Regulatory Compliance Briefing Note -
Online Auctions & Consumer Protection

Online Auctions

The Sale of Goods Act applies to online auctions in the same way it applies to physical auctions. The 2002 Regulations grant consumers new rights that assimilate the responsibilities of persons selling through auctions to normal retail sales. These rights exist against the auctioneer where second-hand goods are purchased in an unattended auction, i.e. via the internet, telephone, fax or mail-order. Of course, auction sites, such as eBay, are normally structured so that the purchaser and vendor contract with one another. This would be categorised as a private auction, in which the vendor takes on role of a facilitator of price. Online auctioneers almost universally require in their terms of business that the bidder is required to enter into a contract with the seller after the auction has concluded. This is to be distinguished from a traditional auction, where the contract is formed at the moment the auctioneer’s hammer falls.

Exceptions to the Sales of Goods Act 1979

Conveyancing transactions and real property are excluded by the Sale of Goods Act 1979. Also omitted are private sales from individuals, for instance, where the initial contact has been made through ‘Loot’ or other similar trade publications. Despite this, sales are not permitted by misleading or misrepresenting the goods and reference should be made to the Trade Descriptions Act 1968. The goods must also be safe and as described.

The Act is applicable to second-hand goods, though consideration is given to their age and fact that they are second-hand.

Consumer Protection Act 1987: Product Liability

Prior to the introduction the Consumer Protection Act 1987, injured persons were left with their remedies under the Sale of Goods 1979. Since the commencement of the Consumer Protection Act, businesses and suppliers may be sued for personal injury or losses on private property (worth £275 or above), provided the claimant can prove on a balance of probabilities that the defect caused the damage.

Consumer Protection (Distance Selling) Regulations 2000

Finally, the Consumer Protection (Distance Selling) Regulations 2000 stipulates amongst many other things, that orders should be dealt with within 30 days, unless otherwise agreed. If the order is not dealt with within that time, the contract will be treated as though it has not been made.

What to Do

Businesses that maintain just in time inventory systems should keep in mind that these timeframes are imposed unless some other timeframe is agreed at the time of the agreement. In any event time of the essence orders should be avoided at all costs, particularly for the provision of high value goods, as the failure to meet the timeframe in the agreement amounts to a material breach of the agreement automatically and exposes the business to litigation.

The Regulatory regime for the protection of consumers in the UK has been developed over many to protect the interests of consumers. Businesses trading online, via telephone, fax or mail order should make it their business to keep abreast of the obligations at law imposed upon them. These risks should be managed in terms of business – contracts of sale in which such matters that may be agreed between the parties may alleviate the impact of the sale of goods legislation.

To minimise the impact of these laws, businesses do their best to incorporate appropriate clauses into the contract of sale tailored to the circumstances of sale. One should also ensure that advertising is within a reasonable ambit of the intended purpose of the goods.

To ensure that software purchasing procedures and models online are correct, current law suggests that businesses’ web sites walk the purchaser through the required recognitions for the purpose of the goods and their intended uses, keeping in mind the operational limitations of the goods.