Consumer Protection

Law
MKT4306

Milinda Samarakoon
MBA (PIM-SJP) (Reading)
LL.B (Hons), BSc. (Hons) (Psychology)
Attorney-at-Law
Contents
• Importance of Law to Consumer
• Legal System of Sri Lanka
• Forms of business organizations
• Contract Law
• Sale of Goods Ordinance
1. Importance of Law to Consumer
1.2 History of Consumer Protection
• The Old Testament mentions a form of consumer protection, and so
does the Code of Hammurabi, but only in a mercantile perspective.

• An early form of movement in defense of consumers was born in the

United States where the bases for the birth and development of
monopoly and oligopolistic capitalism have been started.

Source: https://www.nyulawglobal.org/globalex/International_Law_Consumer_Protection.html
1.3 What is Consumer Law?
• Consumer law helps to make sure that customers are aware of
what they are buying,
-such as the ingredients in food;
-that advertising is fair and does not mislead;
-that debt collection is fair,
-and nearly every step in the buying and selling of goods is ordered towards
creating a level playing field.

Sources: https://www.davislevin.com/blog/2013/december/the-importance-of-consumer-law/
https://www.studysmarter.co.uk/explanations/business-studies/influences-on-business/consumer-law/
2. Legal System of Sri Lanka
2.1 “Legal System”
n.
Law

• the set of laws of a country and the ways in which they are interpreted and
enforced

A Tamil living in Jaffna

• Inherit property – Tesawalamai
• Called upon to be a trustee of a Hindu temple – English courts of equity and Hindu religious law
• Mortgage his property – Roman-Dutch law
• Contract marriage – statue law of the land or custom
• Capacity to marry – statute law
• Divorce – to some extent English Law
• Claim to custody of children – Roman-Dutch law
• His wife’s right to retain property brought into the marriage - Tesawalamai
2.2 Judicial hierarchy
• Supreme Court - Appellate jurisdiction, Constitutional Jurisdiction, Protection of Fundamental
Rights, Jurisdiction in respect of the breach of the parliamentary privileges

• The Court of Appeal - Appellate Jurisdiction, Jurisdiction for correction, Cognizance of matters
and things of Courts of First Instance May call for case records and
examine them, Powers to impose punishment for contempt of Court,
Power to issue writs.

• The High Court – The High Court of Civil Appeal

High Court and the Provincial High Court
Commercial high Court

• The District Court

• The Magistrate Court
• The Primary Court
• The Judicial Service Commission

Source:https://jsc.gov.lk/web/index.php?option=com_content&view=article&id=51&Itemid=64%E2%9F%A8=en
2.3 Sources of Law
• Constitution
Legislation
• Statutes
• Judicial precedent
• Customs
• Religion
Indirect sources
• Equity
3. Forms of Business organizations
4. Contract Law
• A contract may be defined simply as a legally binding agreement.

• Alternatively, it may be defined as a promise or set of promises which

the law will enforce.

• All contracts are agreements – but not all agreements are contracts.

• Contracts Unilateral
Bilateral
4.1 Formation of a contract
Invitation to treat
• Expression of willingness to enter into negotiations which may lead to
the conclusion of a contract.

Offer
• An offer is an expression of willingness to contract on specified terms,
made with the intention that it is to be binding once accepted by the
person to whom it is addressed
Acceptance
• An acceptance is a final and unqualified expression of assent to the
terms of an offer.
• An offer may be accepted by conduct (for example, an offer to buy
goods can be accepted by sending them to the offeror).
• Acceptance has no legal effect until it is communicated to the offeror
(because it could cause hardship to the offeror to be bound without
knowing that his offer had been accepted).
• The general rule is that a postal acceptance takes effect when the
letter of acceptance is posted.
Consideration
• Consideration is "something of value" which is given for a promise
and is required in order to make the promise enforceable as a
contract.
• This is traditionally either some detriment to the promisee (in that he
may give value) and/or some benefit to the promisor (in that he may
receive value)
• For example, payment by a buyer is consideration for the seller's
promise to deliver goods, and delivery of goods is consideration for
the buyer's promise to pay.
4.2 How are contracts destroyed?
• Incapacity
• Misrepresentation
• Mistake
• Illegality
• Duress and Undue Influence
4.3 How do contracts come to an end?
• Discharge by Performance
• Discharge by Breach
• Discharge by Agreement
• Discharge by Frustration
5. Sale of Goods Ordinance No. 11 of 1896
• The Sale of Goods Ordinance No. 11 of 1896 is the statute which
amends and codifies the law relating to the “Sale of Goods” in Sri
Lanka.
• It is based on the English Law. (Sale of Goods Act of 1893 drafted by
Sir Mackenzie Chalmers)
• Unlike the English Act, this Sri Lankan Ordinance has not been
amended since 1896 and still remains static without any reforms.
5.1 Formation of the Contract
• Section 2 (1)- A Contract of Sale
• “A Contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer, for a money consideration called the
price.”
• Section 2 (3)

• When property of the good transferred from the seller to the buyer,
such contract is called a “Sale”

• But, when transfer of such property in the goods’

-is to take place at a future time
-or some condition to be fulfilled later,
the contract is called “Agreement to Sell”

• Also a present sale of future goods also operates as an “Agreement to

Sell”-Section (6 (3)
• Section 2 (4)-

• An agreement to sell becomes a sale when

-the time elapses

Or

-The conditions are fulfilled subject to which the property in the

goods is to be transferred
 The most important elements of “Sale of
5.2
Goods” contracts are
1. Existence of two persons (Buyer and Seller)
2. Price-The Consideration
3. Goods-Subject matter of contract
4. Transfer of Property-Ownership
5. Contract with all essentials
1. Existence of two persons (Buyer and Seller)

Section 59 (1)

• “Seller” means a person sells or agrees to sell goods

• “Buyer” means a person who buys or agrees to buy foods

(Two different parties. A man cannot purchase his own goods)

2. Price-The Consideration
Price
• Sec 2(1) specifies that transfer of goods to the buyer is for a monetary
consideration called the price.
• If goods are transferred without money, then those transactions are called gifts.
• If goods are sold of exchanged for other goods then that transactions are called
“barter” and not sale of goods.
Aldrige Vs. Johnson 1857
• When a new bike is purchased by returning the old bike and paying
the difference in cash, that would also be a sale.
As a matter of fact, the requirement is that the goods must be sold for
a definite sum of money and it may be partly in cash and partly in
valued up goods.
• Section 9
The Price of a contract may be
• fixed by the contract or
• may be left to be fixed in a manner thereby agreed or
• be determined by the course of dealing between the parties.

If the price is not determined, the buyer must pay a reasonable price.
But, how this is going to be determined is a question of fact depend on
the circumstances of each case.
Section 10-Agreement to sell at valuation
• Where there is an agreement to sell goods on the terms that the price is to be
fixed by the valuation of a third party and such third party cannot or does not
make such valuation, the agreement is avoided.

• If such third part cannot make the valuation, then the agreement/contract
becomes void.

• If goods (or any part) have been delivered to and appropriated by the buyer,
then he must pay a reasonable price for that.

• However, sometimes the party is influenced/prevented by the buyer or seller

from fixing the price. In such instances, innocent party may recover damages
from the defaulting party.
3. Goods-Subject matter of contract

According to Section 59 (1) goods include;

“All movables except money”

• This terms includes growing crops and things attached to or forming

part of the land which are agreed to be served before sale or under
the contract of sale.

• Sale of immovable property is governed under different statues.

Doctrine of frustration
A contract for sale can be frustrated by an
• Extraordinary or enforceable event
• Accidental loss or damage of the goods

Section 7
• A contract for sale of specific goods becomes void if the goods have
perished without the seller’s knowledge when the contract is made.

Section 8
• An agreement to sell specific goods is avoided id the goods have perished
without the fault of either party before the risk is passed to the seller.
4. Transfer of Property-Ownership

• The phrase transfer of property in goods means transfer of ownership

of goods.

• The term “property in the goods” may be defined as the legal

ownership of the goods.

• The expression transfer of property means the transfer of ownership

of the goods from seller to the buyer so as to constitute the buyer the
owner thereof.
The rights and liabilities of the parties are linked with the transfer of
ownership
I. Risk Follows ownership (Sec 21) (Risk passes with the ownership)
II. Action against third parties
III. Suit for price
The rules relating to the transfer of property
Section 17
• Until goods are ascertained, no property of the goods can be
transferred to the buyer.

• When there is a contract for a sale of unascertained goods no

property in the goods is transferred to the buyer.

• Property will not pass until goods are identified and specified after
entering into the contract.
Section 18 (1)
• When there is a contract for the sale of specific or ascertained
goods…..property in them transferred to the buyer at such time as
parties to the contract intended them to be transferred.

Section 18 (2)
Intention can be ascertained by the ;
• Terms of the Contract
• Conduct of the Parties
• Circumstances of the case
Time when property passes/Rules of ascertaining the intention (Section 19)

• Unless there is a different intention these are rules for ascertaining the intention of
the parties as to the time at which the property in the goods is to pass to the buyer.

Rule 1
• Unconditional contract (No condition is imposed regarding the transfer of
ownership of goods)
• Sale of specific goods
• In a deliverable state (When the goods are in a deliverable state buyer would
under the contract be bound to take delivery of the goods immediately.)
• The property in the goods passes to the buyer when the contract is made.

**It is immaterial whether the time of payment or time of delivery or both

postponed.
Dennant vs Skinner & Collom (1948) 2 KB 164

• Plaintiff sold a car to a swindler in an auction. Swindler gave a false name and
address and asked to allow the car to take away in return for his cheque. Plaintiff
allowed him to take the car after obtaining his signature to a document (signed
certificate) which stated that the title of the vehicle will not pass until the
clearance of the cheque.
• The cheque was dishonored and his identification has failed.
• The court held that the plaintiffs mistake to establish swindler’s identity did not
affect the validity of the contract, which was concluded on the fall of the hammer.
• The signed document had no effect on the contract as the contract was concluded
before the execution of the certificate.
• Accordingly, property of the vehicle has passed from the plaintiff to the swindler
as per the provisions of section 19
• Rule 1 irrespective of any delay in payment or delivery.
Rule 2:( Exception to Rule 1 )
• Transfer of property is conditioned by the seller doing something.(i.e an act to
put the goods in deliverable state)

• In such cases, the ownership is transferred as soon as the seller has put the
goods in a deliverable state and the byer comes to know about this act of seller.

Rule 3: ( Exception to Rule 1 )

• Passing of property is conditional upon the performance of some act with
reference to the goods for the purpose of ascertaining the price.

• Accordingly, ownership is transferred to the buyer as soon as the seller has done
such act and the buyer comes to know about it.
Rule 4
• When goods are delivered to the buyer on approval or on sale or
return or other similar terms…..the property therein passes to the
buyer;
1. When he signifies his approval or acceptance to the seller or
does any other act adopting the transaction.
2. When he doesn’t signify his approval or acceptance to the
seller without giving any notice of rejection to the seller.,

Property of the goods pass when:

-If the time has been fixed for then return of goods on expiration such
time and,
- if no time has been fixed on the expiration of the reasonable time.
Kirkham vs Attenborough (1897) 1 QB 201
• Plaintiff sent jewelry to a person on sale or return basis. That person
pledges the jewelry with the defendant. It was held that the pledge was
an act by the buyer adopting the transaction and therefore property in
jewelry passed to the buyer and the plaintiff could not recover it from
the defendants.

Pool vs Smith’s car Sale (balham) Limited

• The car was left by the plaintiff with the defendant (dealers) on “Sale or
return” basis. The car was returned nearly after 3 months in damaged
state after several requests made by the plaintiff. It was held that the
car had not been returned within a reasonable time, the property in the
car had passed to the defendants. The defendant was therefore liable
for the price agreed.
Rule 5
In a contract for sale of
unascertained or future goods
in a deliverable state
where the goods are unconditionally appropriated to the contract
by one party with the other’s express or implied approval,
the property passes on such unconditional appropriation

Unconditional appropriation
• The delivery of goods by the seller to the buyer directly or through a
carrier without reserving the right of disposal.
Passing of risk (Section 21)
• Risk prima facie passes with ownership.
• The risk and the ownership of the goods go together
• This means in case of loss of the goods the loss need to be borne by
the party who has the ownership of the goods at the time of the loss.

But, in exceptional circumstances, the goods may be at the risk of one

party and the ownership may be with the other.
Exceptions -
1. Agreement
2. Delay
3. Trade custom
4. Section 32 (2) (Delivery)
5. Section 32 (3) (Insurance)
6. Section 33
7. By the effect Free on Board (FOB) and Cost/Insurance/Freight (CIF),
risk and property passes independently risk passes when the goods
crossed ships rail.
8. When property passes before risk
9. When risk passes before property
5. A Contract with all the essentials
Section 3
Capacity to contract is governed by the general law concerning capacity
to contract, and to transfer and acquire property.

Section 4
No particular form is necessary when making a contract of sale and
accordingly a contract for sale of goods can occur in the following ways.
• It can be in writing
• By word of mouth
• Partly in writing and partly by word of mouth
• Implied from the conduct of the parties
Section 5
A contract for sale will not be enforceable by action unless,
1. the buyer shall accept the part of the goods sold and actually receive
the same.
2. Pay the price or part thereof
3. Some note or memo in writing of the contract be made and signed
by the party to be charged or his agent in that behalf.