What's the issue?
Under the Guarantees Directive, implemented in the UK by the Consumer Rights Act 2015, if goods do not conform to the contract under which they are sold, the consumer has a range of remedies. They are entitled to elect either repair or replacement. The trader is allowed to suggest the other of those remedies if the one chosen by the consumer is impossible or disproportionate.
A remedy will be disproportionate if it imposes costs on the trader which are unreasonable compared with the alternative remedy, taking into account the value the goods would have if they did conform to the contract, and the significance of the lack of conformity together with whether the alternative remedy can be completed without significant inconvenience to the seller.
Repair or replacement must be completed within a reasonable time and without significant inconvenience to the consumer and must be carried out free of charge.
Where the consumer is not entitled to repair or replacement or if the seller has not completed repair or replacement within a reasonable time or without significant inconvenience to the consumer, the consumer then has a right to a price reduction of to have the contract rescinded (effectively cancelled) as long as the non-conformity is more than minor.
There are some quite vague terms in this set of obligations by necessity given the vast array of potential scenarios. What is significant inconvenience in terms of how repair or replacement is carried out? What does free of charge mean? Does it mean that the consumer only has to get a refund for the cost of returns or that the trader should pay them upfront?
What's the development?
The CJEU has handed down judgment in a reference relating to obligations under the Sales and Guarantees Directive. The CJEU ruled on a number of points holding that:
- Whether or not the customer is obliged to return defective goods to the trader for repair or replacement or whether they should merely allow the trader to collect them, should be determined on a case by case basis.
- The main aim of the Directive is to protect consumers from financial burdens which might prevent them asserting their rights. Relevant factors in assessing how non-conforming goods should get back to the trader include whether it will be faster and easier for the trader to examine them in the consumer's home or place of business and how easy it is for the consumer to return the goods, for example how heavy or fragile they are.
- Under the Directive, defective goods must be brought into conformity with the contract free of charge and the trader must bear the cost of postage, labour and materials. The CJEU clarified that this does not necessarily require the trader to pay the consumer return costs in advance, but the consumer should not have to pay costs and wait for their refund where the shipping costs are enough of a financial burden to deter the consumer from exercising their rights.
- The CJEU also said that a consumer wishing to rescind their contract because the trader has failed to repair or replace defective goods within a reasonable time, must first have the following:
- informed the seller that the goods are non-conforming
- elected either repair or replacement
- made the goods available to the seller; it is for the seller to suggest how the consumer should make the goods available for repair or replacement.
What does this mean for you?
If you sell goods to consumers (this case was about distance sales but it has wider relevance), these are useful points to note. There is non-binding guidance from BEIS on these elements of the CRA, including on returns policies but this is subordinate to CJEU case law (at least for now). This judgment doesn't change anything, but provides some useful clarifications.
