Newcastle City Council

This leaflet provides a summary of the main rules for businesses selling goods at Internet auction sites.

Do you sell to consumers?

When you sell goods over the Internet, some rules apply even if you are selling to businesses, but many apply only if you sell to consumers. A consumer is a person who is buying goods for their own personal use.

Items listed on Internet auction sites are normally available to consumers.

You may have to prove that the buyer is not a consumer, if you want to exclude the buyer's consumer rights.

If you sell to businesses and consumers, you could display one set of terms and conditions for each type of buyer.

Do you sell by auction?

On Internet 'auction' sites, some items are sold by auction and some are not. Sales by auction are exempt from some of the main rules, including the requirement to provide cancellation rights.

There is no statutory definition of an 'auction', but all auctions involve some form of competitive bidding. If your item is listed at a fixed price or sold through an instant purchase option, then it is not sold by auction and it does not enjoy the exemptions which are available for auction sales.

Buyers outside the UK

If your goods are available to buyers outside the UK, do not assume that disputes will be dealt with under UK law or in the UK courts.

Consumer buyers in the EU generally have the protection of the laws and Courts of their own country. All EU consumers have the same information, cancellation and basic consumer rights as UK consumers.

You may wish to use separate terms and conditions for consumers outside the EU and for business buyers.

Information requirements

Certain information must be provided to potential buyers before a contract is made. You can comply by including this information in, or clearly linked from, your item listings.

In all cases, including sales by auction, you must declare:

• The identity of your business. A trading name (e.g. 'Marks and Spencer') is not enough. The listing should include the full corporate name of a company (e.g. 'Marks and Spencer plc'), the names of all partners in a partnership (e.g. Mr K Marks and Mr R Spencer), or the name of a sole trader (e.g. Mr K Marks)
• The geographic address where your business is established; a PO Box address is not enough
• Your VAT number, if you have one

If the item is being offered to consumers at a fixed price, or with an instant purchase option, you must also include the following information:

• A description of the item
• The price, including all taxes
• Delivery costs
• Arrangements for payment and delivery
• The existence of the right to cancel (unless an exemption applies)
• Any requirement for the buyer to bear return postage costs, when they exercise their right to cancel
• The fact that you are a business, if this is not already clear

Cancellation rights

A consumer buyer normally has the right to cancel the contract without giving any reason at all. The right is provided because, in distance contracts, there is no opportunity to examine goods before they are delivered.

The consumer can cancel, at the latest, seven clear working days after they receive the goods. If you provide the required information late, the cooling-off period of seven working days starts when the consumer receives that information, or after three months, whichever is the sooner. To exercise the right to cancel, the consumer must notify you in writing or by e-mail.

Some auction sites might refund some of your selling fees in the event of a cancellation. However, be careful not to restrict the buyer's ability to use the auction site again. In most cases, you can report a transaction as cancelled by mutual agreement, and you should not leave the buyer negative feedback.

How do I get the goods back when the consumer cancels?

You are entitled to collect the goods. You must do this at your own expense unless you have told the consumer, before they agreed to buy, that they would have to pay the return postage costs.

The goods do not have to be returned within the cooling-off period. The consumer has to take reasonable care of the goods until they are returned or collected. However, they do not have to return goods unused or in unopened packaging, or in such condition that they can be re-sold as new.

If the consumer fails to take reasonable care of the goods, they do not lose their right to cancel, but you may be able to offset the cost of any unreasonable damage against the refund due.

Do I have to refund the consumer's money?

You must refund all of the money paid, including the price of the goods and the original delivery and packing charges, within 30 days of cancellation.

What are the exemptions?

In the following cases, the right to cancel does not apply:

• Items sold by auction
• Where the consumer meets you in person, for example to view the goods, before agreeing to buy
• Goods whose price fluctuates with financial markets (e.g. gold coins whose value is based mainly on the weight of metal in them)
• Goods made to the consumer's specification (but this does not include goods, such as cars or computers, where components or extras are chosen from a standard list)
• Personalised goods
• Perishable goods (e.g. fresh cut flowers)
• Goods which by their nature cannot be returned (but this does not include goods which by their nature cannot be re-sold as new, for example for hygiene reasons)
• Audio recordings, video recordings and computer software, but only if the consumer unseals them
• Newspapers, periodicals and magazines

Buyers' rights: Sale of Goods Act

What can the buyer expect?

The buyer is entitled to goods that are:

• as described
• of satisfactory quality
• fit for their purpose
• yours to sell (e.g. not stolen, or still on Hire Purchase)

What if the goods fail to meet these standards?

If the goods fail to meet these standards when the buyer receives and inspects them, they can reject them.

A business buyer, however, cannot reject goods if the breach is slight and rejection would be unreasonable.

When the buyer rejects goods, they can claim a full refund, including all postage costs, plus compensation for any other losses which occur. This can include the extra cost of buying a satisfactory replacement elsewhere, or compensation for any damage caused by the goods.

If the buyer delays in making a complaint, or if a fault or misdescription comes to light some time after delivery, the buyer may only be able to claim a repair, replacement goods or compensation. However, the buyer's rights against you, the seller, remain in force throughout the reasonable life of the goods. This is often longer than a manufacturer's guarantee period.

What if the goods are damaged in transit?

If you are selling to a consumer, you are responsible for the risk of loss or damage in transit, until the goods are delivered. If you wish to take out postal insurance, this is your responsibility, not the consumer's. Postal insurance should, therefore, not be offered to consumers at an extra charge.

If you are selling to a business, they are responsible for the risk of loss or damage to the goods as soon as ownership passes to them. This normally happens when payment is made, so you may wish to offer postal insurance to business buyers, and you may wish to make an extra charge for this. If you do offer postal insurance, the buyer will expect you to make any claim on their behalf when the goods are lost or damaged.

What if the buyer is dissatisfied?

If the buyer says that there is a problem with the goods, you should consider whether their claim is justified. If it is, try to resolve the matter promptly. If you believe that the claim is unjustified, contact the buyer and explain why.

If the buyer is not satisfied with your response, or if you cannot agree a solution between yourselves, the buyer might claim under the auction site's (or payment service's) protection scheme. If they have used a debit or credit card, they might ask the card issuer to obtain a refund by processing a chargeback.

Ultimately, a buyer might take their complaint to your Trade Association, to arbitration, to an ombudsman scheme or to Court. You should, therefore, retain any important evidence and be prepared to show that you have made a reasonable response to the complaint (even if you think that it is unjustified).

Can I use contract terms to limit my liability?

Where you sell to a consumer, you cannot use contract terms to limit your liability for supplying faulty or misdescribed goods. Any such terms in your contract will have no effect, and it is a criminal offence to display them.

Where you sell to a business, you can use contract terms to limit your liability, but only if the exclusion is reasonable.

Receiving payments

Buyers can use a variety of payment methods for Internet auctions. Each method has its own advantages and disadvantages:

• Cash
  Cash has the great advantage of certainty. You can be sure that the payment will not be reversed. You can ask a buyer to send cash at his or her own risk
• Cheque
  A cheque payment is not certain until it is cleared; your bank can advise you how long this normally takes. You may want to wait for a cheque to clear before you send goods out
• Bank transfer
  You could ask a buyer to transfer money direct to your bank account. However, you may find it difficult to keep track of payments, unless the buyer uses a suitable reference number when they make their transfer
• Debit cards, credit cards and charge cards
  Card payments can be a convenient option. However, if goods are not delivered, or are unsatisfactory, the buyer may be able to initiate a chargeback in order to claim a refund. Although the risk of a chargeback decreases over time, it can still happen several months after a transaction has been made. Occasionally, you might find that a buyer initiates a chargeback fraudulently, and you may be unable to recover the money from them. As an extra protection to the buyer, the law makes the card issuer liable where you breach the contract, where the item is priced over £100 and the buyer is a consumer, a sole trader or a partnership using a UK credit card. If the buyer claims against the card issuer, then the card issuer will probably make a claim against you
• Money transfer
  It is possible to send and receive payments via a money transfer service (e.g. Western Union, Moneygram). However, these services are intended for the international transfer of money between friends and relatives. Auction sites recommend buyers not to use money transfer to pay sellers
• Payment services
  These services (e.g. PayPal, NoChex) are quick and convenient, and they usually offer buyers and sellers some protection against fraud, non-delivery and problems with goods. Users generally have to provide some evidence of identity and/or financial standing. Claims may be made against you through the service's own protection scheme or, if the payment was funded by debit or credit card, via chargeback

Other Trading Standards Law

Sales at Internet auction sites are covered by the full range of Trading Standards law. These laws are mostly intended to protect the public as a whole, and not to provide redress to individual consumers. The rules include the following:

• False and misleading advertising
  False and misleading descriptions of goods, and adverts which are false or misleading about any aspect of your business, are prohibited by law
• Counterfeit and copied goods
  It is a criminal offence to sell counterfeit goods and to sell unauthorised copies of copyright work (such as audio and video recordings or computer software and games)
• Misleading prices
  It is a criminal offence to display misleading prices to consumers. A price indication can be misleading if it does not include taxes or compulsory extras such as delivery costs. You should not make comparisons with 'recommended' or 'list' prices unless those prices have genuinely been recommended to you by your supplier or the manufacturer and the recommended price is not significantly higher than prices at which the product is generally sold
• Product safety
  All goods must be safe, and some goods (e.g. electrical goods, toys) have to comply with specific safety regulations
• Legislation
  This guidance is based on consumer protection legislation which includes:

• Consumer Protection (Distance Selling) Regulations 2000

• Electronic Commerce (EC Directive) Regulations 2002

• Business Names Act 1985

• Business Advertisements (Disclosure) Order 1977

• Sale of Goods Act 1979

• Sale and Supply of Goods to Consumers Regulations 2002

• Consumer Transactions (Restrictions on Statements) Order 1976

• Unfair Terms in Consumer Contracts Regulations 1999

This leaflet is not an authoritative interpretation of the law and is intended only for guidance. For further information, please contact your local Trading Standards Service.