Consumer rights & wrongs

MP3 players are owned and trusted by the great and good.

However, there have been problems reported with the batteries that Apple uses in its iPods. In August, Sky News reported that the European Commission consumer safety watchdog was conducting an investigation as a result of these problems.

This article concerns the claims made by an 11-year-old girl from Liverpool, whose iPod allegedly exploded (see “Apple tried to silence owner of exploding iPod with gagging order”, The Times, 3 August 2009).

The Sale of Goods Act 1979

The consumer is in a privileged position. Whereas in Sir Mackenzie Chalmers’s original draft of the Sale of Goods Act 1893 there were only two implied terms that were treated as conditions, one of these being Sale by Description, s 13, today under the Sale of Goods Act 1979 (SGA 1979) the implied terms ss 12–15 are all treated as conditions. These implied conditions give the consumer protection when he contracts with a commercial party and ensure that the consumer is entitled, if there has been a breach, to reject the goods and claim a refund on the purchase price.

The Unfair Contract Terms Act 1977 (UCTA 1977), s 6(2) is clear. In the case of consumer contracts the seller cannot exclude ss 12–15.

Confidentiality

These are rights that have been drafted to protect consumers. In its recent report about the 11-year-old girl, The Times included claims made by the girl’s family that Apple wrote to the girl refusing liability, and only offered to refund her the purchase price (£162) on the condition that she agreed to enter into a contract to ensure confidentiality on the matter.

The letter allegedly stated that she was to agree to “keep the terms and existence of this settlement agreement completely confidential”.

The girl’s father claimed that Apple warned them that this was the only way they would receive a refund and that if they accepted the offer, and subsequently breached the confidentiality agreement, then Apple allegedly would seek an injunction and damages to cover the breach and its legal costs.

Potential breach

If this were to be true, then would Apple be in breach of s 14(2) as this particular iPod would arguably not be of satisfactory quality? Furthermore, would Apple’s letter to the girl and her family by implication give a false impression about their actual statutory rights? The letter implies that the refund will only be available if the family agreed to an express confidentiality agreement, any breach of which will entitle Apple to seek the usual remedies of damages in tort and an interim injunction.

Based on the allegations made by the girl’s father has there been a breach of s 14(2)? When approaching s 14(2) it is worth considering the dicta of Hale LJ in Clegg and another v Andersson (trading as Nordic Marine) [2003] EWCA Civ 320, [2003] All ER (D) 150 (Mar).

Her ladyship stated that the “test is whether a reasonable person would think the goods satisfactory, taking into account their description, the price (if relevant)...[it is] not whether the reasonable person will find the goods acceptable; it is an objective comparison of the state of the goods with the standard the reasonable person would find acceptable”.

If there is a known fault with the battery and this has caused the iPod to explode, then in terms of durability and safety the particular iPod is not of satisfactory quality.

The iPod falls below the standard the reasonable person would find acceptable.
 

If there has been a breach of s 14(2) consumers have a legal right to recover the purchase price and to claim consequential damages.

Damages could include replacing any clothing or furnishing destroyed as a result of the iPod exploding. Whether or not consumers realise they have these rights is another matter, however.

They may well know that they are entitled to reject the goods, ie claim a refund, but they will probably be unaware of the extent of their legal rights. Conversely manufacturers will be aware of their legal duties and know exactly what the consumer is entitled to.

Goodwill

An offer of a refund or replacement product is the minimum that the consumer is entitled to.

A manufacturer should protect the goodwill in its brand by offering gift vouchers or an upgrade. A satisfied consumer will be less likely to report the matter to the press.

From the consumer’s point of view a quick resolution of the matter is beneficial. Obtaining the services and advice of a solicitor will prove too expensive for many consumers, especially if the product cost only £162. 

Conditions

It has been claimed that Apple offered the refund on a conditional basis. If this were true it could give the consumer the view that they are not entitled to the refund.

The offer made by the manufacturer could be perceived as a now or never offer. The girl’s father has claimed that the refund was conditional on the girl agreeing to a confidentiality agreement with Apple.

This has been referred to as a “gagging order” in the press. The inclusion of such a condition is unfair: the consumer is entitled to “X” under SGA 1979.

There is real danger here that manufacturers, by their actions and the language they use, give the impression that the consumer is only entitled to “X” if they accept certain conditions. The consumer may not realise that manufacturers will often attempt to rely on the power of a well-played bluff.

The correct approach?

SGA 1979 and UCTA 1977 are unambiguous when it comes to consumers in these circumstances. Where there is a genuine history of malfunction manufacturers should automatically offer a refund, which should not involve conditions.

A corporation which has invested heavily in its brand image is right to protect that image. However, in the case of an organisation the size of Apple it makes good commercial sense to protect the brand by enabling consumers to exercise their rights.

Manufacturers in these circumstances should inform consumers of their rights under statute and the contract; offer a refund or replacement; and offer an additional amount that has no bearing on the former.

The customer could be asked to provide consideration for the additional amount by agreeing to a confidentially agreement. With any product there will be technical faults on some occasions, the question is how the manufacturer responds to these.           

Chris Monaghan is a visiting lecturer in law at Anglia Ruskin University. E-mail:Christophermonaghan@anglia.ac.uk

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