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Copyright © 1997 Rob Bradgate.
First Published in Web Journal of Current Legal Issues in association with
Blackstone Press Ltd.
President Clinton's recent call for the development of a 'framework for global electronic commerce' recognised the potential of the Internet as a medium for trade. As yet, however, trade on the Internet remains relatively insignificant, especially in the UK, but modern developments in communications and broadcast technology, and the increased use of payment mechanisms such as credit and debit cards, have given a significant impetus to all forms of 'distance selling'. Although this offers opportunities to traders to expand their markets and to consumers to choose from a wider range of suppliers, and thus of goods and services, than those in their immediate geographical locality, it exposes the consumer, who will often have to pay for goods or services in advance of their delivery, to transaction risks not raised by face to face transactions. In order to enhance consumer confidence in distance sales the EU has enacted a Directive on distance selling (Dir 97/7/EC on the protection of consumers in respect of distance contracts OJ No L 144/19, 4.6.97) which will regulate certain aspects of all forms of distance selling. The purpose of this piece is to examine the Directive and its likely impact.
IntroductionBook and Music ClubsWritten confirmation
The European Commission sees distance selling as a means to enable consumers to participate in and benefit from the Single Market(1). However, distance sales expose consumers to special risks, due to their inability to examine the goods or to visit the supplier's premises, and thus evaluate his reliability, before entering into the transaction. The new Directive is intended to protect consumers against some of those risks and thus to encourage distance selling. Moreover, although Community action had been proposed in 1975 and 1986, in the late 1980's, a number of Member States introduced their own domestic legislation to regulate distance sales. To prevent such action leading to fragmentation and compartmentalisation of the market, creating a barrier to trade - the same fears which motivated President Clinton's initiative - the Commission brought forward a draft Directive in May 1992 (OJ C 156/14, 23.6.92). Following detailed criticism and comment the Council of Ministers adopted a common position in June 1995 (OJ No C 288/1, 30.10.95) and on 20 May this year, the Directive was finally enacted in accordance with the procedure in article 189b. The Directive came into force on 4 June, when it was published in the Official Journal. Member States have three years from that date in which to implement it. Many of the weaknesses of earlier drafts have been remedied, and the structure of the final text is both simpler and clearer than that of the original draft, but in some areas the final text remains disappointing.
The Directive's substantive provisions cover five main areas: provision of information about the contract and its terms (Articles 4 and 5); the right of withdrawal from the contract (Article 6); the time for performance by the supplier (Article 7); payment by card (Article 8); and inertia selling (Article 9). It applies to all distance contracts between a "supplier" and a "consumer", defined in terms familiar from other recent EU consumer protection measures. Thus a consumer must be a "natural person" "acting for purposes which are outside his trade, business or profession" (Article 2.2) while a supplier is any natural or legal person "acting in his commercial or professional capacity" (Article 2.3)(2). A "distance contract" is "any contract concerning goods or services concluded between a supplier and a consumer under an organised distance sales or service provision scheme run by the supplier who, for the purposes of the contract, makes exclusive use of one or more means of distance communication up to and including the moment at which the contract is concluded" (Article 2.1). The key to the Directive's scope is therefore the use of "means of distance communication" but, as recital 9 of the preamble to the Directive recognises, "the constant development of those means of communication does not allow an exhaustive list to be compiled". It therefore seeks to establish general principles applicable to all such methods and defines "means of distance communication" as "any means which, without the simultaneous physical presence of the supplier and the consumer, may be used for the conclusion of a contract between those parties" (Article 2.4). Annexe 1 contains an indicative list of "means of communication at a distance" which, in addition to more traditional forms of mail order, includes telephone, fax, e-mail, television and videotex. The Internet is, surprisingly, not expressly mentioned but clearly is included. This is somewhat different from the approach of the first draft which applied only where a means of communication at a distance was used to convey a "contract solicitation" and therefore appeared not to apply to contracts initiated by the consumer (Bradgate 1993).
The upshot seems to be that a distance contract is any contract concluded by any means where the consumer and supplier (or their respective agents) do not meet face to face prior to conclusion of the contract. However, certain types of contract are wholly excluded from the scope of the Directive, whilst others are exempted from some of its controls. Wholly excluded are contracts:-
relating to financial services
concluded by means of automatic vending machines
concluded with telecommunications operators through public payphones
for the construction and sale of immovable property "or relating to other immovable property rights. except for rental"
concluded at an auction (Article 3.1).
On the whole this list is understandable. Contracts for financial services are regarded as giving rise to special problems and are therefore often excluded from consumer protection legislation. The same is true of contracts relating to land, where the availability of a right for the consumer to withdraw from the contract could give rise to particularly difficult problems. Contracts concluded through vending machines or for use of public telecommunications services do not give rise to quite the same problems as other forms of distance sale(3).
The original draft appeared not to apply fully to the typical arrangement whereby consumers buy items such as books and cd's from book and music 'clubs'. The present writer criticised this aspect of the draft as inappropriate and based on a misunderstanding of the contractual structure of the relationship between such clubs and their members (Bradgate 1993), which give rise to not one contract but several. The final text of the Directive contains no special provision for such arrangements, but seems still to be based on a misunderstanding of them. Recital 10 refers obliquely to transactions "comprising successive operations or a series of separate operations over a period of time", recognises that they may be treated differently in the laws of different Member States and therefore seems to permit Member States to deal with such arrangements in different ways, only requiring the provisions of the Directive to be applied to the initial contract. This is unfortunate. Whilst consumers may only need to be notified of contract terms on initially joining the club, other aspects of the Directive's protection, such as the right to withdraw form the contract (by returning unwanted items), cancellation of disputed card payments and prohibitions on inertia selling should apply to individual transactions entered into by the parties. It is to be hoped that when it comes to implement the Directive the UK government will take the opportunity to maximise consumer protection and extend the implementing rules to such arrangements.
The Directive requires that the consumer be provided with information about vital elements of the contract "in good time prior to the conclusion" of any contract (Article 4.1) and, where that information is not given in written form, that it be confirmed in writing "or any other durable medium available and accessible to him" (Article 5.1). The relevant information includes:-
the name of the supplier, and, where the contract requires pre-payment, his address;
the main characteristics of the goods or services
the price (including "all taxes")(4);
any delivery costs
arrangements for payment, delivery and performance
the period for which the price remains valid
under contracts for the recurrent supply of goods or services, the minimum duration of the contract
In addition, the supplier should inform the consumer of "the cost of using the means of distance communication where it is calculated other than at the basic rate", a requirement clearly aimed at contracts for the use of distance communications such as premium rate telephone services. The supplier must also notify the consumer of the right to withdraw, where available(5). In effect, therefore, the supplier must notify the consumer of all the main terms of the contract.
The relevant information must be provided in a "clear and comprehensible manner, in any way appropriate to the means of distance communication used and with due regard, in particular, to the principles of good faith in commercial contracts" and of the rules for protection of vulnerable contractors, such as minors, and the "commercial purpose" of the information must be made clear (Article 4.2). These requirements recall the good faith requirement in the Unfair Terms Directive, but the requirement here is derived from the Direct Marketing Code of the ICC. The resultant reference to "good faith in commercial contracts" is unfortunate, not merely because English law recognises no such general requirement at present, but more importantly because one suspects that the requirements of good faith in consumer contracts may differ from those applicable to commercial contracts. Nevertheless, one can surmise that the core of this requirement is, rather as under the Unfair Terms Directive and Regulations, that the supplier should deal openly with the consumer, supplying the information in a comprehensible and legible manner. The ICC Code, for instance, prohibits the solicitation of contracts under the guise of conducting market research. Notably the Directive expressly does not require that the information be supplied to the consumer in his own language. Indeed, recital 8 expressly states that "the languages used for distance contracts are a matter for the Member States". Whilst one recognises the political pressures and national sensitivities behind this approach, it clearly undermines the effectiveness of the information requirement in the Directive. The original draft did at least require the contract information supplied to the consumer to be in the same language as the contract solicitation, it perhaps being a reasonable assumption that if the consumer could understand the language to place an order (s)he could also be expected to understand the contract information in that language. This may be a minor point, however, since it is to be hoped that it would be regarded as a breach of good faith for a supplier to supply contract information in a language which he knows the consumer does not understand (as appears to be the case under the Unfair Terms Regulations). This would not necessarily mean that the supplier should translate the terms, but might well mean that, say, an English company receiving an order in French from a French consumer should supply information in French, whereas it might quite fairly supply the information in English if the order were in English.
Recognising that "information disseminated by certain electronic technologies is often ephemeral in nature insofar as it is not received on a permanent medium" (recital 13), the Directive goes on to require that the information supplied to the consumer must be confirmed "in writing or on any other durable medium" "in good time during performance of the contract" and, at the latest, at the date of delivery of the goods (Article 5). Failure to comply with this requirement may, as seen below, extend the period during which the consumer may withdraw from the contract. The effect of this is that paper and similar physical media will be with us for some time, even where contracts are made via telephone, Internet or other methods of telecommunication. In most cases, however, this will cause few, if any problems: the requirement can be satisfied by including the required information in a delivery note sent with the goods. The only exceptional case where written confirmation is not required is where the required information has already been supplied to the consumer in written form, but even then (s)he must receive a second written notice setting out details of the supplier's address, after sales service and guarantees, the right to withdraw from the contract, and the mechanism for terminating the contract if it is of indeterminate duration or to run for more than one year.
The Directive provides that the consumer should have a right to withdraw from any distance contract (Article 6). Of course, consumers already have a right to withdraw from a proposed contract before the contract is concluded by offer and acceptance. In most cases the offer to contract will be made by the consumer who will therefore have a little time for reconsideration, at least where the offer is made by post. In addition, a consumer may be able to escape from the contract where the supplier is guilty of misrepresentation or of a serious breach of contract, including a breach of condition. The right of withdrawal in the Directive is, however, a right to withdraw from a perfectly binding contract, after offer and acceptance and without proof of breach, misrepresentation or any other vitiating factor. Consumers already have similar rights to withdraw from so-called 'doorstep' contracts and from certain types of credit agreement(6).
The Directive gives the consumer a minimum of seven working days during which to exercise the right to withdraw. The period may, however, be substantially longer - up to three months. The relevant provisions are complex but their effect seems to be as follows. In the case of a contract for supply of goods the seven day period commences on the date of delivery and in the case of contracts for services on the date of conclusion of the contract, provided, in each case, that the consumer has then been supplied with the required contract information in accordance with Article 5 of the Directive (Article 6.1). If not, the seven day period begins at the date the Directive's information requirements are satisfied, provided that in any case the withdrawal period ends at the end of three months from the date of delivery of the goods or of conclusion of a contract for services. Failure to supply the information required by the Directive can therefore considerably extend the period during which the consumer may withdraw from the contract, although the penalty in this regard is far less severe then that applicable in the case of credit agreements and doorstep contracts, where failure to give the consumer notice in the proper form of his/her cancellation rights under a cancellable agreement can result in the agreement being wholly unenforceable(7).
The Directive says little about the actual mechanism of withdrawal - the giving of notice, its effectiveness and so on. However, the effect of withdrawal is to release the consumer from the contract. Any sums paid by the consumer are to be refunded within 30 days. The consumer must return any goods supplied (Article 6.2). The original draft directive would have required the consumer exercising the right of withdrawal to provide proof of the return of any goods. This requirement has since been dropped, although the consumer can be required to pay the costs of returning the goods. Where the price of the goods or services is covered by a credit agreement with the supplier, or with a third party creditor "on the basis of an agreement between the third party and the supplier", the consumer is to be released without penalty from the credit agreement as well as from the supply contract (Article 6.4)(8).
Certain types of contract are excluded from the withdrawal provisions (Article 6.3). On the whole the excluded contracts can be seen as cases where a right of withdrawal would impose an unfair burden on the supplier. Thus the consumer is not entitled to withdraw from contracts for goods or services whose price is subject to fluctuations "in the financial market" outside the supplier's control, for goods supplied to the consumer's specification or which are personalised, by their nature cannot be returned, or are perishable, for the supply of newspapers and other periodicals or for gaming or lottery services. The right of withdrawal is also excluded where, under a contract for provision of services, performance has begun before expiry of the seven day period. The original draft and common position also excluded the right of withdrawal in the case of contracts for items which could be "immediately reproduced", intending this to refer to audio and video recordings and computer software. This was a little surprising since a consumer may be as disappointed with a compact disc or computer program bought by mail order as with any other item. The objective, of course, was to prevent consumers ordering such items, copying them (in breach of copyright) and then returning them. The final version meets both objectives of protecting consumer and supplier by excluding the right of withdrawal in relation to contracts for the supply of audio and video recordings and computer software where the item supplied has been "unsealed" by the consumer. Suppliers can, therefore, protect themselves by supplying the goods in sealed packaging; the consumer can still withdraw if before unsealing the item (s)he realises that (s)he does not want it or that it is not what (s)he thought it was. For fast readers it will, apparently, remain possible to order a book, read it and then return it by exercising the right to withdraw.
The rights already given to consumers to withdraw from or cancel certain types of credit agreement and 'doorstep' contracts are intended to protect the consumer from 'high pressure' sales techniques leading to ill-considered purchasing decisions (although there are curious lacunae in the protection, particularly under the Consumer Credit Act: see Howells and Weatherill 1995 p 258, Bradgate 1995 p 483). The rationale for a right of withdrawal in the present context is different. The consumer is less at risk of high pressure sales techniques (although telephone and similar selling techniques can be intrusive and persuasive) but does risk being committed to buy without the opportunity first to examine the goods or evaluate the supplier. On that basis the right to withdraw from distance contracts for the supply of goods makes perfect sense. The treatment of contracts for services is a little harder to comprehend. A consumer contracting face to face for services, whether such as (say) plumbing or building work, or continuing services such as satellite television or Internet access, has no more chance to judge the service prior to commencement of performance of the contract than does one contracting at a distance. Consumers contracting for services under a distance contract are no more or less in need of a right of withdrawal than those who contract on a face to face basis. Exclusion of the right of withdrawal in cases where, under a contract for provision of services, performance has commenced seems intended to balance the consumer's interests with those of the supplier who may have provided the consumer with a benefit before withdrawal, but a better approach would surely be to require the consumer to pay for any benefit received. Even if exclusion of the right to withdraw is appropriate to cases such as contracts for building work, it seems less so in the case of contracts for services for continuing services, such as satellite television or Internet access, where the consumer can only evaluate the service after performance has commenced. In an age where most goods are sold pre-packaged and without prior inspection, the ultimate logic is that all consumer contracts should be subject to the consumer's right to cancel.
Implementation of the Directive will require a number of other questions to be answered. Detail on the mechanics of the right of withdrawal will have to be completed. The Directive leaves some important questions unanswered: for instance, does the consumer who withdraws from a contract for sale of goods have a lien over goods supplied to secure the return of any payments (s)he has made? (see Howells 1996 p 158). The relationship of the new right of withdrawal to the existing rights to cancel consumer credit and doorstep contracts should also be considered. Some differences between the regimes have already been noted. In addition, the periods during which the right of cancellation may be exercised under each regime will differ. Even if there is little danger of overlap between the rules governing distance contracts and the existing regimes - the categories of distance and doorstep contracts are clearly mutually exclusive and a distance contract is unlikely to be cancellable under the Consumer Credit Act(9) - there would be much to be said for harmonising the rules, where possible, to avoid unnecessary complexity.
Article 7 of the Directive provides that "unless the parties have agreed otherwise, the supplier must execute the order within a maximum of 30 days from the day following that on which the consumer forwarded his order to the supplier". This apparently simple provision raises a number of intriguing possibilities. At common law the consumer's order may, sometimes, be an acceptance of a prior offer by the supplier, in which case the Directive merely fixes a maximum period during which the contract must be performed. It leaves open the possibility that the parties may agree a different period, but it should be borne in mind that any attempt by the supplier to lengthen the period for performance will probably be subject to statutory control under the Unfair Contract Terms Act (s.3) or Unfair Terms in Consumer Contracts Regulations. Often, however, the consumer's order will be an offer. Unless the supplier acknowledges that offer, acceptance will take place, and a contract be concluded, when the supplier despatches goods in response. Does the word "must" impose a mandatory duty on the supplier to accept all offers? Art 7.2 provides for the situation where the supplier is unable to perform because the goods or services ordered are unavailable, in which case the consumer must be informed of that fact as soon as possible and, in any case, within 30 days. However, that could be read merely as covering the situation where the contract is frustrated. Even if one reads Article 7 as fixing a maximum period during which an offer may be accepted (at common law the consumer's offer would lapse if not accepted within a reasonable time), the proviso, "unless the parties have agreed otherwise" is difficult to apply to a situation where, ex hypothesi, the parties have not yet reached agreement. What if the consumer responds to an advertisement offering to supply goods but stating that offers may take 60 days to fulfil? In order to accommodate the wording of the Directive the advertisement must be read as an offer, accepted by the order, but the common law has been reluctant to interpret advertisements of goods for sale as offers to supply. Perhaps to avoid this the advertisement could be read as a statement of terms which the consumer agrees to by placing an order offering to buy, so that the parties are treated as agreeing on terms before formation of a contract of sale, but this seems unnecessarily complicated. The Directive may thus require some reconsideration of traditional common law rules of contract formation.
Another interesting problem is raised by Article 7.3 which permits Member States to allow suppliers to contract to provide alternative goods "of equivalent quality and price" to those ordered, provided that the consumer (1) is informed of this possibility "in a clear and comprehensible manner", and (2) has a right to withdraw from the contract and return the substitute goods at the supplier's expense. The Directive does not state when the consumer must be so informed, but clearly any right to deliver substitute goods must be reserved by the terms of the contract. Any term reserving such a right will be subject to a test of fairness under the Unfair Terms in Consumer Contracts Regulations. If the UK government chooses to give suppliers such a right, will it be arguable that a term reserving a right of substitution is prima facie fair under the Regulations, because permitted by the new rules? In any case, a term purporting to allow a seller to deliver goods of a different description from those ordered will be wholly ineffective against a consumer buyer under the Unfair Contract Terms Act 1977 (s.6).
One of the most important issues to be addressed in the context of distance sales is the security of payment. Consumers are often, and generally in the case of goods, required to pay prior to delivery/performance. The use of credit and debit cards to finance distance selling is often subject to fears that where card details are given to a supplier and transactions authorised without proper authentication, cards may be subject to fraudulent abuse. Doubt about payment security is one of the greatest impediments to the development of shopping via the Internet. The Directive recognises these dangers but its provisions to deal with them are weak and vague. Article 8 requires Member States to ensure that where fraudulent use has been made of his card in the context of a distance contract covered by the Directive "appropriate measures exist to allow a consumer to request cancellation of a payment" , and to be recredited with sums paid. There is no definition of payment card. Let us be generous and, adopting a purposive interpretation, assume that it must include both credit and debit cards. There is nothing on burden of proof. The first draft placed the burden squarely on the supplier to prove, in the event of challenge, that the consumer did authorise the transaction. That might be a difficult burden to discharge, but perhaps its imposition on the supplier was justified given the benefits to suppliers of distance contracting. Now an almost equally great burden may be placed on the consumer. No doubt this was a difficult and controversial issue, but its resolution by leaving the matter to Member States is no resolution at all and will do little to enhance consumer confidence in the security of payments in distance contracts.
Moreover, fraudulent use of payment cards is only one part of the problem of security of payments. Another, at least as important, is the risk of supplier insolvency to which the pre-paying consumer is exposed. In English law a pre-paying buyer of goods may, in certain circumstances, acquire property rights over goods and therefore be secured against the supplier's insolvency, but such situations will be exceptional and recent reforms to domestic sale of goods law to protect pre-paying buyers are unlikely to have much impact in the consumer context(10). Pre-paying purchasers of services have no protection. Exceptionally it may be possible to argue that consumer pre-payments are held on trust to satisfy their orders, so that in the event of non-performance the consumer is entitled to recover some or all of the payment (see, eg: Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567). A consumer who pays by credit card may also be protected by the right to recover against the card issuer (Consumer Credit Act 1974 s.75). Despite these possibilities, however, there is a real risk that pre-paying consumers will be unable to recover their payments if the supplier becomes insolvent without performing the contract. The obvious solution is a statutory requirement on suppliers to establish a pre-payment protection fund, or to participate to a protection scheme operated by a third party(11). But such a requirement would impact on national property and insolvency distribution laws, ever a sensitive topic. The Directive therefore ignores the problem and leaves a real impediment to confidence in distance contracting unaddressed.
The Directive requires Member States to take measures necessary to prohibit the supply of goods or services to a consumer with a demand for payment without the consumer's prior order (Article 9). No further measures should be necessary to implement this aspect of the Directive in the UK since inertia selling is already regulated by the Unsolicited Goods and Services Act 1971 which has largely exterminated the practice.
There is no doubt that the final version of the Directive is a considerable improvement on the Commission's first draft and that, when implemented, it will provide consumers with a measure of legal protection not currently available (although many of its provisions do no more than reflect best current practice as contained in the various industry codes of practice applicable in the distance sales context). It will, nevertheless, have to be implemented with care to reconcile it with established common law analyses of contract formation. Thought should perhaps be given at the same time to reconciling the different cancellation and withdrawal rules applicable to different types of consumer contract. The Directive is, moreover, flawed in several respects. There are some curious lacunae in its protection, such as the exclusion of the right of withdrawal where performance has commenced under a contract for services. In many cases it may be argued that consumers who contract for goods and services on a face to face basis are as much in need of contract information and a right of withdrawal as those who contract on a distance basis. And, despite the recognition of the impact of the development of new methods of communication, the Directive appears, in many respects, to be backward looking. In the specific area of the Internet, the requirement that contract terms be provided in writing or some equivalent medium is likely to be restrictive. Above all, the failure to deal adequately with the various problems of payment security means that the biggest single impediment to the development of distance trade remains unaddressed.
Bradgate, R (1993) 'Distance Selling in the UK and the proposed EC Directive' 1 Consumer Law Journal 19
Bradgate, R (1995) Commercial Law, 2nd ed (London: Butterworths)
House of Lords (1997) Report of the European Communities Committee on Consumer Guarantees (10th Report, Session 1996-7, HL Paper 57)
Howells, G, and Weatherill, S, (1995) Consumer Protection Law (Aldershot: Dartmouth Publishing)
Howells, G (1996) 'A consideration of EU proposals to regulate distance selling'
in Lombay, J. (ed) Enhancing the position of the European Consumer
(IEL/BIICL)
Footnotes
1. The Directive is therefore motivated by the same concerns as the recent draft Directive on Consumer Guarantees (COM(95) 520; see Bradgate (1997)). However, whereas the draft Guarantees Directive would mainly protect the consumer who travels to shop, the Distance Selling Directive is intended to protect the consumer who shops from home. There are real doubts about the need for a Directive on Guarantees (see Bradgate (1997), House of Lords (1997)) but the case for a Directive on Distance Selling is more compelling. Back to text.
2. Although the definitions are broadly similar to those appearing in other, related, Community legislation, there are annoying and incomprehensible differences between the definitions used in different contexts. Compare the definitions of "seller or supplier" in the Unfair Terms Directive as "any natural or legal person ... acting for purposes relating to his trade, business or profession" and in the recent draft Directive on Consumer Guarantees as a person who sells goods "in the course of his trade, business or profession". Back to text.
3. The original draft contained a longer list of exclusions, including contracts for services which involve a reservation, such as booking a hotel room or airline ticket, because of the need for the supplier to make advance arrangements for performance of the contract and contracts for the supply of "foodstuffs, beverages or other goods intended for current consumption in the household" or for "services for current consumption". Although some provisions of the Directive are inappropriate for application to such contracts, there is no justification for their wholesale exclusion, and it is therefore reassuring to see that, although they are excluded from the provisions giving the consumer a right to withdraw from the contract, they are nevertheless covered by the Directive's other provisions. Back to text.
4. Curiously the first draft did not require the supplier to include details of the price in the information supplied to the consumer. Back to text.
5. No specific form of notification is prescribed. It is to be anticipated that when the Directive is implemented the form of wording to be used will be prescribed, as is the case under the Consumer Credit Act 1974 and the Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987 (SI 1987 2117 which implement Council Directive 85/557/EEC to protect the consumer in respect of contracts negotiated away from business premises, OJ 1985 L372/31). Back to text.
6. Consumer Credit Act 1974 and the Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987. Back to text.
7. Consumer Credit Act 1974 s. 127(4)(b) and the Consumer Protection (Cancellation of Contracts Concluded Away from Business Premises) Regulations 1987 reg 4. Back to text.
8. Where in such circumstances the credit agreement is a regulated agreement under the Consumer Credit Act the contract for the supply of goods or services will be a linked agreement for the purposes of the Act (s.19(1)) and, as a result, will be cancellable under that Act if the credit agreement is cancellable. However, a credit agreement is only cancellable under the 1974 Act if there have been face to face dealings between the creditor, or his agent, and the consumer. Back to text.
9. A consumer credit agreement is only cancellable where oral representations have been made by the creditor or his agent in the presence of the consumer: Consumer Credit Act 1974 s.67. It is theoretically possible, however, to envisage a situation where a consumer enters into a distance contract for the supply of goods or services, financed by a credit agreement with a creditor with whom the supplier has arrangements, and deals face to face with the creditor, in which case both sets of cancellation rules could apply. Back to text.
10. Where the contract is for specific goods, the buyer may become owner of the goods when the contract is made, by virtue of s.18, rule 1 of the Sale of Goods Act 1979, and doubtless a court would strive to reach that conclusion where a consumer had paid in advance for specific goods to be delivered by a (now) insolvent seller. However, distance contracts for specific goods will be rare. More commonly the contract will be for unascertained goods, in which case the consumer will not become owner of any particular goods unless and until the goods to be delivered under his/her contract are ascertained and unconditionally appropriated to the contract (as a result of a combination of s.16 and s.18 r.5 of the Sale of Goods Act). In practice this means that the consumer will not own any goods until, at the earliest, goods are addressed to him and ready for despatch, and possibly not until goods are put in the post. As a result of changes made by the Sale of Goods (Amendment) Act 1995 a pre-paying buyer may sometimes become a co-owner of unascertained goods from which he is to be supplied (Sale of Goods Act 1979 s.20A). However, the new provisions only apply where the parties have agreed that the goods should be supplied from an identified bulk source. This will rarely be the case in respect of consumer distance contracts - unless, perhaps, an agreement can be inferred that the consumer's contract should be satisfied from the supplier's current stock. Back to text.
11. Such schemes are required by some of the Industry Codes of Practice applicable to distance selling. Back to text.
