any means whatsoever) an indication that he is giving anything described by the word "guarantee" in relation to any particular product ordinarily supplied for private use or consumption (whether a Consumer Guarantee or not), the terms of the guarantee must be in writing, must contain the name and address of the guarantor, and must be in, upon or attached to the product, or its labelling or packaging.") Before Clause 1, insert the following new clause:

("Enforceability of guarantees

.—(1) Subject to subsection (2) where any producer or supplier had given (by any means whatsoever) an indication that he is giving a guarantee in relation to any product ordinarily supplied for private use or consumption (whether a Consumer Guarantee or not), a consumer supplied with the product shall be entitled to enforce the terms of the guarantee for the period indicated or in the event of a guarantee not being given the minimum terms of a Consumer Guarantee as if those terms constituted a contract between the producer and supplier jointly and the consumer.

(2) As against a person enforcing the terms of a guarantee (whether a Consumer Guarantee or not, and whether under subsection (1) or not), the other party cannot by reference to any such term or by notice exclude or restrict his liability, except in so far as the term or notice satisfies the requirement of reasonableness.

(3) To the extent that subsection (2) prevents the exclusion or restriction of any liability it also prevents—

1. (a) making the liability or its enforcement subject to restrictive or onerous conditions;
2. (b) excluding or restricting any right or remedy in respect of the liability, or subjecting a person to any prejudice in consequence of his pursuing any such right or remedy;
3. (c) excluding or restricting rules of evidence or procedure;

and (to that extent) it also prevents excluding or restricting liability by reference to terms and notices which exclude or restrict the relevant obligation or duty.

(4) Except as expressly provided by this section, nothing in this section shall be taken to limit, restrict or otherwise affect any right or remedy a person would have had if this section had not been enacted.

(5) For the purpose of this Act, anything which is likely to be taken for an indication that a product is covered by a Consumer Guarantee shall be deemed to be such an indication and shall be actionable as such, but expressions which it would be unreasonable to read as such (for example, "parts guarantee", "limited guarantee" or "warranty" by themselves) shall not amount to such an indication."). Before Clause 1, insert the following new clause:

("Power to make regulations

.—(1) The Secretary of State may, after consulting the Director General of Fair Trading and such other persons as the Secretary of State considers it appropriate to consult, by regulations make provision for—

1. (a) modifying the minimum terms of a Consumer Guarantee in relation to prescribed description of person or in prescribed circumstances so as to increase the obligations of, or impose new obligations on, the guarantor;
2. (b) determining the charge referred to in section 1(g) directly attributable to the use by a consumer of a product during a guarantee period;
3. (c) enabling or requiring prescribed symbols to be used to indicate that a Consumer Guarantee is being given or that no Consumer Guarantee is being given.

(2) The power to make regulations under this section—

1. (a) shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament; and
2. (b) shall include power—
1. (i) to make different provision for different cases; and
2. (ii) to make such supplemental, consequential and transitional provision as the Secretary of State considers appropriate.").

Before Clause I, insert the following new clause:

("Definitions

.—(1) In Part I of this Act, unless the context otherwise requires— consumer" in relation to any product means—

1. (i) any person who is supplied with that product, mainly for his own private use or consumption
2. (ii) any person who derives title to that product through or under that person; but does not include any person falling within paragraph (i) or (ii) who is not habitually resident in the United Kingdom.

guarantee" in relation to a product means any promise or assurance (however worded or presented) that defects in the product will be made good by complete or partial replacement of the product, by its repair, or by monetary compensation or refund or in any other way, and includes a Consumer Guarantee; guarantor" in relation to a particular product means a producer or supplier of that product who has stated that he is giving a guarantee in relation to it; motor vehicle" has the same meaning as in the Road Traffic Act 1988; prescribed" means prescribed by regulations made be the Secretary of State; price" includes a charge of any description; producer" in relation to a product means—

1. (a) a producer of a product within the meaning of Part I of the Consumer Protection Act 1987; or
2. (b) any person who has imported a product into the United Kingdom from a place outside the United Kingdom in order, in the course of any business of his, to supply it to another from in the United Kingdom;

product" has the same meaning as in Part I of the Consumer Protection Act 1987; product ordinarily supplied for private use or consumption" shall mean a product of a kind of specification where the majority of products of a similar kind or specification are not purchased for the purposes of industrial or commercial processes;. reasonableness" has the same meaning as in section 11 of the Unfair Contract Terms Act 1977; supply" and cognate expressions shall have the same meaning as in the Consumer Protection Act 1987; and

(2) For the purpose of Part I of this Act a product is of defective quality if it is not of satisfactory quality within the meaning of section 14 of the Sale of Goods Act 1979.").

On Question, amendments agreed to.

Clause 1, as amended, agreed to.

Clause 2 [Acceptance of goods and opportunity to examine them]:

The Deputy Chairman of Committees

I should remind Members of the Committee that if Amendment No. 6 is agreed to I cannot call Amendment No. 7.

Lord Meston moved Amendment No. 6: Page 2, line 29, leave out subsections (4) and (5).

The noble Lord said: In moving this amendment I should like to speak also to Amendment No. 16 and I must, inevitably, refer to Amendment No. 7 tabled in the name of the noble Baroness, Lady Ewart-Biggs. The latter amendment has essentially the same objective, except that it is to be reached by a different route.

This group of amendments raises the question of a right to reject defective goods and to claim a refund. The topic was raised on Second Reading by the noble Lord, Lord Allen of Abbeydale, the second star of those proceedings who is unable to attend the debate this evening. I shall try not to repeat all that was then said. The law provides that a buyer cannot reject goods, or get his or her money back, once those goods have been accepted. One of the ways in which the purchaser is treated as having accepted the goods is by retention of those goods for a reasonable time, irrespective of what may turn out to be wrong with them. Thus one can lose the right to reject and the right to a refund before one has any idea that anything is wrong.

The case most often referred to, which of course was referred to on Second Reading, is Bernstein v. Pamson Motors Limited. The stark facts of that case are well known, but need repeating briefly for the purposes of the amendment. Mr. Bernstein was held to have lost the right to reject a new motor car in which he had travelled 140 miles only over some 27 days following the purchase. For some of that period he had been ill. He was held unable to reject, despite the sudden appearance of a serious mechanical defect, that being a defect which would not have been apparent to the layman. Mr. Bernstein wrote promptly to reject the car the day after it seized up.

On those facts the judge, who was clearly sympathetic to Mr. Bernstein, and presumably would have found in his favour if he possibly could, held that in law Mr. Bernstein was barred from rejection and from a refund. Mr. Bernstein lodged an appeal against that decision, but unhappily the matte' was never tested on appeal because the car manufacturer made him an offer which he could not prudently refuse. Regrettably, the Law Commission and the Government have decided that the existing law is satisfactory, not least because it is said to be certain.

I suggest that the law is not satisfactory to Mr. Bernstein and others like him who act promptly in trying to get back their money, and is not satisfactory for others who are perhaps more patient and conciliatory and try to give the seller the opportunity to put matters right. I also suggest that the law is not even certain in that respect, because the loss of the right to reject depends upon what a judge decides is a reasonable time. Different judges differ, reasonably, about what is a reasonable time. The judge in the Bernstein case said that what might be a reasonable time for the purchaser of a bicycle would not be the same for the purchaser of a nuclear submarine. I am aware of other cases in which judges have taken a more lenient view, as does the law in other jurisdictions. All that does not suggest certainty.

On Second Reading the noble Viscount, Lord Ullswater, referred to a case in 1823 which concerned a chandelier retained for almost six months. That was a case called Milner v. Tucker. I venture to suggest that it is of not great relevance to the purchaser of a computer, or something like it, in 1990. He also referred to a case called Rogers v. Parish. more recently decided, in which the court allowed the right to reject a car after some 5,000 miles and six months. The Minister's reference to that case was confusing, because it was not a case of a straightforward sale but of a conditional sale, where the lapse of time is not a barrier to rejection.

If of course the Government intend to equate the law of hire purchase and conditional sale with ordinary sale, then I suppose that they support the amendment. If that is so, we shall have a better form of certainty; but what I propose in the amendments is that time should run against a purchaser only when defects come to light. To give the purchaser in those circumstances a right to reject will spare the dissatisfied purchaser from litigation, it will spare him from having to deal with the seller over repairs after he has lost confidence in the seller; it will provide a simple and effective remedy; it will meet the reasonable expectations of the consumer; and it will raise and maintain standards.

At this stage I shall not take up further time ventilating the rival attractions of the amendments that I have tabled and Amendment No. 7 in the name of the noble Baroness, Lady Ewart-Biggs. I merely beg to move.

Baroness Ewart-Biggs

As the noble Lord has said, the object of the amendments is to provide consumers with a long-term right to reject. Although I have sympathy with the thrust of the amendments they are unrealistic because, in practice, they will mean that the right to reject goods is indefinite or will at least exist for the six months allowed by the Limitation of Time Act.

The argument that the noble Lord has advanced is that the provision will equate the law of sale with that of hire. What the amendment fails to recognise is that the Sale of Goods Act applies to all products while only certain types of products are hired. That would give rise to a situation in which after five years the buyer of a product such as, for example, an apple could demand a full refund.

If the intention is to leave acceptance under the Bill to the common law rules of affirmation and waiver which govern the law of hire that should be expressed in the amendments. I am not convinced by the noble Lord's arguments and I advise the Committee to oppose the amendment.

Viscount Ullswater

I shall deal with the two amendments separately. The first provides, as the noble Lord, Lord Meston, has said, that the buyer would not be taken to have accepted goods, thereby losing his right to reject them, on the ground that he has retained them after a reasonable time without indicating to the seller that he has rejected them. The buyer would lose his right of rejection only when he intimated to the seller that he had accepted the goods or where the goods had been delivered to him and he did an act in relation to them which was inconsistent with the seller's ownership of the goods.

That is a fundamental change, which would affect both consumer and purely commercial transactions. In certain circumstances, the amendment could result in the buyer having the right to reject for a substantially longer period than under the present law. In their review of the law on the sale and supply of goods and services, the Law Commissions considered whether there should be a long-term right of reject in contracts of sale. Their conclusion, in the light of public consultation, was that there should not. They considered that the complications of introducing a long-term right to reject would be considerable. In their view, it would be unfair to require the seller to refund the purchase price to a buyer if the buyer did not reject the goods until a long time after delivery, when he had already enjoyed the use of those goods for that period.

It would be extremely difficult to make statutory provision for the buyer to give some credit for the use and enjoyment which he had from the goods. Indeed, if I may quote from their report, the Law Commissions doubted: whether any meaningful principles or formulae could be devised which did not depend upon criteria so uncertain as almost to invite dispute". They also believed that giving credit for use and enjoyment would take away much of the force of the consumer buyer's bargaining position. In their opinion, it was preferable to retain a rather shorter-lived right to reject with a corresponding automatic right to the return of the full purchase price. They pointed out that, particularly from the consumer's point of view, the absolute nature of the buyer's right is an important factor in his ability to bargain from his position of relative weakness against the seller.

I now turn to the second amendment tabled by the noble Lord, Lord Meston, which deals with the changes to Schedule 2. The noble Lord's amendment would treat consumer buyers under outright contracts of sale in the same way as consumers under conditional contracts of sale in that the consumer buyer under an outright contract of sale would not lose his right to reject defective goods, even when he had accepted them. The consumer buyer would only lose his right to reject such goods when he became aware of the defect and then affirmed the contract or waived his right to terminate it or did some other act which precluded him in law from relying on his right to terminate it.

This amendment would very significantly alter the balance of rights between consumer buyers and sellers. It would mean that a retailer could be faced with a return of a product on the grounds of it being of unsatisfactory quality and would be obliged to return the full purchase price without consideration of the buyer's use of the product during the intervening period. The noble Lord said that in contracts of supply other than sale, the right to terminate a contract persists until the customer knows of the defect. However, this does not persuade me that the same should be true in the case of sale. The analogy is not as strong as it may appear at first sight. In the case of hire, unlike the case of sale, there is a continuing relationship between the parties. The goods still belong to the owner, who may be under an obligation to repair or replace the hired goods if they break down. Further, in hire there is a convenient method of valuing use and enjoyment: the hire charge itself can be taken as a basis for valuation. I am not persuaded that the difference in approach in contracts for sale and supply amounts to a justification for changing the rules in contracts for sale.

For these reasons, the Government could not accept these amendments which would very significantly extend the rights of consumers at the expense of retailers.

Lord Meston

I did not intend to suggest an indefinite time for rejection. With respect to the noble Baroness, her reference to the limitation Act was not correct. I doubt whether anybody would keep an apple for five years and then try to take it back to the shop. Perhaps that example demonstrates that the longer the right to reject is left, the harder it will be to show that the defect complained of was there at the time of purchase. However, if the defect was there from the outset and is serious and the purchaser acts promptly, why on earth should he not have his money back?

The Bill and the next Amendment No. 7 in better form depend on the reasonable opportunity to examine the goods. I am sure that I speak only for myself, but I could have an endless opportunity to examine a video recorder or the inside of a car or a computer and find no defects. I might find it difficult to discover even the most patent defect, let alone the latent defect which may cause trouble months or years after purchase.

Furthermore, I remind the Committee that the Bill introduces, in what was Clause 1 until the events earlier this evening, a consideration of durability. What will be a reasonable opportunity to examine the goods, to discover their durability? By definition, durability takes time presumably to discover.

I wish to find common ground with the noble Baroness, Lady Ewart-Biggs, in this respect. I recognise that her amendment goes some way to meet my anxieties. I suggest that it does not deal as well as my amendment with the latent defects. But for the time being at any rate, I am prepared to withdraw the amendment. I beg leave so to do.

Amendment by leave, withdrawn.

8.30 p.m

Baroness Ewart-Biggs moved Amendment No. 7:

Page 2, line 32, leave out subsection (5) and insert: ("(5) Where the buyer deals as a consumer or (in Scotland) the contract is a consumer contract, the buyer is not deemed to have accepted the goods for the purposes of subsection (4) above until he has had a reasonable opportunity of examining them for the purpose mentioned in subsection (2) above.").

The noble Baroness said: This amendment provides that a consumer cannot lose the right to reject faulty goods until he has had a reasonable opportunity to see whether the product works. I am grateful to the noble Lord, Lord Meston, who said that, failing acceptance of his own amendment, he would support mine. He mentioned the notorious Bernstein case in which the judge allowed Mr. Bernstein an opportunity to examine the goods. However, as is clear, the Bill currently provides that the right to a refund can be lost, whether or not the buyer had had a reasonable opportunity to see whether the product is satisfactory. Therefore the position of the consumer has been weakened.

I remind the Committee of the Law Reform Committee recommendations which referred exclusively to consumer contractions: cases where a non-technical buyer has not had a reasonable opportunity to examine goods; cases where the product is sold in a sealed container. The recommendations stated: We are told … that the accuracy of a representation about the quality or construction of a motor vehicle is seldom apparent from an inspection from a person who is not an expert, or even from a short trial run. No doubt similar difficulties occur on the sale of other articles of a mechanical or technical nature, where defects are unlikely to come to the notice of the uninitiated until some time after the sale is completed". It is quite clear that the report of the Law Reform Committee wished this protection to be given to consumers.

Finally, if the Government oppose my amendment, perhaps they could advise the Committee of the circumstances in which they think a consumer should lose the right to reject faulty goods, even though he has not had a reasonable chance to see whether the product works. I stress that word "reasonable" because that involves an objective not subjective test. I beg to move the amendment and hope that the Committee agrees that it would make an important safeguard for consumers.

Viscount Ullswater

This amendment would change the acceptance provisions in the Bill. The present Clause 2 provides that the buyer is deemed to have accepted the goods (and therefore to have lost his right to reject them) if he retains them after the lapse of a reasonable time without intimating to the seller that he has rejected them. The effect of this amendment would be that a consumer buyer would not lose his right to reject unsatisfactory goods on the grounds that he has retained them for a reasonable time unless he has had a reasonable opportunity to examine them.

As the noble Baroness, Lady Ewart-Biggs, has said, there is some difference in view among legal experts about the position under present law. Some have argued that the lapse of time rule may be subject to Section 34 of the Sale of Goods Act so that however long the buyer retains the goods, he is not to be deemed to have accepted them until he has had a reasonable opportunity to examine them. Others, including the Law Commissions in their report, consider that this is not the case and that a reasonble time provides the final cut-off point under the present law.

I share with the noble Baroness the view that the law should be clear on this matter. It is in the interests of buyers and sellers alike to know where they stand in this important issue. We differ however on the point of policy as to whether a reasonable time (as provided in the Bill) or a reasonable opportunity (as provided by the amendment of the noble Baroness) should provide the final cut-off. In practical terms these will amount to much the same thing in the large majority of cases. It is difficult to imagine many situations in which the buyer will have retained the goods for any length of time without having had a reasonable opportunity to examine them. But I can envisage less common circumstances where the two approaches might lead to different results. For example, I wonder what effect the amendment might have in the case of a pair of skis bought during a summer sale and not tried out on snow until the following winter.

The amendment makes the law more subjective and acceptance less certain. It provides a different approach to acceptance in consumer and commercial contracts. It is a substantive change and one on which there has been no opportunity for all the interested parties to examine and consider the point in more detail. There has been no opportunity for consultation on this point, but I understand that the Retail Consortium has some concerns about the effect of this amendment, which it has drawn to the attention of the sponsor.

The Law Commissions recommended that the law should state clearly that a final cut-off comes after a reasonable time has elapsed. In making this recommendation they said that it makes no change to present law. The DTI consulted widely on the Law Commissions' recommendations. Some consumer bodies have expressed concern that this provision would leave consumers without an opportunity to examine goods. I am very doubtful that this is the case. But the Government were mindful of the concerns expressed and proposed an addition to the Law Commissions' recommendations. That is contained in Clause 2(5), which makes clear that a reasonable opportunity to examine is relevant to the question of whether a reasonable time has elapsed. This would not preclude the court from reaching the view in a particular case that a reasonable time had elapsed even when the buyer has not had an opportunity to examine the goods. However, it would ensure that, when considering whether a reasonable time had elapsed, the court would positively address its mind to the question whether the buyer had had a reasonable opportunity to examine the goods.

The law should strike a balance between the interests of buyers and those of sellers, for whom commercial certainty is of importance. I remain sceptical about whether this amendment is justified and could not offer my support that it be made.

Baroness Ewart-Biggs

The Minister is not looking favourably on the consumer this evening. However, I am grateful to him for having taken so much trouble to respond to my amendment. We shall certainly reconsider the matter before Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 agreed to.

Clauses 3 to 7 agreed to.

Clause 8 [Short title, commencement and extent]:

[Amendments Nos. 8 to 10 not moved.]

Lord Williams of Elvel moved Amendment No. 11: Page 5, line 34, leave out ("Parts I to IV of this Act or in any order under subsections (2) and (3)" (and insert) "Part I of this Act").

The noble Lord said: I have already spoken to this amendment. I beg to move.

On Question, amendment agreed to.

[Amendment No. 12 not moved.]

Lord Williams of Elvel moved Amendments Nos. 13 and 14: Page 5, line 37, leave out ("Part V") and insert ("Part II"). Page 5, line 41, leave out subsection (6) and insert: ("(6) This Act extends to Scotland but only Part I and this section apply to Northern Ireland.").

The noble Lord said: I have already spoken to Amendments Nos. 13 and 14. I beg to move.

On Question, amendments agreed to.

[Amendment No. 15 not moved.]

Clause 8, as amended, agreed to.

Schedule 1 agreed to.

Schedule 2 [Minor and Consequential Amendments]:

[Amendment No. 16 not moved.]

Schedule 2 agreed to.

Remaining schedule agreed to.

[Amendment No. 17 not moved.]

In the Title:

The Deputy Chairman of Committees

The Question is that this be the title of the Bill.

Lord Williams of Elvel

I do not wish to detain the Committee for long but I wish to put on the record that the Committee has put back a consumer guarantee into the Consumer Guarantees Bill. I hope that when we have completed the remaining stages of this Bill it will leave the Chamber with the consumer guarantee still in it. It is now up to the Government to decide, as the noble Viscount, Lord Ullswater, quite rightly said, what they will do about the Bill in another place if it leaves this Chamber with a consumer guarantee in it. I say to the noble Viscount and to the Government in the clearest possible terms that if they do not make time for this Bill in another place they will be in contempt of both Houses of Parliament.

Title agreed to.

House resumed: Bill reported with amendments.