The ECJ ruled that the supplier had to not remove and replace but also install the replaced goods despite not having been responsible for the original installation as the goods had been faulty on delivery and consumers needed to have an absolute right for them to be put right without suffering loss. Alternatively, the supplier would have to bear the cost of someone else doing so. The ECJ further said that if only one remedy is possible then the seller cannot refuse to provide that remedy even if the cost of removing and reinstalling would be disproportionate to the value. In this case, the tiles cost €1,382 and the cost of removing and replacing was €5,830. The seller would not have been liable for the replacement if the reason for the defect was the poor installation (that the supplier was not responsible for), although proving who was at fault may not be easy.

An invitation to purchase is a commercial communication and must contain details of the product and price in a way that enables the consumer to make a purchase. The ECJ ruled that an invitation to purchase can exist even where the means to actually purchase the product or service, such as an order form, have not been provided. The implication for businesses is that the ruling seems to suggest that even an advertisement referring to a product or service and its price may be considered an invitation to purchase.

English law and guidance offered by the Office of Fair Trading previously presumed that an invitation to purchase existed only where the means of purchase was provided. The ECJ’s ruling means that the definition is much wider than this, and an invitation to purchase arises wherever the information and price on a product are sufficient for a consumer to make a transactional decision. The ECJ’s ruling is wide enough for a verbal or visual reference to a product or service merely identifying it to be considered an invitation to purchase. However, the ECJ stated that it would be up to a Member State’s national court to decide, in the particular circumstances, whether an invitation to purchase had been made or not based on the information given.

This ruling is a potential massive headache for any businesses supplying consumers as they would need to provide lots of information at a very early stage or they would fall foul of the law. However, the ECJ did limit the effects of its ruling by interpreting Article 7(4) of the Directive as allowing a trader to refer a consumer to its website for the ‘mandatory material information’ rather than actually having to set out that information in the invitation to purchase, although certain information still must be provided in the invitation to purchase and the website must actually contain the mandatory material information required by the Directive.

In this case, S supplied goods to J with a retention of title clause. That clause stated that in the event of J becoming the subject of a formal insolvency procedure, S could by notice prevent J from selling or parting with possession of any of those goods. In the meantime, as in most contracts, it was implicit that the buyer could deal with the goods. However, J did actually go into administration. S failed to serve notice to prevent further dealing with the goods. S claimed that J’s subsequent dealings amounted to wrongful interference with its goods.

The High Court initially, and now the Court of Appeal, disagreed with S. The contract did allow S to terminate J’s right to deal with the goods if J went into an insolvency procedure, but that express termination right – that had not been exercised – clearly showed that the parties did not intend that the right should terminate automatically in an insolvency event. The Court added that it was open for the supplier to state the basis on which the buyer could deal with the supplier’s goods. They could agree that the buyer’s right to deal with the goods in the ordinary course of its business would be limited by express contractual provision, but unless the parties expressly agreed to that the court would not imply such a term. The Court said that trading in an insolvency process was not in the ordinary course of business.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: “This case shows that a court would be likely to uphold an automatic restriction in the supply contract on the buyer from dealing with the goods if the buyer goes into an insolvency type process. It is open for the supplier to agree the basis on which the buyer can deal with goods that remain owned by the supplier. Traders should look at their own standard terms and conditions and get them updated as necessary without delay.”

The High Court dismissed Southwark’s claim. The framework agreement and the order had to be read together, so the reference to the Orchard software being of satisfactory quality had to be read in conjunction with the warranty in the order. The software conformed to the standard set out in the order. The judge said that satisfactory quality should be interpreted in that light rather than given the meaning under the Sale of Goods Act. It was clear from the wording in the contract that no statutory terms (including fitness for purpose or satisfactory quality) would be implied. The judge added that, in any event, the Sale of Goods Act would not apply in this case because there was no sale of any goods, as the contract made clear that there was no transfer of property in the software as the software was licensed rather than sold and on termination of the agreement all copies had to be returned or destroyed.

The Government’s ability to do this will depend on the outcome of the European Commission’s ambitions to introduce a new Consumer Rights Directive. If enacted, that Directive would harmonise all consumer laws across the European Union. However, that proposal has been controversial and opposed by the UK Government because it would water down the rights that UK consumers currently have to reject goods that do not conform to the contract.

For more on the Government’s latest recommendations, click here: http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/c/10-1255-consolidation-simplification-uk-consumer-law.

On appeal, the Court of Appeal has now ruled that B’s argument that there should be an implied term was wrong. The contract had provided that the product would be tested by an inspector at the time of loading and that decision was final and binding unless there was a manifest error. The Court of Appeal said that the implied term would render such an inspection meaningless. It could not possibly have been impliedly agreed by the parties. The parties had clearly had a desire for contractual certainty.

However, that was a pyrrhic victory for P as it lost on the other point. The implied term of Section 14 of the Act was not excluded by Clause 18 because of the poor wording of that Clause. Under English law, there was a difference between ‘conditions’ and ‘warranties’. Section 14 of the Act was a ‘condition’, but Clause18 did not exclude ‘conditions’.

This can be the danger of using a contract not written with English law in mind. This problem often arises when people use a US-originated contract and substitute the words ‘English law’ instead of the other US governing law. Unless exclusion clauses are drafted properly to reflect English law requirements, they may not work. That’s what one of the parties found out to its cost here.

The High Court said that the warranty did not apply because no operating documents had been provided by the time of the contract. There was therefore a disconnect between what Red Sky provided in its contracts and its actual processes. Instead of the contractual warranty, implied warranties applied based on the Sale of Goods Act and Supply of Goods and Services Act (notwithstanding that the contract terms had purported to exclude those terms) as no other reasonable warranty applied. The software was not of satisfactory quality or fit for its purpose. In addition, the exclusions and proposed cap on liability did not apply because, in deciding upon reasonableness, the judge took account of the fact that the parties were not of equal bargaining power, the standard terms had sought to exclude the statutory implied terms without providing reasonable replacements, and Kingsway did not know of the existence of the exclusions and limitations on liability. The judge sided with the customer to a large part based on its inability to satisfy itself with the system unless there were clear demonstrations or operating documents.