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What happens when traders stop trading?

In previous articles we have highlighted which statutory consumer rights apply when you've had a problem with a trader with whom you have entered into a contract.

The word 'trader' usually refers to the person or persons you gave money to in exchange for goods and services. In law the money is known as the consideration and confirms a contract has been created.

In these cases you have implied rights written into the contract to protect you. The rights are contained in the Sale of Goods Act 1979 (as amended), it states that goods must:

Match any description that was applied to them.

Are of satisfactory quality.

Meet any particular conditions that you explained to the trader when making the purchase (for example a watch that must be waterproof and suitable for scuba diving).

A breach of one or more of these conditions gives you grounds to pursue some sort of remedy. If the trader is one of the high street chains there shouldn't be a problem making your claim. However, if the breach occurs where the trader with whom you contracted has for some reason ceased to be a business, you've got a problem. This article examines under what circumstances and against whom you may be able to make a claim.

1. Limited Companies: Remember that it is only companies that go into liquidation. You may be able to make a claim against any remaining assets of the company but, as an unsecured creditor, you may find yourself towards the back of the queue. A similar problem occurs if the company has been sold on as a going concern: the assets of the company are bought but the liabilities (including contracts of previous customers) are not.

Therefore, nothing more remains of our trader in a legal sense and the acquiring company can address your claim at its discretion with no legal need to answer it. Remember that this only covers limited companies; sole traders and unlimited partnerships represent the business of an individual or group.

The cessation of trading in this case means you may have a claim against the assets of the business, or any assets of the individuals who owned it.

2. Manufacturers Warranties: It is often useful to fall back on the manufacturer warranty if your rights cannot be established against the trader. However, the manufacturer is not obliged to give a warranty with their product and so the terms and conditions of the warranty may be more rigid, with regard to the circumstances under which a claim can be made and what remedies are offered if a claim is upheld. Read the terms and conditions carefully.

3. Finance: Sometimes the method of payment can give you rights against someone other than the trader. Claiming under Section 75 of the Consumer Credit Act reveals that the creditors are equally liable for a breach of contract by the trader.

To make a section 75 claim there must be:

A business link between the creditor and the trader. This most commonly occurs when making a purchase with a credit card, or through finance introduced to you by a trader but doesn't include personal loans, debit, store or other charge cards such as Amex.

The purchase is valued at pounds 100-pounds 30,000 for a single item. A single item means any one product or a number of products sold as a set.

It is worth noting that at present, this legislation does not apply to overseas transactions.

4. Hire Purchase & Conditional Sale: Hire purchase and conditional sale contracts are governed by slightly different rules. When you 'buy' an item on HP the financier purchases the goods from the trader and hires the goods to you. In this case, even if the trader is used to provide a remedy for the problem, it is ultimately the financier that may be held responsible for the breach of contract.

Generally speaking, you can ensure maximum protection in a contract by paying, at least in part, for items over pounds 100 in value by credit card. Also make sure you are aware of any guarantees or warranties offered by the manufacturer. Do ensure that you have a copy of the guarantee or warranty and know what rights the terms and conditions afford you.

You can contact Consumer Direct by ringing 08454 04 05 06. There is also a dedicated Welsh line on 08454 04 05 05. Lines are open from 8am - 6.30pm, Monday to Friday and 9am - 1pm on Saturday. Calls are charged at the local rate and advice is totally free.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2005 Gale, Cengage Learning. All rights reserved.

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Publication:Western Mail (Cardiff, Wales)
Date:May 30, 2005
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