Chapter 10Contracts for the supply of goods and servicesguarantee or warranty which accompanies the goods.
A manufacturer’s guarantee has become an expected
standard feature of the sale of ‘consumer durables’.
The guarantee usually consists of an undertaking by the
manufacturer to repair or replace faulty goods within
a certain period of time.
The question arises of whether a manufacturer is
bound to honour the promises contained in his guaran-
tee. In other words, can the guarantee form the basis of
a contract between the consumer and the manufacturer?
Unfortunately, the legal position was far from clear. If
the consumer could show that he knew about the guar-
antee before he bought the goods, he would be able to
establish the existence of a collateral contract with the
manufacturer by applying the reasoning employed in
the Carlillcase. The liability of the manufacturer of
defective goods which are under guarantee could be
established in another way. The guarantee often takes
the form of a postcard, which the consumer must com-
plete and send off to the manufacturer within a certain
period of time. The inconvenience that this entails may
be sufficient consideration to support the manufacturer’s
promise. In the past, guarantees often contained an
exemption clause, which deprived the consumer of the
rights he might otherwise have had against the manu-
facturer. Section 5 of the Unfair Contract Terms Act
1977 now prevents this practice by providing that any
clause in the manufacturer’s or distributor’s guarantee
purporting to exclude or restrict liability in negligence
for loss or damage will be unenforceable against a con-
sumer if the following conditions are met:
■the goods are of a type ordinarily supplied for private
use and consumption;
■the goods have proved defective while in consumer
use;
■the manufacturer or distributor did not sell the goods
directly to the consumer.
Since 1 November 1978, manufacturers have been
required to include a statement in their guarantees to
the effect that the consumer’s statutory rights are unaf-
fected by the terms of the guarantee. Failure to make
such a statement is a criminal offence by virtue of orders
made under the Fair Trading Act 1973.
Reform and guarantees
The problems relating to guarantees were highlighted
in an Office of Fair Trading (OFT) Report (Consumer
Guarantees) published in 1984:
■the consumer may buy an extended guarantee, which
may become worthless if the guarantor goes out of
business;
■delays in dealing with complaints or authorising repair;
■consumers have expectations of ‘peace of mind’,
which often disappear when they come to enforce the
guarantee;
■the guarantee may not be transferable to a subsequent
purchaser.
Over the years proposals for reform have been made
variously by the OFT, the National Consumer Council
and the DTI (now BERR). A private member’s Con-
sumer Guarantees Bill was introduced in 1990, but was
lost because of a lack of parliamentary time and govern-
ment opposition.
The European Directive on the Sale of Consumer
Goods and Associated Guarantees, adopted on 7 July
1999, introduces the notion of a legally enforceable
guarantee. The UK has implemented the requirements
of the Directive by the Sale and Supply of Goods to
Consumers Regulations 2002 which came into force on
31 March 2002. Where goods are sold or supplied to a
consumer and a consumer guarantee is offered, then the
guarantee will be legally binding as a contractual obliga-
tion. The guarantee must:
■be in writing, and, if the goods are offered in the UK,
it must be in English;
■set out in plain and intelligible language the contents
of the guarantee and the information necessary to
make a claim, including the name and address of the
guarantor and the duration and territorial scope of
the guarantee;
■be made available within a reasonable time in writing
or some other durable and accessible medium.
Enforcement authorities may apply for an injunction
against the guarantor or other person offering the guar-
antee in the event of non-compliance.