Credit transactions 427Creditor regarded as agent of the supplier
Often a creditor deals directly with a debtor, for example where a business directly gives
credit to a customer. However, credit is sometimes given without the creditor meeting the
debtor. This happens, for example, when a customer uses a credit card in a shop or when a
shop arranges a hire-purchase contract for the customer. Section 56 CCA 1974 provides that
if there is a connection between the supplier and the creditor, the supplier of the goods is
regarded as the agent of the creditor. The consequence of this will be that the creditor will
be liable for what the supplier says when negotiating. The creditor is therefore liable for
statements of the supplier which amount to misrepresentations or to terms of the contract,
and money paid to the supplier is regarded as having been paid to the creditor. There is a
connection between supplier and creditor when a credit card is used by the customer,
because the supplier will have agreed with the creditor that he will accept this type of credit
card. There is a also a connection when goods are taken on hire-purchase, because the sup-
plier first sells the goods to the creditor who then makes the hire-purchase agreement with
the customer. (See triangular transactions, explained in Figure 16.1.)
Example
Salman visits a car dealer and buys a second-hand car because the dealer says that it will
do 50 miles to the gallon. He pays with his credit card. In fact, the car does only 30 miles to
the gallon. The dealer has made a misrepresentation and Salman will be able to rescind the
contract. However, the dealer has gone into liquidation. Section 56 regards the misrepre-
sentation as having been made by the credit card company, as well as by the dealer. Salman
can therefore regard the company as having made the misrepresentation and insist that they
re-credit his account in return for his giving back the car.Creditor responsible for dealer’s misrepresentations and breaches of contract
Section 75 CCA 1974 protects a customer who uses credit supplied by someone other than
the supplier of the goods or services being bought. It provides that the creditor is liable for
any misrepresentation or breach of contract made by the supplier if:
(i) the contract was a commercial transaction relating to the supply of a single item with a
cash price between £100 and £30,000; and
(ii) the credit is given either under a credit card or where there is a connection between the
supplier and the creditor.
This section is particularly useful when the supplier has become insolvent before the con-
tract has been performed. When Laker Airways went into liquidation customers who had
paid cash for their tickets were left with no remedy. Those who had paid any amount of the
ticket price with their credit cards could sue the credit card companies for the whole of their
ticket price.
Notice that s. 75 will apply only if the cash price of any single item was more than £100.
If a customer bought five different items at £90 each from the same supplier, the provider
of credit would not assume any liability under s. 75. However, if the cash price of any
single item is between £100 and £30,000, then the creditor is fully liable in respect of that
particular item, no matter how small the credit advanced.
Notice also that s. 75 does not apply where the customer has arranged his own credit
in advance. It would apply to purchases with a credit card but would not apply where a
customer overdraws his bank account to make the purchase.