Legal advice for Alison Regarding Problems with her new car purchase
Legal advice for Alison regarding problems with her new car purchase
Alison has recently bought a new car from Billy’s Motors in Brighton. The car is made by the Reliable Motor Corporation (RMC). The car is the Reliable X launched a few months previously. As part of the launch, RMC had a major advertising campaign with the slogan: The Reliable X – the most reliable car with the best fuel consumption and the best for the environment. If pandas could drive, this is the car they would want to own.
The accompanying television advertisement showed a family setting off on holiday and travelling almost the entire length of Britain (from Land’s End to Edinburgh to see the pandas at Edinburgh Zoo) without stopping to refuel.
Before she bought the car, Alison explained to Billy that her primary use for the car was her daily commute from her home to her work – a 30 mile round trip. Alison asked if the benefit of the low fuel consumption would also show over shorter distances such as her daily commute and she was assured by billy that it would.
After three weeks, Alison noticed that the brakes were slower to respond than when she first got the car, the engine had started making a whining noise whenever she changed gears at low speed and the car was using significantly more fuel than her previous car. A news story has also broken that suggests that the Reliable X is fitted with a similar “cheat” device to that fitted on some Volkswagen cars and fails to meet emission standards by a significant margin.
Advise Alison regarding her remedies. Would your answer be different if the car that Alison had purchased was a three year old second-hand model?
Introduction
This problem poses a number of issues such as what constitutes a consumer, representations, mere puffs and statutory implied terms. This advice will begin by determining whether Alison is a consumer. This will inform the statutory provision which is applied to the subsequent facts. The analysis will then move to the advert, Billy’s representation and the quality of the car. Finally, it will be determined if Alison’s remedies would be different if the car had been second hand.
Alison’s Status
The first legal issue is whether Alison is a consumer. The Consumer Rights Act 2015 (CRA) regulates transactions between trader and consumer[1]. Section 2(3) of the CRA states that a consumer is an ‘individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession’[2]. Complexity arises because Alison intends to use the car to commute. Kemenova illustrates the interpretation of ‘consumer’ in European law. The CRA implemented an EU Directive[3] so this interpretation is applicable. The European Court stated that the rationale behind consumer protection is to recognise consumer’s weaker bargaining position[4]. The Advocate General proposed a list of considerations, such as expertise and desire to re-sell, for deciding whether someone is a consumer[5]. The Court approved these[6]. Despite the list, the Court was clear that when making such decisions an holistic approach must be adopted[7]. If Alison worked in the motor industry, then Stevenson v Rodgers[8] might apply and Alison could not to be a consumer because she would be operating within her profession. Assuming this is not the case, I would advise that she is a consumer. The fixed nature of her commute means it remains outside of her business as supported by UK tax law[9]. If Billy Motors wanted to refute this, then the burden of proof would fall on it[10]. Billy’s Motors is a trader under the definition in Section 2(2) CRA as it is acting for the purposes of trade[11]. Goods were supplied; a car is a ‘tangible movable item’[12]. There also needs to be a contract[13]; it is assumed that the formalities were fulfilled. Finally, the CRA came into force on 1 October 2015[14]. No information is given on the dates of events but it is assumed that they were after this date. Therefore, Alison’s transaction is covered by the CRA.
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The next issue is whether the advertisement is a contractual warranty or mere puff. In Chitty, puffs are described as statements which are ‘vague’ and ‘elaborate’[15]. In Benjamin it is suggested it is a statement which should not be taken seriously[16]. It is notable that in Walker v Milner the statement that a safe was ‘strong, holdfast, thiefproof’ was held to hold no liability[17]. However, what constitutes a puff has narrowed[18]. In Easterbrook v Hopkins Justice Sim stated that a puff is ‘a statement so preposterous … nobody could believe that anyone was misled’[19]. This is a New Zealand case but is quoted in Benjamin in summary of the position. There are three different, potentially contractual warranties or puffs: reliability, fuel consumption and the environment. Reliability will be discussed later.
Regarding fuel consumption, the slogan alone is vague, but coupled with the advertisement it does give it the semblance of possibility. This being said, the present facts are similar to Jewson v Boyhan[20] in that fuel consumption is dependent on many factors outside of the manufacturer’s control such as driving style. Thus, I feel that a court could interpret it as puff because it would be ‘unreasonable’[21] for Alison to rely on it.
Being environmentally friendly is a selling point for cars. Claiming that a particular product is the best for the environment is not so great a hyperbole that people would not believe it. I would advise that this is not puff as many consumers will believe that it is true and backed by evidence. The jovial opinion reinforcing the environmental claim does not negate this conclusion. The suggestion itself creates no liability. We know from Porter v General Guarantee that personal opinions are unlikely to create obligations[22].
The above advice presents challenges regarding privity of contract. Alison purchased from Billy’s Motors but it was not its advert. One way in which a purchaser can hold a manufacturer liable is through a collateral contract. In Wells v Buckland Sand it was held that there was a collateral contract[23]. However, this can be distinguished because it was a personal, colloquial statement[24]. In Lambert v Lewis the Court of Appeal held that statements by a manufacturer in a brochure could not constitute a collateral contract because they were not intended to create legal relations[25]. Atiyah and others criticise Lambert[26] by stating that manufacturers use promotions to influence purchasers so an assertion of fact should create a collateral contract[27]. In our scenario, it is a fact; this is further supported by the mention of a ‘cheat device’ that suggests data were used to support the claim. Precedent suggests the court might not find a collateral contract but the academic comments might persuade. If a collateral contract was found, then Alison could sue RMC for breach of contract. The remedy would likely be damages.
Billy’s Representation
The next issue is Billy’s assurance to Alison. Billy’s affirmation is potentially a misrepresentation. For there to be misrepresentation, there must be an unambiguous, false statement of existing fact which induced the representee to enter into a contract[28]. The assurance does not seem ambiguous. As in Esso Petroleum v Mardon, an assertion by an expert is a statement of fact[29]. For inducement to occur, there must be a material representation[30], it must be known to the representee[31], it must be intended to be acted upon[32], and it must actually be acted upon[33]. Inducement is fact specific and more information is required, but actual inducement can be inferred from material representations[34] which is the case here. The falseness of the fact is again fact-specific and can be assumed from the car using ‘significantly’ more fuel. There is nothing to suggest Billy was acting fraudulently. Therefore, he was either negligent or innocent in his misrepresentation.
If he believed the statement was true but did not have reasonable grounds for this belief, he was being negligent[35]. If Billy knew about the emissions testing or had literature that conflicted with his affirmation, then this could point to negligence. With negligence, there is a ‘fiction of fraud’; rescission is a potential remedy for this[36]. However, under section 2(2) of the Misrepresentation Act the court could award damages in lieu of rescission if it is equitable to do so for either innocent or negligent misrepresentation[37]. The courts have stated that damages received will be for reliance loss and not expectation but in any case this is usually the same[38]. Billy could defend an action for negligent misrepresentation by stating that he had reasonable grounds for his belief, thus creating innocent misrepresentation[39]. This would likely fail as in Howard Marine v Ogden the majority stated that it was not reasonable for a buyer just to rely on a register of ships[40]. This case shows that negligent misrepresentation has a broad scope which makes it extremely likely here. This being said, Billy’s statements had a myriad of variables. In Jewson v Boyhan a promise was not able to be relied upon because there were factors outside of the promisor’s control[41]. Billy could not say for certain if she would benefit because it depends on speed and driving style. The broad scope established in Howard Marine v Ogden suggests that negligent misrepresentation will be found but if not then certainly innocent. The decision in Jewson v Boyhan adds complexity as the court may decide it was unreasonable to rely on the statement. This is difficult to advise upon but I would suggest that a misrepresentation claim would be successful.
Implied Terms
The faults with the car raise questions regarding statutory implied terms. Satisfactory quality is implied by section 9 of the CRA[43]. The standard is that of a reasonable man taking account of numerous factors[43]. One factor is public statements about the characteristics of goods[44], including advertising[45]. Therefore, RMC’s claims are applicable. The term ‘satisfactory’ is given its usual meaning[46], and when examining whether the good is of satisfactory quality there are a number of aspects to take into account such as fitness for purpose[47], safety[48] and durability[49]. Fitness for purpose is also an implied term in its own right. Section 10(1) states that implying a fit for purpose term relies on whether the consumer makes known the purpose to the trader[50]. Alison makes it known that one of the purposes is her daily commute.
There is nothing to suggest that the car cannot take her to and from work although this depends on roadworthiness. The main issue arises when assessing satisfactory quality. In 1994, the Law Commission moved away from a test of usability to acceptability[51]. It is clear that the car is not acceptable. There is a rebuttable presumption of non-conformity for quality and fitness for purpose[52]. This presumption does not apply to the short term right to reject but does cover all other remedies[53]. I would advise Alison at the least satisfactory quality has been breached. The first remedy Alison could seek is the short term right to reject found in sections 20 to 22 CRA. This right to reject lasts thirty days[54]. Alison has had the car three weeks so this remedy is available. In rejecting the goods, Alison could claim a full refund[55]. The trader will be responsible for the reasonable costs of returning the goods[56]. Another remedy available is repair and replacement[57]. The trader must perform a repair or replacement at no extra cost within a reasonable time without causing significant inconvenience[58]. If Alison opted for repair, the clock for the short term right to reject would pause[59]. Finally, Alison could claim a price reduction or she has the final right to reject[60]. A price reduction can be up to the whole value[61]. If Alison was to reject, she could claim a refund but money could be deducted for use[62].
A consideration in assessing whether a good is of satisfactory quality is the price paid[63]. Buying second hand is cheaper but expectations of quality are similarly reduced. In Thain v Anniesland Trade Centre the court stated that if you buy a second hand car the risk is on you; you cannot expect it to be without fault[64]. This is approved of in Chitty[65] but is a case emanating from the Sheriffs Court in Scotland. It is, therefore, at the lowest end of precedential value. Satisfactory quality is mainly concerned with hidden defects. A second hand car is more open to inspection thus defects are found and it remains satisfactory[66]. However, this would depend on whether Alison examined the relevant areas of the car because in MacDonald v Pollock it was held that because the purchaser had not examined an engine specifically they ought not to have known of defect[67]. The decision hinges on whether it remains a hidden fault; if it is, then it will not be of satisfactory quality, but if it is not, then it likely will be. The fact that the claimant in MacDonald v Pollock did not ordinarily purchase ships in the course of business assisted his case because there was a power imbalance[68]. There is also a power imbalance between Billy and Alison as she is not an expert and he is. It seems apparent that in second hand cases the stance is buyer beware rather than vendor beware but consideration is given to power relations. The power imbalance between Alison and Billy certainly strengthens her case. In advising her, RMC’s claims about reliability need to be borne in mind. On this issue, Ervine states that saying something is second hand reduces the quality expected but if the good is advertised as top of the range and little time has passed from it being new, then this can raise the expectation of quality[69]. Only three years has passed since this car was new; the promotions around the car suggest that it is very reliable so after three years the quality expected would still be high, although this obviously depends on the miles travelled and the price paid. I would therefore advise that the implied term of satisfactory quality has once again been breached. Remedies would be unchanged from the above, but due to the second hand nature the court favours traders who act reasonably[70]. The court will not order its repair if the cost is more than the value of the car but instead may opt for a swap[71].
I would advise Alison that she is a consumer so the CRA applies. Regarding the advertisement, the fuel promise is puff but the statements regarding the environment are a contractual warranty. Billy’s assertion is a misrepresentation that creates liability for him. Implied terms regarding quality and fitness for purpose have been breached and the remedies Alison could seek, including the short term right to reject and repair. Finally, purchasing a second hand car lowers the expectation of quality but there would still be a breach.
Table of cases and statues
Andrews v Hopkinson [1957] 1 QB 229.
Avon Insurance plc v Swire Fraser Ltd [2000] CLC 665.
Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013.
Case C-105/17 Komisia za zashtita na potrebitelite v Kamenova [2018] EU:C:2018:808.
Consumer Rights Act 2015.
Council and European Parliament Directive 2011/83/EU Consumer Rights, Amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council [2011] OJ L304/64.
East v Maurer [1991] 1 WLR 461.
Easterbrook v Hopkins [1918] NZLR 428.
Esso Petroleum Co Ltd v Mardon [1976] QB 801.
Horsfall v Thomas [1862] 158 ER 813.
Howard Marine v Ogden [1978] QB 574.
Jewson Ltd v Kelly/Boyhan [2003] EWCA Civ 1030.
Lambert v Lewis [1980] 2 WLR 299.
MacDonald v Pollock (The Monaco) [2013] SC 22.
Misrepresentation Act 1967.
Peek v Gurney [1873] LR 6 HL 377.
Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386.
Porter v General Guarantee Cort Ltd [1982] RTR 384.
Rodgers v Paris (Scarbrough) Ltd [1987] QB 933.
Stevenson v Rogers [1999] QB 2018.
Thain v Anniesland Trade Centre [1997] SLT (Sh Ct) 102.
Walker v Milner [1866] 4 F&F 745.
Wells (Merstham) v Buckland Sand and Silica Co [1965] QB 170.
Bibliography
Atiyah P, Adams J and MacQueen H (eds), Atiyah’s Sale of Goods (12th edn, Pearson 2010).
Beale H (ed), Chitty on Contracts, Volume 2 (32nd edn, Sweet and Maxwell 2015).
Bridge M (ed), Benjamin’s Sale of Goods (10th edn, Sweet and Maxwell 2017).
Dietzel K, Wisking S and Herron M, ‘Nothing to See Here? The UK’s Implementation of the EU Damages Directive’ [2017] Global Competition Litigation Review 169.
Ervine W, ‘Satisfactory Quality: What Does it Mean’ [2004] Journal of Business Law 684.
HM Revenue & Customs and HM Treasury, ‘Travel and Subsistence: Discussion Paper’ (Consultation outcome, 24 March 2016) https://www.gov.uk/government/consultations/travel-and-subsistence-framework-discussion-paper/travel-and-subsistence-discussion-paper accessed 8 January 2019.
[1] Consumer Rights Act 2015 s1(1).
[2] Ibid, s2(3).
[3] Council and European Parliament Directive 2011/83/EU Consumer Rights, Amending Council Directive 93/13/EEC and Directive 1999/44/EC of the European Parliament and of the Council and repealing Council Directive 85/577/EEC and Directive 97/7/EC of the European Parliament and of the Council [2011] OJ L304/64.
[4] Case C-105/17 Komisia za zashtita na potrebitelite v Kamenova [2018] EU:C:2018:808, para 34.
[5] Ibid Opinion of AG Szpunar, para 51.
[6] Ibid para 38.
[7] Ibid para 30, 41
[8] Stevenson v Rodgers [1999] QB 1028, 1042, 1043.
[9] HM Revenue & Customs and HM Treasury, ‘Travel and Subsistence: Discussion Paper’ (Consultation outcome, 24 March 2016)https://www.gov.uk/government/consultations/travel-and-subsistence-framework-discussion-paper/travel-and-subsistence-discussion-paperaccessed 8 January 2019.
[10] CRA s2(4).
[11] Ibid s2(2).
[12] Ibid s2(8).
[13] Ibid s1(1).
[14] Kim Dietzel, Stephen Wisking and Molly Herron, ‘Nothing to See Here? The UK’s Implementation of the EU Damages Directive’ [2017] Global Competition Litigation Review 169, 174.
[15] Hugh Beale (ed), Chitty on Contracts, Volume 2 (32nd edn, Sweet and Maxwell 2015) ch 44, s3(a).
[16] Michael G Bridge (ed), Benjamin’s Sale of Goods (10th edn, Sweet and Maxwell 2017) ch 10, s4.
[17] Walker v Milner [1866] 4 F&F 745, 747, 762.
[18] Andrews v Hopkinson [1957] 1 QB 229, 230.
[18] Easterbrook v Hopkins [1918] NZLR 428, (Sim J) 442.
[20] Jewson Ltd v Kelly/Boyhan [2003] EWCA Civ 1030, [2], [75], [79] [85].
[21] Ibid [52].
[22] Porter v General Guarantee Cort Ltd [1982] RTR 384, 389, 390, 392.
[23] Wells (Merstham) v Buckland Sand and Silica Co [1965] QB 170, 178-180.
[24] Ibid 176.
[25] Lambert v Lewis [1980] 2 WLR 299, 300, 304, 325, 329.
[26] Patrick Atiyah, John Adams and Hector MacQueen (eds), Atiyah’s Sale of Goods (12th edn, Pearson 2010) 260.
[27] Ibid 260.
[28] Beale (n15) ch44, s3(a).
[29] Esso Petroleum Co Ltd v Mardon [1976] QB 801, 828.
[30] Avon Insurance plc v Swire Fraser Ltd [2000] CLC 665, (Rix J) [14], [17].
[31] Horsfall v Thomas [1862] 158 ER 813, 816-817.
[32] Peek v Gurney [1873] LR 6 HL 377, 410.
[33] Peekay Intermark Ltd v Australia and New Zealand Banking Group Ltd [2006] EWCA Civ 386, [45], [50].
[34] Avon Insurance plc v Swire Fraser Ltd [2000] CLC 665, [204].
[35] Howard Marine v Ogden [1978] QB 574, 597, 599.
[36] Misrepresentation Act 1967, s2(1).
[37] Ibid s2(2).
[38] East v Maurer [1991] 1 WLR 461, 466-468.
[38] Misrepresentation Act 1967, s2(1).
[40] Howard Marine v Ogden [1978] QB 574, 574, 580, 594.
[41] Jewson Ltd v Kelly/Boyhan [2003] EWCA Civ 1030, [26], [40], [79].
[42] CRA s9(1).
[43] Ibid s9(2).
[44] Ibid s9(5).
[45] Ibid s9(6).
[46] Rodgers v Parish (Scarborough) Ltd [1987] QB 933, (LJ Mustill) 942.
[47] CRA s9(3)(a).
[48] Ibid s9(3)(d).
[49] Ibid s9(3)(e).
[50] Ibid s10(1).
[51] Ibid s9(3).
[52] Bridge (n16) ch14, s2(d)(iii).
[53] Ibid.
[54] Ibid s20(8).
[55] Ibid s20(7), (9).
[56] Ibid s20(8).
[57] Ibid s23.
[58] Ibid s23(2)(b).
[59] Ibid s22(6).
[60] Ibid s24.
[61] Ibid s24(2).
[62] Ibid s24(10)(a).
[63] Ibid s9(2)(a).
[64] Thain v Anniesland Trade Centre [1997] SLT (Sh Ct) 202, 106.
[65] Beale (n15) ch44, s3(b)(iii).
[66] CRA s9(4)(b).
[67] MacDonald v Pollock (The Monaco) [2013] SC 22, [12], [30], [52].
[68] Ibid [23].
[69] William Cowan Ervine, ‘Satisfactory Quality: What Does it Mean’ [2004] Journal of Business Law 684, 688.
[70] Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013, 1018.
[71] Thain v Anniesland Trade centre [1997] SLT (Sh Ct) 102, 106.
