This case concerns the perennial issue of satisfactory quality and, in particular, those cases where there are only minor defects to the goods. It is an important case for finance companies who supply goods to customers on hire purchase or lease agreements. This case concerns a car, but its principles are applicable to all types of equipment.
Mr Lamarra entered into a hire purchase agreement with Capital Bank for the hire of a new Range Rover supplied by a dealership called Shields Automotive. Mr Lamarra rejected the car just four days after entering into the agreement on the basis that, upon delivery, the vehicle had some defects. Finance companies will know that this factual situation is unfortunately very common. Mr Lamarra agreed a price of £51,550 for the car and claimed that a reasonable person would expect to receive the vehicle free of any defects. The court found, at the time of delivery, the vehicle had several defects. In particular the front wheels were incorrectly balanced, there was some road speed noise emanating from the transmissional drive system, there was a scratch on the ashtray cover, the glove box was misaligned and, some of the paintwork was poorly finished.
So the defects were minor and the dealership offered to resolve all the complaints at their own cost (and in any event they were covered by the warranty).
What the court decided
In the original trial, the Sheriff concluded that the vehicle was of satisfactory quality and that Mr Lamarra had not been entitled to reject the vehicle. This was on the basis that the defects were easy to rectify and were in any event covered by the vehicle’s warranty. In the appeal, the dealership argued that the warranty was a ‘relevant circumstance’ to have taken into account when deciding whether goods were of a satisfactory quality. Under the terms of s.10 of the Supply of Goods Implied Terms Act (1973), goods are considered to be of satisfactory quality if they meet the standard a reasonable person would regard as satisfactory taking account of any description of the goods (if relevant) and all other ‘relevant circumstances’.
On appeal, it was held that a warranty is only an undertaking by the manufacturer to remedy defects in the goods which emerge after its supply. However, the issue of the satisfactory quality of the goods had to be judged at the time of delivery - and so the warranty was irrelevant.
Additionally, in terms of the hire purchase agreement, it stated that Mr Lamarra could only have the benefit of the warranty if he complied with the terms of the agreement. By having refused to pay the instalments, the benefit of the warranty was not something he was contractually entitled to take the benefit of. On the facts of this case, however, the dealership had offered to remedy the defects at their own expense. This is therefore very much a secondary point of principle arising from the case.
The most important point of principle was that the car was sold as a high quality vehicle. The provisions of the 1973 Act specifically state that appearance and finish and freedom from minor defects are central to the definition of quality. It did not matter that the defects could be remedied, Mr Lamarra was entitled to expect to receive a car without any defects given the amount of money that he had paid.
This is a decision that very much strengthens the customer’s hand in cases where there is customer dissatisfaction with the goods supplied, even where that dissatisfaction emanates from some relatively minor issues. It reinforces the need for finance companies to involve dealerships at a very early stage in these disputes and to be proactive in seeking to appease the customer and resolve a complaint.
It is likely that had Mr Lamarra purchased a lower value and lower specification vehicle, the court would not have been quite so strict on the finance company. It would have given more weight to factors such as looking at the ease at which the defect could be remedied and whether the defect was of such a kind that it was capable of being repaired to produce a result as good as new.