The Seller’s Right to a Deduction for Use: Under Challenge?

Two recent developments have both raised the issue of whether or not a seller can impose a charge on consumers for any use of goods that has been enjoyed by the consumer, prior to returning the goods in question.  Where, for example, a purchaser takes delivery of a car which breaks down after two weeks, as a result of a fault which renders the car not of satisfactory quality under section 14 of the Sale of Goods Act 1979, the purchaser is entitled to rescind the contract.  The question then arises as to whether the seller can nevertheless make a charge for the use of the car that the consumer has enjoyed for the two week period prior to rescinding. 

This question is even more pressing for sellers who operate by way of a distance selling contract, since purchasers under such contracts are entitled to cancel the contract for no reason at all (i.e. there is no requirement that the goods be faulty) and receive a full refund of the purchase price.  Under the Distance Selling Regulations (SI 2000/2334, implementing the European Directive on distance contracts, 97/7/EC), this right of cancellation lasts for seven days from receipt of the goods, but it is extended where the purchaser is not informed of the right.  The length of the extension varies from Member State to Member State:  in the UK the maximum period for cancellation is three months and seven days, whereas it extends indefinitely in Germany until notice of the right to cancel is given to the consumer. 

This right of cancellation can result in a situation where a purchaser receives a book from an online retailer and is not informed of his right to cancel, thereby extending the cancellation period, such that it would be possible for him to return the book two months later, and cancel the contract – claiming his money back.  Since he could easily have read the book in this period, is the e-tailer entitled to deduct an amount to cover the use and benefit of the book enjoyed by the consumer in this period?

The position in Scots law is currently that the retailer is entitled, where the contract is rescinded, to make a deduction for the value of the goods used.  A recent Joint Law Commission Consultation Paper (LCCP 188/ SLCDP 139 on Consumer Remedies for Faulty Goods) has, however, assessed the value of this right.  It concludes that it rarely used, perhaps because of retailer and consumer uncertainty as to its extent and operation.  The Consultation Paper concludes that the right of a retailer to seek a deduction for use should be abolished, and seeks views on this conclusion.  The final outcome of the consultation is awaited.

In the meantime, however, a recent opinion of an advocate general of the European Court of Justice lends support to the view that a deduction for use should no longer be seen as part of a retailer’s weaponry against consumers.  In Pia Messner v Firma Stefan Kruger (Case C-489/07), this question arose in the specific context of the Distance Selling Regulations.  The advocate general concluded that it is not possible for e-tailers to make such a charge for use of the goods prior to cancellation.  This is because, under the Distance Selling regulations, the e-tailer can only charge the consumer for the cost of returning the goods, and may not make any other charge.  Allowing the e-tailer to levy a fee for the value of the used goods would equate to such a charge or penalty. 

Until such time as the final ECJ decision is available and the outcome of the Joint Law Commission consultation paper is known, the position remains unclear as regards retailers and e-tailers, but it looks as though there could be movement on both fronts in the near future.