In October, I wrote this blog identifying some of the steps businesses can take if the goods they have bought do not match up to the original specifications, for example, a consignment of facemasks with no elastic loops, writes David Little, a Partner in our Corporate and Commercial Team.
In a similar vain, the Law Commission is looking at draft legislation to reform Victorian-era rules which still apply to consumers today. As most of us are buying Christmas presents online, the importance of this work is acutely relevant. Internet sales have grown exponentially in some sectors this year, especially amid the lockdown closures of non-essential retail outlets in response to the COVID-19 pandemic. This year, internet sales jumped from 19.9% of all retail sales in January 2020 to 32.8% in September 2020, according to the Office of National Statistics.
The consultation seeks to modernise and simplify the rules on when consumers acquire ownership of goods, including where they have ordered goods online or where a retailer goes insolvent before they have received the goods.
Consumers often pay for goods in advance of receiving them, for example, whenever consumers buy goods online. It can also happen when consumers pay for products in a physical store, but the product is left with the retailer to be altered or has to be ordered by the retailer. However, If the retailer goes insolvent before the goods are delivered, a consumer can be left wondering: “can I still get the goods I ordered”?
The answer depends on whether ownership of those goods has transferred to the consumer. This is currently determined by complex, technical and outdated rules which have remained largely unchanged since the late 19th century. Some of the terminology is old-fashioned and unclear, and the rules were not designed with consumer transactions or internet shopping in mind. As a result, the rules can leave consumers confused and questioning why they cannot claim the goods they have ordered, and out of pocket if a retailer becomes insolvent after they have paid, but before they receive the goods.
The Law Commission’s draft legislation sets out in simple terms when ownership of the goods will transfer to the consumer. For most goods that are purchased online, ownership would transfer to the consumer when the retailer identifies the goods to fulfil the contract. This would occur when the goods are labelled, set aside, or altered to the consumer’s specification, among other circumstances.
If enacted, this change would bring the rules into the 21st century, ensuring they are easier to follow so consumers understand what their rights of ownership are.
The result of the upward trend in online shopping is that more and more consumers are paying for goods before receiving them. However, in recent years the number of retailer insolvencies has also been increasing. Last year saw the highest number of retailer insolvencies in five years and the Centre for Retail Research forecasts that store closures will increase by 25% in 2020 over 2019 levels.
“The current transfer of ownership rules are shrouded in complex language and lead to insolvency situations which consumers find difficult to understand,” says Sarah Green, the Law Commissioner.
It is hard to disagree with her view that with the risk of retailer insolvencies increasing, it is time for the rules to be modernised so that consumers have clarity on their rights of ownership, especially in an insolvency situation.
David Little is a Partner in our Corporate & Commercial team. Should you require any further advice or assistance, please contact us at company@bishopandsewell.co.uk
The above is accurate as at 17 December 2020. The information above may be subject to change during these ever-changing times.
The content of this note should not be considered legal advice and each matter should be considered on a case by case basis
