Sale and Supply of Goods Bill

HL Deb 22 July 1994 vol 557 cc480-9

11.38 a.m.

Lord Dormand of Easington

My Lords, I beg to move that this Bill be now read a second time. The Bill is simple and, I hope, uncontroversial. It is intended to tidy up and clarify one of the more antiquated corners of the law and at the same time update and strengthen consumer rights.

Essentially the Bill will implement the recommendations of the English and Scottish Law Commissions in their report on the supply and sale of goods published in 1987. It is an area of law which to this day remains largely untouched by statute. Instead, over centuries certain common law principles emerged. Among them were the principles that goods sold by way of trade or business must be described, must be fit for that purpose and must be of merchantable quality. Those principles were codified but not significantly altered in the Sale of Goods Act 1893. That Act was consolidated but not significantly altered in the Sale of Goods Act 1979.

The result is that the purchaser's rights when buying goods are essentially those conferred under the common law as it developed in the 18th and 19th centuries. It is not surprising, therefore, that those rights; have become a little antiquated in the light of modern trading conditions.

It was for those reasons that the Law Commissions were asked to look at the matter in 1987. While they saw no need for radical reform, they concluded that one of the central principles of present law—the doctrine of merchantable quality—was out of date, and that the definition of what constituted acceptance of goods was both untidy and unclear. They accordingly made a number of recommendations.

I shall summarise the Bill's provisions. Clause 1 implements the most important of the Law Commissions' recommendations, which was that the outdated phrase "merchantable quality" should be replaced by a phrase more in tune with today's trading conditions. The Law Commissions suggested "acceptable quality", but the present Bill follows its 1989 predecessor in preferring the phrase "satisfactory quality".

A non-complaining buyer might decide reluctantly that goods he bought were of acceptable quality, even if by objective standards the quality was not satisfactory.

The Law Commissions then went on to list some of the aspects to be taken into account in judging whether goods were of the required quality. These included fitness for purpose, appearance and finish, freedom from minor defects and safety and durability, and those are duly included in Clause 1.

Clause 2 deals with the question of acceptable goods. Although it does not substantially modify the existing law in this area, it does clarify it and, in particular, makes it clear that, in judging whether a buyer has accepted goods, account must be taken of whether the buyer has had a reasonable opportunity of examining the goods to determine that they are in conformity with the contract. The clarification is important, as there is considerable uncertainty over the extent of a buyer's right to reject faulty goods. A tidying-up operation is therefore long overdue.

Clause 3 provides that if a buyer has accepted some of a batch of goods he does not thereby lose the right to reject the rest if they are not in conformity with the contract. Clauses 4 and 5 provide that where a buyer is not acting as a consumer, he may not reject goods if the breach of contract is so slight that it would be unreasonable to do so. Because English and Scots law are slightly different in that area, separate provision must be made for each country; hence the need for two clauses.

Clause 6 provides for the introduction of provisions equivalent to Part I of the Supply of Goods and Services Act 1982 for Scotland. There was a separate recommendation of the Scottish Law Commission which was included in the two commissions' 1987 report. It does not substantively change Scottish law in that area, but is a useful clarification and will bring Scots law relating to the supply of goods into line with that of the rest of the United Kingdom. Differences in terminology between English and Scottish law means that the new law needs to be set out in full, and that is done in Schedule 1.

Finally, Clause 7 calls up Schedule 2, which makes a number of necessary consequential amendments to other legislation, and Schedule 3, which makes some consequential repeals. Clause 8 deals with Short Title, commencement and extent.

To sum up, the Bill is intended to bring about a long-awaited amendment to an area of law which, although it does not have a high public profile, nevertheless governs every transaction that we make. The Bill is not intended to bring about a major shift in the balance of rights and obligations as between a customer and a supplier, but by updating and clarifying the law I believe it will be of benefit to both. I therefore commend the Bill to your Lordships.

Moved, That the Bill be now read a second time.— (Lord Dormand of Easington.)

11.45 a.m.

Lord Beaumont of Whitley

My Lords, I congratulate the noble Lord, Lord Dormand, on producing this Bill for your Lordships' House and I congratulate the noble Earl, Lord Ferrers, on having such an acceptable Bill to deal with as his first in his new job.

My purpose in rising to speak is merely to say that we on these Benches approve of the Bill and will do our best to further it and to give notice that there is one area which we will want to probe at the Committee stage. I should like to make it quite clear now that nothing I shall do is intended to or will delay or hazard the adoption of the Bill. I will want to probe the mover's views, and rather more particularly the Government's views, on the inclusion in this area of guarantees of durability, provision of spare parts and after sales service. This Bill is being introduced post-Rio. We are all committed to the sustainable economy. Much the most important part of the sustainable economy is in making certain that the goods that we have and use last as long as possible and that when they are finished with they are disposed of in the best possible way, with the re-use of as much of their material as possible.

It is not right for me at Second Reading to go further into this matter. I am merely giving notice that I intend to put down an amendment to this effect and to ask for the Government's response.

Lord Peston

My Lords, before I welcome the Bill I wish to associate myself with the remarks of my noble friend earlier in welcoming the noble Earl, Lord Ferrers, to our deliberations on industry and trade matters. I look forward to working with him. As he knows, I am always reasonable and never give Ministers a hard time, except when I am thwarted. But I am sure, especially in many of the areas with which we concern ourselves which are non-political, that we shall be able to work together to improve many aspects of our industry and economy.

As my noble friend said, this is a small measure, but it is an important one. I have one other difficulty in that I find the subject extremely interesting and therefore I shall wish to make quite a few points on it, even though it is Friday morning and there is other business which noble Lords wish to go on to debate. Perhaps I may say more generally that the whole sale of goods area is an interesting one and, in my view, much in need of legislative reform. I put it to the noble Earl the Minister that at some stage we need a new Sale of Goods Act to replace the Sale of Goods Act 1979, as there are many other areas—earlier in the year we debated the problem of markets overt—which will need to be dealt with in that Act. We could do with a new Act as all that a Bill like this can do is to tidy up a minor part of it.

I should say in connection with this subject that the Bill was debated very extensively in the other place. I say slightly sardonically that it was debated very extensively to my surprise. But it was debated overwhelmingly by lawyers. As always, I fail to understand many of their arguments.

There are several economic aspects to this matter to which I should like to refer. The starting point is the balance between buyers and sellers. My noble friend Lord Dormand of Easington said that he did not wish to do anything that would change fundamentally that balance at this stage. Car boot sales were debated in the other place and will perhaps be discussed in your Lordships' House. In that connection the balance between buyers and sellers is of the essence. What we have to ask about in terms of balance is the difference in information between the buyer and the seller. At some markets and sales—the car boot sale is the most obvious—the seller knows a great deal more about the product being sold than the buyer can possibly know until he or she has bought the item. That is a serious problem.

It leads to a question of which I know I should have given the noble Earl notice. I do not yet know, as regards the Deregulation and Contracting Out Bill and the various clauses to do with markets which were withdrawn in the other place, whether they may be reintroduced here. Is the noble Earl able to say anything today about markets and the deregulation Bill? What we are going to do about car boot sales and that kind of thing could be dealt with very appropriately in that Bill. I remind the noble Earl that the whole point of the market amendments was the hope that they would be dealt with by agreement. Therefore, if they are reintroduced there should not be a big problem assuming that the noble Earl and his department have agreement. It is not obvious as to the extent to which this Bill covers things such as car boot sales. It was argued in the other place that if the seller at a car boot sale or similar activity is not engaged in that activity in the course of business, then this Bill will not apply and the kind of protection one gets will not be sufficient.

The Bill as it stands—I am interested in both my noble friend's and the noble Earl's judgment on this matter—applies, I believe, to second-hand goods as well as new ones. From my reading of the Bill I am not entirely certain whether it does or not. When I rose to speak I was not certain that we would have a Committee stage for this Bill, but the noble Lord, Lord Beaumont of Whitley, has said that he will definitely be tabling amendments and therefore there will be a Committee stage. I give notice that I may table a few amendments, largely of a probing nature, in order to discover more of the Government's mind on these matters.

The main question we have to ask is whether, following what the Law Commission recommended, this Bill is at least as strong as what it replaces in terms of consumer protection. I am interested to know the Government's view. Since the original Bill was drafted with the help of the Department of Trade and Industry, I assume that it is the view that this Bill is at least as strong. I would like some reassurance.

I have several other questions, but I am not sure whether they should be put to my noble friend or to the noble Earl. Clause 1 includes the words, "there is substituted," and in subsection 2(A),the expression appears, taking account of any description of the goods". The question I ask is this: does "any description of the goods" include advertising? I looked in today's newspapers for suitable advertisements to quote. I saw some for videos. One version of, taking account of any description of the goods", is that a video is a video. If you go into a shop and say that you want to buy a video recorder, then that is what you have to get. But if the advertisement says that the video does a number of things, does that count as part of the description? And is that what this subsection of the Bill means?

Subsection (2B) refers to "freedom from minor defects". Is the expression "minor defects" well known to the law? Can it be assumed there would be no difficulty in saying what a minor defect is. On all these matters—it has dominated my contributions to proceedings on the deregulation Bill—I am not a lawyer. I have learnt slowly but surely that words which mean something to ordinary human beings do not seem to mean even remotely the same thing to lawyers. To me, a minor defect is a defect which does not matter. But a lawyer may well say, "Oh no, you have to take the advice of Queen's Counsel on what a minor defect is; it goes much deeper than that". I would like to know what "minor defect" means. Does it cover reliability and so forth?

The underlying text of my remarks relates to my own experience as a consumer. I am placing before noble Lords some of the problems I have experienced with items which do not meet what used to be called "merchantable quality". I am particularly interested in Clause 2(4) which states: The buyer is also deemed to have accepted the goods when after the lapse of a reasonable time he retains the goods without intimating to a seller that he has rejected them". I have taken advice, but this is a problem which consumers —myself included—often have.

For example, you decide—I hope noble Lords will forgive the banality of the example—to have a new kitchen and to place in it a new oven. You buy it and it is delivered in a box which you do not open. The kitchen supplier says "I'm sorry, the suppliers cannot deliver your new kitchen for the next three months". Typically, I regret to say, in the case of kitchens the best suppliers are German and they seem to go on holiday for the whole of the summer. Three months go by and eventually your new kitchen is delivered. The kitchen fitter then says "I'm sorry, the original date is not possible" and so another month passes. Four months go by and eventually your new kitchen is installed. At long last you open the box containing your oven—you have been sensible and not messed around with it until installation—only to find that it does not work.

When this happened the supplier said to at least one person very close to me, namely, me, "I'm sorry, you bought it four months ago and you have accepted it". The question is this: what does "the lapse of a reasonable time" mean? If we have a Committee stage, that is a part of the Bill to which I may return with the suggestion that we do something about that aspect.

I have broken one of the rules which I always try to keep, and that is not to speak longer than the first speaker. I hope that my noble friend does not think that I am discourteous—indeed, I hope that he thinks the reverse—and agrees that I have spent so much time on this Bill because it is extremely interesting and significant and may be made slightly more significant.

I have two further questions to raise with the Minister and then I shall happily sit down. One aspect of a purchase is the question of caveat emptor. I would like to have the Minister's judgment and to be told to what extent he believes that in many of the areas I have raised caveat emptor should suffice. In my judgment it does not, for the reason I raised at the beginning; namely, that there is a definite difference between the buyer and the seller when it comes to knowledge of many goods and services. Therefore we need a Bill of this kind.

My second question is this. Some of the points that I raised, particularly about representations, may well be covered by the Trade Descriptions Act, and I should be interested to hear the noble Earl's reply on that.

I turn now to my last point. It was remiss of me not to say this earlier. Although the noble Lord, Lord Beaumont of Whitley, and I do not usually agree on questions relating to sustainable growth and matters of that kind, I found his point very interesting. I had not thought of it previously. It is a good one and I am intrigued by it. In addition to the question of the goods being what they are and of what we are now going to call "satisfactory quality", the provision of spare parts and/or service ought to be taken a bit further in the way that the noble Lord suggests.

My intention has been, first, to say that the Bill is both interesting and important and, secondly, to wish it very good speed. If we are able to improve it in minor ways, perhaps we might—I only say "might"—take the opportunity to do so.

Lord Tordoff

My Lords, before the noble Earl replies, I wonder whether he will enlighten the House on another matter which has been brought to my attention. Turning to the list of ministerial appointments and resignations, we have not congratulated the noble Earl on the fact that he is shown in the list as, The Earl Ferrers DL MP".

Midday

Earl Ferrers

My Lords, I cannot think what on earth that has got to do with the Sale and Supply of Goods Bill. As a matter of fact, I did notice that but I did not know whether or not it was flattery. In some respects, it is an error; but it is perfectly right in other respects because we are all Members of Parliament, albeit Members of the Upper Chamber.

I was grateful to the noble Lord, Lord Beaumont, for the kind remarks at the beginning of his speech. I was particularly grateful for the enchanting words of the noble Lord, Lord Peston, who said that I am a very reasonable person and that I shall not give him a hard time. That was in contrast to what his noble friend, the noble Lord, Lord Clinton-Davis, said earlier. The noble Lord, Lord Peston, said that with great charm, but he then proceeded to fire about 20 questions at me and when he got to the last one, he said, "My second question is this". I have no doubt that the noble Lord forgot the number of questions that he had asked. It reminded me of the Bishop who was preaching a sermon and after 40 minutes said, "And secondly", and his congregation just about died. Of course, the noble Lord did not speak for 40 minutes and I am not trying to make a jibe against him in that way.

Indeed, I had great sympathy for the noble Lord when he said that he found it difficult to understand lawyers' language because they often say things that are completely different from what the normal layman would regard as an interpretation of a statute. That is something with which I have struggled on previous occasions—including fairly recently on another Bill for which I had a certain amount of responsibility only a few days ago.

Although I shall try to answer the easy questions, I shall leave the nasty ones to the noble Lord, Lord Dormand of Easington, whose Bill this is, to see how he gets on. Perhaps I may take this opportunity to congratulate the noble Lord on introducing the Bill in your Lordships' House. It represents the first major modification to the sale of goods legislation for about 100 years.

Although the Sale of Goods Act carries the date of 1979 on it, that was primarily a consolidation measure to tidy up a number of minor changes which had been made over the years to the original Act of 1893. These changes were introduced more to deal with particular difficulties as they appeared rather than to change the, overall structure of the law.

The Bill implements recommendations which, as the noble Lord, Lord Dormand, said, were made by the Law Commission and the Scottish Law Commission in their 1987 report, the Sale and Supply of Goods. The Government support the changes which they suggested and I am glad to be able to give the Bill the Government's support and blessing. I know that a number of noble Lords have expressed concern about the difficulty in finding parliamentary time to implement reports from the Law Commissions from time to time, and I am sure that the House will wish to see the Bill complete its stages swiftly, although with proper consideration.

The Bill was discussed extensively in another place and I think that in the end most of the concerns that were raised there were satisfied. There is though one aspect which had been raised when a previous Bill came before your Lordships' House on a previous occasion but which failed to reach the statute book. I would like to say just something about that.

The noble Lord, Lord Peston, asked whether this Bill is as strong on consumer protection as the previous Bill. The Bill will clarify and it will therefore strengthen, consumer rights. It will do so in this respect—this is the matter which was raised on the previous Bill which did not reach the statute book. It concerns Clause 2 of the Bill and the question of when a consumer loses his right to reject goods which are faulty or which do not satisfy the other requirements of the Act. Whenever this question is raised, the case of Bernstein v. Pamson Motors is always quoted. Every case must, of course, be looked at in the light of its own particular circumstances, but the Bill is designed to remove an ambiguity which many feel led to the Bernstein judgment.

In the Act as it stands at present the rules on examination and acceptance are contained in two sections, Sections 34 and 35. Section 34 provides that a buyer who has not previously examined goods which are delivered to him is not deemed to have accepted them until he has had a reasonable opportunity of examining them for the purposes of ascertaining whether they are in conformity with the contract. The noble Lord, Lord Peston, gave the example of a kitchen.

Section 35 then sets out the various ways in which a buyer may be deemed to have accepted goods and may have, thereby, lost his right to reject them. There are several such ways in which that can be done. Acceptance is deemed to take place where the buyer intimates acceptance; where the goods are delivered to the buyer and he does any act which is inconsistent with the ownership of the seller; or where after the lapse of a reasonable time the buyer retains the goods without intimating to the seller that he has rejected them.

The difficulty is that, as the Act at present stands, the interrelationship between the two sections is not at all clear. Section 35 does include a reference to Section 34, but there is certainly scope for the view to be taken that, in deciding whether goods have been accepted because of the passage of time, there would be no need to have regard to whether the purchaser had, in fact, had a reasonable opportunity to examine the goods for the purposes provided in Section 34.

This ambiguity can lead to unfortunate results. In the Bernstein case the judge certainly appears to have taken the view that there was little interrelation between the two sections. This enabled him to adopt a qualified interpretation of the word "examine"—an interpretation which amounted to the purchasers trying out the goods in general terms.

The judge expressed the view that the nature of the particular defect of the goods and the speed with which it might have been discovered were irrelevant to the concept of "reasonable time" in Section 35. He went on to hold that a period of three weeks amounted to the lapse of a reasonable time after the delivery of a new motor car so that Mr. Bernstein was deemed to have accepted the car under the terms of Section 35(1) of the 1979 Act.

It is, I think, generally agreed that this verdict, however correct it may have been as an interpretation of the law as it then stood, was unsatisfactory from the point of view of maintaining a fair balance of rights between supplier and consumer.

If the Act is recast, as it is in the Bill, the provisions which are at present in Sections 34 and 35 will be tied much more closely together. This will make it clear that a material question in determining whether a reasonable time has elapsed—and therefore whether the buyer has accepted the goods—will be whether he has had a reasonable opportunity to examine the goods in order to satisfy himself that they are in fact in conformity with the contract and are what he wanted to buy. This means examination to see whether, among other things, the implied terms of the contract are satisfied.

It is clear, therefore, that the examination must be more than just an examination in general terms. The term "examine" has to be interpreted in the context of the type of examination which it is necessary to conduct in order to ensure that the goods in question are in conformity with the contract. In the circumstances of his new oven described by the noble Lord, Lord Peston, the customer would not have examined the goods and would not therefore be deemed to have accepted them. I hope that that will give him at least some satisfaction.

It has been argued that it should be explicit on the face of the Bill that the word "examine" must be interpreted in the context of the type of examination which it is necessary to conduct to ensure that the goods are in conformity with the contract. But the Oxford English Dictionary definition of "examine" encompasses that type of inspection. I do not believe that it is necessary therefore to introduce into the Bill a definition of "examine". Indeed, there are good reasons for not doing so. A definition of "examine" would constrain the discretion of the courts to consider individual cases on their merits, and that could lead to results which the Bill does not intend.

The noble Lord, Lord Peston, asked all sorts of questions about markets, car boot sales, the deregulation Bill and so forth. The Government are still considering the subject of market franchise rates in respect of the deregulation Bill. He was also concerned about whether the Bill applied to second-hand goods, and the answer is that it does. With regard to car boot sales, Clause 1 will apply if the seller acts in the course of business, and that is a question of fact that a court will have to decide. He was also interested in whether the description includes advertising. He suggested videos. The answer is that it does, but again it will be a matter for the courts to decide.

The noble Lord then referred to caveat emptor, which is a legal expression, and I am sure that the noble Lord is enormously familiar with the length and breadth of it, as, indeed, are most, although possibly not all, of your Lordships. I say merely that caveat emptor is a basic rule, but there are measures designed to assist the buyer where that rule might be deemed to be harsh. I hope that that explanation satisfies the noble Lord, Lord Peston, at least temporarily. The noble Lord, Lord Dormand, has introduced the Bill and explained it to your Lordships. It has our blessing, and I hope that your Lordships will pass it in due course effectively and with approbation.

Lord Peston

My Lords, before the Minister sits down perhaps I may thank him for the excellence of his answer. He said that the Bill has the Government's blessing. Does that mean that, were we to have a Committee stage and were we to amend the Bill, time would be found to ensure that the Bill still had the Government's blessing and would become an Act of Parliament? What does "the Government's blessing" mean? Does it mean take it or leave it? 1 am sorry to introduce aspects of buying and selling here, but does it mean that it has the Government's blessing if we agree to every word on that piece of paper or does it mean that it has the Government's blessing if noble Lords, in their normal deliberate way, say, "This could improve it a little."? What does "blessing" mean for these purposes?

Earl Ferrers

My Lords, I can tell the noble Lord exactly what it means. The Bill has the Government's approval as it is. If your Lordships decide to put down a whole lot of amendments which reverse the Bill's intentions, it would not necessarily have the Government's blessing. If your Lordships were to put down sensible amendments I am sure that they might have the Government's blessing. The real point that the noble Lord will have to consider is whether the addition of amendments will put at risk the Bill's passage through Parliament.

Lord Peston

My Lords, I thank the Minister. As I have expressed as strongly as I can my support for the Bill, I should not dream of amending it in any way that was not in my judgment an improvement. I should seek to persuade the Minister that that was so. I was just listening for any word of warning, because I assure the Minister and my noble friend that I shall do nothing to stop the Bill from going on to the statute book. Equally, I am always frustrated if I cannot obtain an improvement when we all agree that it is an improvement. However, I proceed no further.

Earl Ferrers

My Lords, perhaps I may have the permission of the House to say that obviously Bills have to have a Committee stage and are subject to amendment. The other House rose yesterday and this House rises next week. When we come back in the spillover there is relatively little time, and I just flag up this hazard: if we amend the Bill, that obviously puts it at risk when it goes back to another place.

Lord Simon of Glaisdale

My Lords, perhaps I may intervene on that discussion. If there are amendments, will parliamentary counsel be made available to ensure that they are technically correct?

Earl Ferrers

My Lords, if I may have the leave of the House, we are getting into rather dangerous procedural waters here. Your Lordships can put down whatever amendments you desire. If they do not make sense, I am sure that parliamentary counsel would devise means of putting them right, but that is yet another hazard to which the Bill would be subjected. I just advise your Lordships to be cautious.

Lord Dormand of Easington

My Lords, I am glad that the Bill has been given a general welcome, although I note the comments made by my noble friend Lord Peston and the noble Lord, Lord Beaumont. I am sure that their intentions are benevolent. I commend the Bill to your Lordships.

On Question, Bill read a second time, and committed to a Committee of the Whole House.