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Selling Goods and Services

If you run a company which sells goods and services, then there are a number of legal considerations that you need to be aware of.

Implied rights of customers

It is important to know the implied rights that customers have when purchasing goods or services from you. These are rights that consumers are automatically entitled to by law and do not have to be agreed upon.

The Sale of Goods Act 1979

The Sale of Goods Act places an obligation on those selling products to ensure that they are fit for purpose, of satisfactory quality and as described. This means that customers must be able to use items for the purpose that they commonly expected to be used for as well as for any particular purpose that they made known to you at the time of sale.

The item must also be of a standard that a reasonable person would expect, which generally means the item is free from defects or faults and of a reasonable appearance. An item must also correspond with any description applied to them, be it in an advert, a sign or verbally.

The customer has the right to reject the goods and demand a refund if they do not fulfil any of these criteria, providing they have not accepted them. Acceptance could mean the customer has:

  • told you that they have accepted them
  • used them in such a way that they cannot return them in their original state
  • kept them for a reasonable amount of time without telling you that they wish to return them

When you’re not obliged to offer a refund

You are under no legal obligation to offer a refund to a customer if:

  • they knew the item was faulty before they bought it
  • they have damaged the item by attempting to repair it themselves or by enlisting a third party
  • they no longer want the item as it doesn’t match their preferences (e.g. wrong colour), unless they bought it without seeing it
  • the breach is so slight that it would be unreasonable for the seller to allow refunds

Certain items, like customised items, perishables, newspapers, magazines and CDs only have to be refunded if they’re faulty.

Does the customer need to prove an item is faulty?

If a fault arises with a product within six months of its purchase, and it is not a result of wear and tear, then the customer does not need to prove it was faulty at the time of purchase. The seller must either repair or replace the faulty goods. Even if a fault appears after six months, you may still be obliged to repair or replace but the customer needs to be able to prove that the item has an inherent fault and this was the cause of the problem.

The Supply of Goods and Services Act 1982

This is an important piece of legislation for service providers to be aware of as it applies to contracts which are for services only, as well as contracts for services and the materials provided. The aim of the Act is to protect consumers from poor workmanship or the poor provision of services.

The Act decrees that any service must be:

  • carried out with reasonable care and skill
  • finished in a reasonable time (if no time was agreed)
  • carried out for a reasonable charge (if the price was not fixed in advance)

If you provide a service which includes goods (for example, if parts are replaced) then these goods must be (as per the Sale of Goods Act):

  • as described
  • of satisfactory quality
  • fit for purpose

If a customer complains, they may be able to claim compensation from you which in the first instance is a repair and/or replacement at your expense. If you are unable or unwilling to repair/replace the work then the customer can look to recover the costs of hiring someone else to remedy the work.

Distance Selling Regulations 2000

Any business partaking in distance selling, i.e. selling online, by mail or telephone, should note that customers buying this way have the right to reject items for any reason within 14 days of receiving them. This 14 day period is commonly known as a ‘cooling off’ period. If a customer does this then you must refund them, in full, within 14 days of you receiving the items back.

There are specific documentary requirements that need to be complied with under these regulations, more information on which can be found on our Business Regulations and Legislation page.

Online sellers also need to be aware of the Consumer Contracts Regulations, which are covered on our Starting an Online Business page.

Product liability

If you run a business which supplies products, you must ensure that they are safe for customers to use. Suppliers and distributors as well as manufacturers have responsibility in this regard and could be held liable if any harm is caused.

The government advises that the following steps should be taken to ensure your customers are not placed in danger by your products:

  • warning consumers about potential risks
  • providing information to help consumers understand the risks
  • monitoring the safety of products
  • taking action if a safety problem is found

Nonetheless, it may be wise to take out product liability insurance to cover yourself against any potential claims.

The Consumer Protection Act 1987

This legislation gives further protection to the public against faulty goods. If you sell a product which is not as safe, as the average person would expect, it is defective under the Act. If you have sold or produced such defective goods, you are strictly liable for any damage or loss caused to anyone who used it. It is a criminal offence for a manufacturer to supply unsafe products.

Unfair terms in sale of goods contracts

You need to make sure when selling goods and services to consumers that the terms of any contracts of sale you use are fair, otherwise they may not be enforceable. You must also make sure terms are communicated in plain language so that they do not mislead the customer.

Terms that are always unfair in consumer contracts

You can’t try to claim that you’re not responsible for:

  • death or injury
  • faulty goods
  • goods that aren’t as described
  • selling goods that you have no right to sell

It may also be unfair to try and sidestep your responsibilities by, for example:

  • delays
  • providing poor customer service
  • not doing what was agreed

Sales of goods contracts should not weigh things heavily in the favour of the seller and may be unfair if they allow:

  • excessive cancellation charges (known as penalty clauses)
  • a change of price by the seller deep into the process