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AN ANALYSIS OF UGANDAS LEGAL REGIME ON RETURN POLICIES IN ELECTRONIC COMMERCE

University of Oslo Faculty of Law

Candidate number: 8013 Supervisor: NUTH MARYKE SILALAHI Deadline for submission: 12.1.2010 Number of words: 16.765 (max. 18.000) 04.11.2011

Table of Content

CHAPTER ONE..............................................................................................................................1 1. GENERAL INTRODUCTION...................................................................................................1 1.1 INTRODUCTION......................................................................................................................1 1.2 STATEMENT OF THE PROBLEM........................................................................................6 1.3 PURPOSES OF THE STUDY...................................................................................................7 1.4 SCOPE OF THE STUDY..........................................................................................................7 1.5 METHODOLOGY OF RESEARCH.......................................................................................8 1.6 SYNOPSIS OF CHAPTERS.....................................................................................................8
1.6.1 Chapter one: General Introduction.........................................................................................................8 1.6.2 Chapter two: An Examination of Ugandas legal Framework On Electronic Commerce......................8 1.6.3 Chapter three: an Examination of the Practical and Legal Application of Return Policies in Uganda. .9 1.6.4 Chapter four: Conclusion and Recommendations..................................................................................9

CHAPTER TWO...........................................................................................................................11 2. CONSUMER PROTECTION AND RETURN POLICY PRACTICE IN UGANDA..........11 2.1 INTRODUCTION....................................................................................................................11 2.2 FREEDOM OF CONTRACT.................................................................................................11
2.2.1 Control of freedom of Contracts- The bargaining phase......................................................................13

2.3 JUSTIFICATION FOR CONSUMER PROTECTION........................................................14 2.4 THE RIGHT TO WITHDRAW FROM A CONTRACT.....................................................16
2.4.1 Common law position...........................................................................................................................16

2.5 CONSUMER TRUST IN ELECTRONIC COMMERCE....................................................17 2.6 RELATIONSHIP BETWEEN WARRANTY AND RETURN POLICIES.........................19 2.7 RETURN POLICIES AS POLICY.........................................................................................19
2.7.1 Difference between policy and law......................................................................................................20 2.7.2 Use of return policies as method of self regulation in electronic commerce.......................................20 2.7.3 Establishing Electronic Commerce Policies.........................................................................................22 2.7.4 Implementation of return policies........................................................................................................22

2.8 EFFECT OF EXERCISING RIGHT OF WITHDRAWAL.................................................23 2.9 ROLE OF RETURN AND WARRANTY POLICIES IN ESTABLISHING CONSUMER CONFIDENCE...............................................................................................................................25
2.9.1 Who benefits?.......................................................................................................................................26

CHAPTER THREE.......................................................................................................................26 3. AN EXAMINATION OF THE LEGAL FRAMEWORK IN THE APPLICATION OF RETURN POLICIES IN UGANDA.............................................................................................26 3.1 INTRODUCTION....................................................................................................................27 3.2 INTRODUCTION TO UGANDAS LEGAL SYSTEM........................................................27
3.2.1 Interaction of Statutory and Common law...........................................................................................27

3.3 RETURN POLICIES...............................................................................................................29


3.3.1The legal genesis of its use....................................................................................................................29 3.3.2 Return Policies in Uganda; the Old practice in respect of Sale of Goods............................................30 3.3.3 The market place- returns policy practice............................................................................................31 3.3.4 Returning consumer purchases.............................................................................................................31

3.4 ENFORCEABILITY OF RETURN POLICIES UNDER UGANDAS LEGAL FRAMEWORK..............................................................................................................................32 3.5. LEGAL STATUS OF RETURN POLICIES .......................................................................32
3.5.1 Incorporation of terms..........................................................................................................................33

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3.5.1.1 Notice...........................................................................................................................................33 3.5.1.2 Contractual document..................................................................................................................35 3.5.1.3 Attention of the other party..........................................................................................................36 3.5.2 Collateral Contracts..............................................................................................................................37

3.5 ADVANTAGES OF RETURN POLICIES OVER STATUTORY RIGHTS FOR INFORMAL REDRESS ...............................................................................................................40 3.6 CHALLENGES OF THE CURRENT LEGAL FRAMEWORK ON CONSUMER REDRESS.......................................................................................................................................41 CHAPTER FOUR..........................................................................................................................44 4. CONCLUSION AND RECOMMENDATIONS......................................................................44 4.1 RESEARCH FINDINGS.........................................................................................................44
4.1.1 Is Ugandas legal framework supportive to the use of return policies?...............................................46 4.1.2 Limitations of the legal framework......................................................................................................47

4.2 RECOMMENDATIONS.........................................................................................................47
4.2.1 Enforcement.........................................................................................................................................47 4.2.2 Consumer protection bodies.................................................................................................................48 4.2.3 Capacity building..................................................................................................................................49

4.3 CONCLUSION ........................................................................................................................50 REFERENCES...............................................................................................................................58 ANNEX (OPTIONAL)....................................................................................................................A

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CHAPTER ONE

1. GENERAL INTRODUCTION
1.1 INTRODUCTION Rapid developments in Information and Communication Technology (ICT) have fueled the new paradigm of electronic commerce (e-commerce). Enterprises all over the globe have either created or are in the process of creating the E-commerce front ends to their traditional businesses. Several new products and services are being innovated and marketed through the internet thus creating global business opportunities to the tune of billions of dollars. Since the business transactions as well as the delivery of goods and services are handled through electronic media, several changes in the business regulations become necessary for the smooth conduct of business and to offer consumer protection.1 In response to recent and anticipated future growth in long-distance commerce using electronic media such as the Internet, some commentators have suggested that legal and economic institutions will have to change substantially in response to new technologies of trade, in the same way that they did in response to the major technological and organizational innovations of the 18th and 19th centuries.2 Others have taken a more skeptical position, arguing that recent developments are better viewed as changes of degree rather than of kind, and that they can be accommodated by extending and modifying existing arrangements in a more evolutionary fashion.3
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Prof. Rama Rao T.P. E-Commerce and Digital Divide: Impact on Consumers: Presented at the regional Meeting for the Asia-Pacific: New Dimensions of consumer Protection in The Era of Globalisation, Goa, India, 10-11 September 2001 2 See e.g., David R. Johnson & David G. Post, Law & Borders- The Rise of Law in Cyberspace, 48 Stan. L. Rev. 1367 (1996) 3 See e.g., Frank H. Easterbrook, Cyberspace & the Law of the Horse, 1996, University of Chicago, legal F. 207

The above differences notwithstanding, developing countries such as Uganda, with no substantive and appropriate legal framework on matters pertaining to consumer protection in electronic contracts, regulation of electronic commerce among others, are likely to lag behind and lose out on the benefits of ICT revolution and e-commerce opportunities if the policies and corresponding laws are not introduced in time or in the alternative, if the existing legal and economic regulatory infrastructure are not modified soon enough to meet the current demands of electronic commerce. Electronic commerce refers generally to all forms of commercial transactions involving both organizations and individuals, which are based upon the electronic processing and transmission of data, including text, sound and visual images. It also refers to the effects that the electronic exchange of commercial information may have on the institutions and processes that support and govern commercial activities4. Electronic commerce covers mainly two types of activity- the electronic ordering of tangible goods, which still must be physically delivered using traditional channels such as postal services or commercial couriers; and direct electronic commerce- the online ordering, payment and delivery of intangible goods and services such as computer software, entertainment content, or information services on a global scale.5 The amount of trade conducted electronically has grown extraordinarily with widespread internet usage. Modern electronic commerce typically uses the World Wide Web (www) atleast at some point in the transactions lifecycle,6 making Information Technology networks an important and perhaps primary vehicle for electronic commerce. Electronic commerce widens the range of goods and services available to consumers, and increases the size of producers markets. Items can be modeled and customized before purchase. Electronic commerce can make shopping easier: purchases may be made 24 hours a day, from home, at work or on the move, and certain services can be delivered online. Buyers gain access to goods and services that were previously beyond their geographical or financial reach; the converse of this is also true, sellers gain access to buyers who were
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OECD (Organisation for Economic Co-operation and Development). Electronic Commerce: Opportunities and Challenges for Government (1997), at 11 5 European Commission, A European Initiative in Electronic Commerce, COM (97) 157 at 1(7) 6 http://www.en.wikipedia.org/wiki/Electronic_commerce

previously beyond their reach. Electronic commerce lowers entry barriers, expands existing markets and creates new markets7. Although a number of electronic commerce activities are emerging in most countries, its growth has been slow in many developing countries for a variety of reasons; prominent among them are the low levels of internet penetration, high costs of internet connectivity and limited communications infrastructure.8 For example in Uganda, many Ugandans are still unaware of the opportunities offered by electronic commerce. Between the years 2000 and 2008, internet use in Uganda grew from about 0.2 percent to about 7.8 percent of the population.9 Expensive, unreliable bandwidth is the major obstacle to ICT growth. Most of the African continent is served by a system of submarine fiber optic cables that bring bandwidth to Africa from the Middle East, Europe and South Asia.10 Until the arrival of the seacom11 cable in July 2009, Eastern Africa was the only part of the continent without access to this system.12 The projects business model is to provide affordable bandwidth via volume discounts and large bandwidth growth. It is the first to provide broadband to countries in East Africa, which previously relied on expensive, slower, satellite connections. Upon being switched on, the owners of the cable stated that it would reduce internet costs by up to 95 percent to wholesale customers, whilst providing a far greater speed of internet connection.13 It may take a long time for the benefits to reach ordinary citizens, particularly those who live in remote rural areas.14 However that notwithstanding, its arrival has laid down a solid foundation for an efficient, fast and reliable communications infrastructure and platform, that are necessary for the carrying out of electronic commerce.
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John Dickie, Producers and Consumers in EU E-Commerce Law, (2005) University of Leicester. Hart Publishing, Oxford and Portland, Oregon 8 Aida O.M., Assefa B., &Mhlanga. S. E-commerce challenges in Africa: Issues, Constraints, and Opportunities. Briefing paper; World summit on the Information Society, Geneva 2003- Tunis 2005. Economic Commission for Africa. 9 International Telecommunications Union, ITU Internet Indicators 2000, http://www.itu.int/ITUD/icteye/Reporting/showReportFrame.aspx?ReportNam... 10 News.com, Undersea cables, February 6, 2006, http://www.news.com/2300-1033 3-6035611-1.html? part=rss&tag=6035611&subj... 11 SEACOM is a privately funded venture which built, owns and operates a submarine fiber cable connecting communication carriers in South and East Africa 12 Xan Rice, East Africa finally joins broadband revolution, The Guardian, July 23, 2009, http:// www.guardian.co.uk/technology/2009/jul/23/east-africa-broadband... 13 Ibid 14 BBC News, East Africa gets high speed web http://www.bbc.co.uk/2/hi/africa/8165077.stm

Electronic commerce is not a new trend. Businesses have long performed transactions electronically using Electronic Data Exchange (EDI) mechanisms. However, the potential of the internet, most notably the www15, as a medium to carry out electronic commerce, has increasingly helped to shift business operations from the traditional brick and mortar environments to the electronic commerce paradigm. With time, it is likely that electronic commerce will replace a substantial part of traditional trade. In order for E-commerce to successfully take root in Uganda and to grow in a sustainable manner, it is necessary to have prudential legal regulation that guarantees the safe operation and satisfactory performance of E-commerce. An issue of critical significance, often raised in the context of ensuring commerce reaches its full potential, is how to build business and consumer confidence in the security and enforceability of electronic transactions which occur on the internet between parties that do not have a pre-existing relationship and more often between parties operating across borders. Consumers must have confidence that the post contractual remedial infrastructure which already exists for offline commerce can also be established or replicated for electronic transactions. More specifically, those consumers can have cost effective and time saving appropriate redress mechanisms if something goes wrong or if the consumer is dissatisfied with a particular good or service of the electronic transaction. It is worth noting that Ugandas commercial laws; if not the whole legal framework is derived from nineteenth-century English law and is largely based on English principles of contract. This is mainly due to the fact that Uganda was a British protectorate. The United Kingdom is mostly credited for introducing the common law legal system. Against that history, section 14 of the Judicature Act (1996) chapter 1316 provides for the laws applicable in Uganda to include among others, the statutory law, common law and principles of equity.
15

The world wide web (www) is a system of inter-linked hypertext documents accessed via the internet, developed by Sir Tim Berners Lee with the assistance of Robert Cailliau 16 Judicature Act, Cap 13, Laws of Uganda (2000 edition)

Thus, section 2 of the Contract Act (1963) chapter 7317 provides that subject to any written for the time being in forcethe common law of England relating to contracts as modified by: The doctrines of equity The public general statutes in force in England on 11thAugust 1902 The Acts of Parliament of the United Kingdom mentioned in the schedule of this Act (to the extent and subject to the modifications specified in that schedule), shall extend and apply to Uganda. This has been modified by the Judicature Act which deleted reference to statutes of general application.18 Uganda is undertaking a legislative over haul of some of its laws so as to be at par with the ever changing trends of life that by necessity calls for new laws and a further amendment to some of the existing laws, so as to specifically tackle and address the issues that arise from electronic commerce. Currently there are about three bills that are undergoing legislative processes. The Electronic Transactions Bill, The Computer Misuse Bill and Electronic Signatures Bill. There is also an ongoing exercise to reform most of Ugandas commercial laws such as the Contract Act, the Mortgage Act among others, so as to keep pace with the new market trends and forces. If the internet/ electronic commerce is to be a place where both businesses and consumers derive mutual benefits, it probably needs the legal protection to be strong so that consumers can have confidence in shopping on-line. To that end, the thesis will seek to investigate the use of return policies in electronic commerce and analyse if there is a supportive and effective normative legal foundation to support the use of return policies by online merchants in support of their online businesses There is need to examine whether, the present and prospective laws, are effective in handling the unique challenges and requirements presented by electronic commerce and ultimately gauge if consumers can obtain satisfactory post contractual remedies in the event of electronic commerce contracting. The need to examine both sets of laws, is due to the fact that, Uganda is
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Contract Act (1963) chapter 73, Laws of Uganda 2000 revised edition, supra note 3 Judicature Act, loc.cit.,

currently going through a legislative process to amend its commercial laws and also adopt new laws relevant to the prevailing market needs, and more specifically the needs of electronic commerce. 1.2 STATEMENT OF THE PROBLEM Despite the rapid growth of the internet and the high potential of business to consumer (B2C) electronic commerce actual online revenues still remain modest when compared to the offline world. One of the most frequently cited reasons for consumers not pushing the purchase click19 is the absence of trust.20In fact lack of consumer trust, both in the attributes of specific web-based vendors and in the overall web environment, has been, and remains a hindrance to electronic commerce21Although this mistrust may in part be stirred up by the coverage of some incidents by the media and the internet community itself, several studies and reports have pointed out that there is sufficient ground for the potential electronic commerce consumer to exhibit caution before engaging in an electronic commerce transaction.22 In this I will examine, if and how return policies/ guarantee policies can try to remedy this lack of confidence on the part of the consumers and thereby establish a secure and trust worthy market place. However, it is imperative to note that, return policies by themselves cannot single handedly solve all the problems inherent in electronic commerce that trigger off mistrust amongst consumers. It therefore has to be qualified, as simply one of the many solutions that may or could be invoked in trying to increase consumer trust and confidence in electronic commerce. Further, the current legal framework was modeled for traditional paper based commerce, yet electronic commerce has its own peculiar needs which most times challenge existing
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This is the process by which the consumers trigger off the contractual process by pressing their computer or other gadget buttons to make orders for desired goods online. 20 Lee, M.K.O & Turban, E. (2001). A Trust Model for Consumer Internet Shopping. International Journal of Electronic Commerce, 6(1), 75-91 21 McKnight, D.H., Choudhury, V. & Kacmar, C. (2002). The impact of initial consumer trust on intentions to transact with a web-site: a trust building model. Journal of strategic Information Systems, 11, 297-323. 22 Cybersource.com conducted a survey on the (potential) consumers perception of online fraud. http://www.cybersource.com/fraud survey

and established legal principles and positions. The thesis will therefore attempt to examine the current legal regulatory framework with an aim of ascertaining if it is supportive of the use of return policies by online merchants/ vendors in their quest to boster consumer trust and confidence in electronic commerce. 1.3 PURPOSES OF THE STUDY a) b) c) To examine the current legal framework for return policies. To examine the extent to which such a legal framework provides a good normative basis for the use of return policies in electronic commerce. To make recommendations as legal reform.

1.4 SCOPE OF THE STUDY The study as already indicated by the title is intended to analyse Ugandas legal regime and examine if it provides any supportive normative basis for the use of return policies in electronic commerce which are aimed at enhancing consumer trust. Emphasis will be put on the commercial laws that are applicable to Uganda, that have a bearing on the nature and regulation of contracts. The research will also stretch to the ongoing reform of the existing commercial laws and the set of laws that are undergoing legislative processes which have a bias towards electronic commerce. The discussion intends to analyse the effectiveness of the existing legal regime and the prospective laws in tackling the challenges of e-commerce in Uganda in the area of consumer protection and more particularly post contractual remedies. Emphasis will be on addressing the legal questions, difficulties and challenges that have arisen as a result of using return policies in Uganda under the current legal framework and ultimately analyzing if Ugandas legal regime has or can deliver the much needed consumer protection which is best offered through comprehensive, timely and cost effective post contractual remedies, in this case being the return policies. Further, the thesis will be restricted to business to consumer contracts (herein after called B2C contracts). However even in that respect, the thesis will be about trust in B2C on the

consumers side of B2C electronic commerce and more specifically how trust is enhanced on the consumers side by the merchants/ vendors use of return policies.

1.5 METHODOLOGY OF RESEARCH In an effort to obtain as much information as possible, the author will employ the qualitative research method on the different modes of data collection. Library research on various written texts on the subject of the Information Technology, and e-commerce will be utilized so as to carry out comparison of the various findings. Such texts include reports, seminar papers, journals, articles and so on. This research will also focus its emphasis on the various laws obtaining in Uganda, which deal with commerce and may have a bearing on the topic of the research and can influence the research questions. The internet will also be used to access recent publications on information technology and its interplay with the electronic commerce.

1.6 SYNOPSIS OF CHAPTERS The research thesis is intended to be sub-divided into about four chapters.

1.6.1 Chapter one: General Introduction


The first chapter will deal with a general introduction to the study. It will provide a background to the study. It states the problem which the study sets out to solve, the objectives of the study, the scope of the research, methodology, synopsis of the study.

1.6.2 Chapter two: An Examination of Ugandas legal Framework On Electronic Commerce


This chapter will discuss the limitations of the value of contractual freedom in the market place (being a corner stone of contractual relations) which will form the basis for the need

of return policies in electronic commerce. The discussion of the need for consumer protection in the form of return policies, as an exception to the rules in contract law will ultimately form the foundation for the subsequent discussions on the legal and market responses to the market failures and more specifically return policies which will be at the heart of this paper. It will further discuss the need for the use of return policies and the inspiration for bits use. The chapter will also discuss the link between use of policies and the law in commerce and then ultimately discuss the effect return policies have on enhancing or developing consumer trust and confidence in electronic commerce.

1.6.3 Chapter three: an Examination of the Practical and Legal Application of Return Policies in Uganda
This chapter will form the crust of the thesis, as it will seek to examine the extent to which Ugandas legal regime and judicial system as a whole, provides for a supportive normative basis for the use of return policies in Ugandas electronic commerce environment. The discussion will try to probe if Ugandas legal framework provides for the use, enforcement of return policies. Further, effort will be made to analyse briefly the current legislative efforts in tackling the challenges and a critique will be made of how effective such legislation (if successful) may be in solving some of the current legal lacunas that prevailing in the country. To that end, a lot of help through comparative analysis may be drawn from other jurisdictions on how the challenges are being addressed, to which Uganda can look to in modeling its own legislation so as to usher in effective, functional and accessible post contractual remedies for electronic commerce consumers.

1.6.4 Chapter four: Conclusion and Recommendations.


This will be the last chapter and will deal with the conclusions based on the research findings and the necessary recommendations. It focuses on the analysis of the findings in

relation to the research questions and the topic of study and suggest solutions to the problems identified and appropriate ideas for change and improvement.

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CHAPTER TWO

2. CONSUMER PROTECTION AND RETURN POLICY PRACTICE IN UGANDA


2.1 INTRODUCTION It is now beyond doubt that electronic commerce brings in tremendous benefits for both the consumers and the traders and cannot be ignored anymore or left to the market forces to regulate the conduct. However for that to thrive, then it is of utmost importance that consumer confidence and trust in the system be prioritised. This is even more important considering the asymmetrical balance of power between the consumers and the traders in a virtual world where in most cases there has been no prior contact or business relationship between the two. This chapter intends to briefly discuss the limitations of the value of contractual freedom in the market place (being a corner stone of contractual relations) which will form the basis for the need of return policies in electronic commerce. At stake are the elements of the correction of market failure and additionally, the achievement of fairness for consumers as the economically weaker parties. The discussion of the need for consumer protection in the form of return policies, as an exception to the rules in contract law will ultimately form the foundation for the subsequent discussions on the legal and market responses to the market failures and more specifically return policies which are at the heart of this paper. Under contract law, parties are bound by their contractual bargains no matter how unfair they may be in given circumstances. Return policies however do come into play as exceptions to that general rule 2.2 FREEDOM OF CONTRACT In general, the economic approach to law favors freedom of contract. While this conclusion is a familiar one, it is worth briefly reviewing its underlying logic. The fundamental

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theorem of welfare economics holds that if all market actors are informed and all commodities are allocated through competitive markets, then the outcome of decentralized market exchange will be Pareto efficient.23 It is little wonder that from as way back as the 19th century, the notion of freedom of contract formed a cornerstone for contractual negotiations. This was given more judicial weight in the famous observation by Sir George Jessel M.R that: If there is one thing which more than another public policy requires it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that their contracts entered into freely and voluntarily shall be held sacred and shall be enforced by courts of justice.24 The religious imagery chosen by Sir George Jessel is a striking illustration of a belief that such notions transcend ordinary law and are instead part of some higher set of norms which confer power on the individual citizen with which the state should not interfere.25 Increasingly the connected notions of individualism, freedom of contract and judicial non interventionism in the parties bargain have lost their sacredness and are no longer necessarily realistic in the modern day electronic commerce consumer transactions, where the relationship between the parties is typically economically imbalanced in favour of the supplier. The supplier knows more about the product or service. The more complex the subject matter, the less likely that the consumer will be capable of making any informed judgement about quality or even safety.26 Although in principle, the growth of electronic media should mitigate the problem of imperfect information in contracting by reducing the relative costs of acquiring and processing such information. For instance, parties who might previously have lacked the time or inclination to investigate a counterpart's reputation or the terms of the specific contract will now be able to do so at lower cost, and will be better able to shop comparatively for price and other terms.27 In the consumer area, price comparison portals
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Avery W. Katz, Is Electronic Contracting Different? Contract Law in the Information Age. Available at http://www.columbia.edu/-ak472/papers/Electronic Contracting.pdf 24 Printing and Numerical Registering Co. Vs Sampson (1875) LR 19 Eq. 462, 465 25 Geraint H., Stephen W. (2005): Consumer Protection Law; Markets and the Law. 2nd Edition, Ashgate Publishing Ltd. UK. Page 15 26 Ibid page 19 27 Prof. Rama op.cit

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such as MySimon28 are already widely used and should become equally widespread in the business setting as markets become thicker. However despite the above developments, the asymmetry of information still exists and it is compounded by the fact that the electronic transactions do not permit for the consumer to see the products they are purchasing, save for what had been told to them by the trader. Even worse is the fact that many of the products offered via electronic commerce are likely to be services rather than physical products therefore do not require physical delivery. That can lead to even greater problems for the consumers in understanding the nature, quality and performance of the services and what to do if something goes wrong29.

2.2.1 Control of freedom of Contracts- The bargaining phase


One approach to adjusting contract law in the light of the diminution in effective negotiation which characterises modern consumer contracts would involve a more sceptical examination of the process of decision making in contracts. The consumer is often not really negotiating freely or with full knowledge about the bargain. One could then seek to use the law to improve the transparency of the bargaining process and to control outcomes which are not deemed to be the product of proper contractual freedom30. The common law has responded more actively to the absence of negotiation about, agreement on, or even awareness of terms, in such situations.31 Cases in recent years show that failure to bring unusually onerous clauses adequately to the attention of the consumer will result in their exclusion from the binding terms of the contract. Lord Denning M.R in Thornton Vs Shoe Lane Parking suggested that: It (the exception) is so wide and so destructive of rights that the court should not hold any man
bound by it unless it is drawn to his attention in the most explicit way. It is an instance of what I had in mind in J. Spurling Ltd V. Bradshaw (1956) 1 W.L.R. 461-466. In order to give sufficient notice, it
would need to be printed in red ink with a red hand pointing to it-or something equally startling.32
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MySimon is a comparison shopping website owned by CBS Interactive. The site offers shopping recommendations, buying advice, and side by side price comparisons for various products. The site directs users to other shopping sites such as Amazon.com when searching for products. 29 Australian Competition & Consumer Commission (ACCC) (1997). The Global Enforcement Challenge; Enforcement of consumer Protection laws in a global market place. Discussion paper, page 8 30 Geraint, op.cit., page 23 31 Ibid 32 Thornton V. Shoe Lane Parking , (1971) 2 Q.B. 163 at 170

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In respect of electronic contracts conducted with the aid of websites, it is of utmost importance that the traders or online merchants comply with the notification requirement. Out of the available means for satisfying the notification requirement, electronic commerce businesses will need to balance legal weight and certainty with the resulting attractiveness of their websites. After all, the web pages are there to promote and sell goods and services not as a legal exercise.33 Complying with notice requirements in email contracts probably offers the e-business very little choice. Standard terms and conditions will probably have to be included at the bottom of the email offer (or invitation to treat) in order to constitute proper notice. Emails with phantom referencing statements such as this contract is subject to the Companys standard terms and conditions will not suffice.34 The above being said, it is imperative to note that, each electronic contract transaction will be assessed on a case to case basis, in order to determine if it warrants judicial intervention by way of assessing the transparency of the contractual negotiations. The absence of transparency will afford the consumer with the luxury of avoiding some contractual obligations at a later stage, some of which are onerous or better still withdraw from the whole contract without incurring any penalty.

2.3 JUSTIFICATION FOR CONSUMER PROTECTION Consumer protection is justified on two primary grounds. First, it promotes a more efficient functioning of the market by compensating for the imbalance between consumers and sellers as regards bargaining power and informational control. Consumers are generally isolated individuals who do not have the substantial resources or power to engage traders in specific and favourable bargains, in light of the standard form contracts which are virtually the only ones used in electronic contracts.35 Furthermore, sellers often have dramatically superior information, while seldom supplying sufficient information for consumers, and the
33

Michael Chissick & Alistair Kelman. Electronic Commerce: law and Practice. London, Sweet & Maxwell. 2002. Page 101 34 Ibid, Page 102 35 Ibid

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increased speed with which global transactions can be carried out means that consumers generally have less time to consider purchases. Even on the flipside, high information volume mechanisms like the internet can have information deficiency problems, because the large volume of information available may hamper consumers from attempting to find specific information36 necessary for the conclusion of the contracts. In the absence of adequate remedial measures to compensate for the unequal bargaining power between consumers and sellers, the market will ultimately fail. In the Ugandan context, the above justification holds a lot of truth, considering that the majority of those who purchase goods through electronic commerce, are in respect of small value goods and therefore, with no capacity to negotiate with the big traders (assuming that they are even aware of that possibility!). The second justification for consumer protection is the societal recognition of the right of consumers to be protected from dangerous goods and deliberate attempts by vendors to exploit the consumer's weaker position. Legal structures are created to protect consumers from harmful substances such as defective foods and drugs. Consumer protection regimes may also seek to protect consumers from making costly and dangerous mistakes because of a lack of information as to the quality and usefulness of the product or service they acquire. The intended effects of these socially motivated forms of regulation are the promotion of consumer confidence in the safety and justice of the marketplace, and indirectly, the prevention of social unrest and economic failure. Uganda has tried to achieve this latter objective through the establishment of a public body to specifically address that challenge. Through the Uganda National Bureau of Standards Act,37the Uganda national bureau of standards (UNBS) was established to among other duties, formulate and implement standards and also carry out conformity assessment of products and services based on quality and standards requirements, so as to protect consumers against substandard, shoddy and hazardous products. Section 3 (1) (h),38
36 37

Ibid, page 8 The Uganda Bureau of Standards Act 1983, chapter 327 of the 2000 revised laws of Uganda 38 Ibid

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specifically provides for the testing of imported goods, with the aim of ensuring compliance with set standards. A technical committee on consumer products was set up39 but despite its establishment there is yet to be established any tangible standards on consumer contracts. Uganda therefore still remains a haven for very substandard and hazardous products, most of which are imported. This is in part due to the weak administrative and administrative structures of UNBS, a porous and corrupt customs department and most importantly a willing public to consume such substandard goods, driven by their desire for cheap and affordable goods.

2.4 THE RIGHT TO WITHDRAW FROM A CONTRACT Even when a contract has been concluded, in certain circumstances a party may extract itself from the contract without penalty, for example by mutual agreement, or where further performance is discharged by breach or frustration.

2.4.1 Common law position


The position in English common law has traditionally been that, once parties had contracted, they were bound to complete the bargain. Although contracts have been held to be unenforceable for mistake, duress, or illegality, and it further stands to reason that if one party repudiates a contract, or failing to perform the breach, has the effect of discharging the other, there is no basic rule of English common law that has the effect of allowing one party to unilaterally cancel his participation in an agreement.40 However, the above position in the common law, developed in respect of traditional paper based and often times contracts involving face to face interactions. The same does not hold for electronic contracts, whose peculiar dynamics and peculiar characteristics make it hard if not impossible to apply the same common law legal principles and positions to electronic commerce.

39 40

Consumer Products(UNBS/TC 11), cited from http://unbs.go.ug/main.php?menuid=20 Daniel Tunkel & Stephen York; E-Commerce: A Guide to the law of Electronic Business. Second edition, second edition, London, Butterworth, 2000

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2.5 CONSUMER TRUST IN ELECTRONIC COMMERCE To many consumers, electronic commerce represents an excursion into unfamiliar territory. Trust in general, is an important factor in many social interactions involving uncertainty and dependency41 as exemplified by electronic commerce.42 Transactions over the internet are not only characterised by high levels of uncertainty, but also by anonymity, lack of control and potential opportunism, making risk and trust crucial elements of electronic commerce.43 The nature of electronic commerce raises concerns about the trustworthiness of a trading partner. In electronic commerce, buyers and sellers conduct business through a website or other electronic medium. As a result, lack of direct contact between a buyer and seller in online transactions leads to uncertainty about the identity of the trading partner and product quality.44 Moreover a buyer cannot inspect the merchandise before purchase. Showing pictures of the merchandise and suitable descriptions reduce some informational problems, but does not resolve all quality concerns.45As a result of such inherent risks, electronic commerce is not something most people will readily and hastily enter into, unless they have some certainty or some kind of assurance that the risks involved have been substantially minimised. Due to the risks involved in electronic commerce transactions, consumers need to be assured that they can trust the seller. Aware of such a need, retailers have increasingly incorporated return policies in their practice as a way of attracting custom and gaining their trust.46

41

Dependence here refers to a state of reliance upon the retailers to help the consumers achieve or obtain a certain desired result or commodity or the make or quality as desired by the consumer. 42 Grabner-Krauter, S. (2002); The Role of Consumers Trust in Online- Shopping. Journal of Business Ethics, 39 (1), 43-50 43 Ibid 44 Ba, Sulin & Pavlou A; Evidence of the effect of Trust Building Technology in Electronic Markets: Price Premiums &Buyer Behaviour. MIS Quarterly Vol. 26, No.3: 243-268, 2002 45 Bland, et al, Risk-reducing and risk-enhancing factors impacting online Auction Outcomes: Empirical Evidence from eBay Auctions. Journal of Electronic Commerce Research, Vol. 8, No. 4: 236-243, 2007 46 Most big retailing outlets that also offer online trading options have incorporated return policies in their practice.

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A study by Ramsay and Enzle47 confirmed that businesses usually allowed consumers rights which went beyond their strict legal entitlement. The reasons for doing so were to encourage repeat business and to engender good publicity. However, Ramsay obtained the impression that it might be easier for a consumer to obtain a refund or replacement where he was returning goods on arbitrary grounds for which there was no legal justification than if goods were being returned for judgmental problems...for which there might be legal justification48. Using such return policies which grant the rights of withdrawal from distance contracts, helps achieve such trust by encouraging consumers to use the internet to make purchases. It also helps remove the psychological barriers (if any) against buying goods from someone outside ones presence.49 Whenever consumers think about purchasing a product or service from such an online store, they also desire to have some security and control similar to buying in the corner shop, although she/he cannot personally inspect the product or service before ordering online. The consumer probably will be willing to pay in advance only if she/he can be sure to get the money back in case of non delivery, defectiveness of the product or in case of discontent. This is in order to allow the consumers a chance for quiet reflection on a contract struck in the heat of the moment. Removing the danger of rash decision making certainly plays a part in the policy50. As the vast amount of pure play web-retailers have only a short business history and thus not built up a high level of reputation yet, the question of easy returns is crucial for potential consumers/ customers.51

47

Ramsay Iain D.C & Enzle J.; Consumer redress mechanisms for poor Quality and defective products. University of Toronto law Journal, 31, 1981 48 Ibid 49 Omri B. S. & Eric A. P.; The Right to withdraw in Contract Law. The Law school, University of Chicago. The Chicago Working Paper Series index, http://www.uchicago.edu/Lawecon/index.html 50 Geraint, Howells, Consumer Protection Law; Markets and the law. 51 Kaluscha, E.A., Grabner-Kruter, S., Patterns for Consumer Trust in Electronic Commerce

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2.6 RELATIONSHIP BETWEEN WARRANTY AND RETURN POLICIES Practically, almost all manufactured goods reach the ultimate consumer with guarantees. The typical guarantee contains undertakings by the manufacturer as to defects in the goods sold. The manufacturer undertakes to repair or replace defective parts or equipment free of charge during a specified time. The advantage of a guarantee is that it gives a remedy without the formality of establishing a legal claim.52 In todays competitive marketplace, customers have come to expect that the products they purchase will perform as intended. A warranty is a guarantee by the manufacturer, which defines a responsibility with respect to the product or service provided. A warranty is a commitment to repair or replace that product or re-perform that service in a commercially acceptable manner if it fails to meet certain standards in the marketplace.53 In many respects, most warranties tend to operate as return policies, to the extent that consumers are allowed to return certain purchases if they fail to meet set standards or expectations. However they differ from the return policies which are at issue in this thesis. This is because, whereas warranties have to pass a certain test and standard, return policies can be invoked or exercised for practically any reason or no reason at all, provided it is within a specified time frame. But considering that the practice of using return policies in Uganda is one that is at the retailers discretion, it is possible for certain exceptions to be incorporated in the Ugandan setting that may differ from the practice and legal requirements in some other jurisdictions, such as the in the member states of the European union.

2.7 RETURN POLICIES AS POLICY A policy is typically described as a principle or rule to guide decisions and achieve rational outcomes.54 The term may apply to government, private sector organisations, groups and

52

Michael G. Pecht (2006); Establishing a Relationship between Warranty and Reliability. IEEE Transactions on Electronic Packaging Manufacturing, Vol. 29, No.3, July 2006 53 Ibid 54 http://en.wikipedia.org/wiki/Policy

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individuals.55 In this context however, it is used in respect of policies in the corporate/business and or private sector groups or organisations. The intended effects of policy vary widely according to the organisation and the context in which they are made. Broadly, policies are typically instituted to avoid some negative effect that has been noticed in the organisation, or to seek some positive benefit. In the context of electronic commerce, policies in the form of return policies are mainly used by retailers to help them win the trust and confidence of the consumers.

2.7.1 Difference between policy and law


A law is a legally enforceable rule with which policies and individual actions must comply. A policy is a broader set of initiatives, decisions, priorities or guidelines that are usually set by organisations and corporations to achieve certain goals. Whenever there is a law in place as regards a certain matter, then every organisational policy should comply with the law. In the Ugandan setting, there is no comprehensive law that either directly or indirectly deals with issues relating to consumer returns and refunds. Thus in such a case, it is open for any online merchant to formulate an individual policy aimed at promoting or building consumer trust in their electronic transactions activities. However such policies created by individual online merchants or agencies are enforced/ interpreted through internal channels, as opposed to the justice system and definitely, such policies in themselves do not become or equate to laws.

2.7.2 Use of return policies as method of self regulation in electronic commerce


The protection of the general interest and market imperfections for example in the field of consumer protection is one of the main reasons for governments to regulate a particular market. Governments can regulate markets, among other things, by defining rules that are laid down in legislation. In order to achieve the desired effect, legislation requires that the government fully understands the market itself, including the external factors that may
55

http://en.wikipedia.org/wiki/Policy

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influence this market. The development of legislation takes place according to pre-defined procedures that, in practice, take considerable time. If the market situation changes with a faster pace than the development of legislation, the desired effect may not be achieved. Due to the introduction of electronic commerce, markets may even change so fast that the consequences of legislation are (too) difficult to foresee. Furthermore, the cross-border character of electronic commerce allows the globalisation of markets that would otherwise remain geographically separated and hence, would also remain subject to different rules and regulations. The regulation of global markets through legislation may introduce frictions between governments different regulatory approaches.56 The complexity of regulating particular markets has caused governments to be more cautious with developing legislation. In fact, many governments, as well as industries, currently advocate self-regulation as the most suitable approach to regulate markets in which electronic commerce is applied57. It is therefore in that spirit that the use of return policies has been highly encouraged in electronic commerce, even in the absence of any legislation providing for their use in Uganda58. This is because electronic commerce stake holders and players have realised the potential of return policies to improve and encourage consumer trust and confidence in electronic commerce. On the other hand, a corporate policy as regards returns and refunds usually, documents a set of broad guidelines, formulated after an analysis of all internal and external factors that can affect a firms objectives, operations and plans. Such a policy lays down the firms response to known and knowable situations and circumstances. One such external factor is the absence or the lack of a clear cut legal position or provision as regards a likely risk that a business undertaking is bound to encounter in its operation. Such a business entity will likely put in place a policy to minimise its exposure to risk and losses and further put in place a policy that will promote their objectives and operations.
56

Ronald de Bruin (2002) Consumer Trust in Electronic commerce: Time for Best Practice. Kluwer Law International. The Hague, The Netherlands Page 137 57 Ibid 58 The Republic of Uganda, Ministry of Tourism, Trade & Industry; National Trade Policy; Trading out of Poverty, Into Wealth & Prosperity, August 2007.

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Currently Uganda has no law that directly tackles the very likely problem or issue of returns and refunds in both the offline and online world. Therefore such a legal lacuna creates a big problem for online merchants, as it directly impacts on their business operations. As a result of consumers fearing for their lack of immediate, cost effective and time saving remedies in the event of dissatisfaction with the goods and services purchased, will hold back from engaging in electronic transactions, thus adversely affecting online merchants. As such merchants motivated not by any need to comply with a legal requirement, but rather by the desire to attract more consumers and thus bolster their sales will formulate return policies of their own.

2.7.3 Establishing Electronic Commerce Policies


When merchants create their online stores, they are often so fixated on uploading products and creating an aesthetically pleasing website that they forget to establish good policies. Although establishing policies doesnt fall into the fun category, policies can protect the merchant and are a necessity.59 A return policy is one of the most important policies a merchant can construct. It will vary from business to business and may also depend upon industry and what competitors are doing. Some will allow for exchanges and store credits, while others might offer a complete money back guarantee. Whatever category it is, the website ought to mention a time component for enforcing it. You should know shipping costs and how they pertain to returns. Having a clearly defined shipping policy is extremely important and unfortunately something that every online merchant will fall back on at some point in time.60

2.7.4 Implementation of return policies


The information provided in the return policy ought to contain detailed contact information, all relevant due dates and time for returns, essential supporting documents, any possible restrictions and exceptions, among others allowing the user to get a clear impression of what she/he can expect from the company.
59 60

http://www.ecommerce-blog.nexternal.com/establishing-ecommerce-policies. Ibid

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Further when publishing a Return Policy on its website the online vendor ought to focus on keeping it in plain English as too much legal expressions in the policy may confuse the customer and potentially leave a negative impression in the mind of the reader (for example the user might think the vendor wants to intentionally confuse readers). Thus, the return policy ought to be kept simple and might be best structured according to concerns consumers face most often (for example what can I return? What is the time limit for returns?)61

2.8 EFFECT OF EXERCISING RIGHT OF WITHDRAWAL "There is a great principle which I think ought to be adhered to by this court and by every court where it possibly can do so; that is to say that a man shall abide by his contracts and that a man's contracts should be enforced as against him."62Thus wrote Justice Romer in Biggs V Hoddinott. That is a statement which still holds value and relevance in common law, traditional contractual relations. Therein, persons are required to abide by their contracts to discharge their contractual obligations. Doing so completes the contract and frees each party from it. However the same cannot be said to be true in respect of electronic commerce transactions. Over time, new rules have been developed through practice to suit the peculiar needs and challenges facing electronic commerce and as such an exception to the above rule has been developed. These new rules are the rights of withdrawal and or return policies often used interchangeably but meaning different things. The right of withdrawal simply provides the consumer the right to cancel the contract within a period of time after the contract has been entered. Withdrawal from an electronic commerce contract terminates the obligations to perform the contract. So in effect, whereas the right of withdrawal is the legal right to which a consumer may be entitled to in a given case, the return policy of or simply put, right of return may be the avenue for exercising such a right. To that end, party has to return at its own expense to the other what it received under the contract, unless the
61 62

Ibid Biggs Vs Hoddinott (1898) 2 Chancery Division 307 at page 313

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contract provides otherwise in favour of the entitled party. The withdrawing party is not liable to pay any other costs and does not incur any other liability through the exercise of its rights of withdrawal. The other party must return any payment received from the party that has withdrawn free of charge and as soon as possible, once the withdrawal becomes effective. The party withdrawing from the contract is not liable for damage to the received goods, provided that it exercised reasonable care. The same party is not liable for diminished value of the received goods caused by inspecting, testing and normal use during the period before the exercise of the right of return expires. A recent judgment from the European Court of justice shades more light on the matter. Although Uganda is not bound by the decisions of the European Court of Justice, the case nonetheless has some persuasive value63. In Pia Messner v Firma Stefan Krger Case C489/07, a reference by the Amtsgericht Lahr (local court) on the wording of the German Civil Code (BGB), to the Court of Justice of whether, in the case of a revocation by a consumer within the revocation period, the provisions of Directive 97/7/EC on the protection of consumers in respect of distance contracts allow the possibility for a seller to claim compensation for the value of the use of goods acquired under a distance contract. The Court found that a general requirement to pay compensation for the value of the use of the goods acquired under a distance contract is incompatible with the objectives of the Directive in question. The effect is that there are very few circumstances where a consumer exercising a right of withdrawal can be required to pay anything at all in respect of the goods received. In certain limited circumstances, however, a consumer can be required to pay compensation for the use of the goods acquired where he has made use of those goods in a way incompatible with the principles of civil law, such as those of good faith or unjust enrichment.64

63

It is of persuasive value only because the decisions of the European Court of Justice are not binding on the Courts of Uganda. 64 European Court of Justice case 489/07

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2.9 ROLE OF RETURN AND WARRANTY POLICIES IN ESTABLISHING CONSUMER CONFIDENCE For the full potential of electronic commerce to be realised and if the prophesied rewards are to be seen by both traders and consumers, then it is imperative for measures to be adopted to ensure consumer confidence and trust in electronic commerce and its infrastructure. Of course this involves a multi dimensional approach, ranging from technological and logistical issues to some kind of legal security. Moreover, unless a legal framework is put in place that inspires confidence, the internet will simply bolster the position of established brand names rather than being a vehicle through which small independent traders can benefit from lower entry costs to the market. Such a legal framework could possibly be attained by the use and of return policies in the carrying out of electronic business. Whereas most electronic businesses within the member states of the European Union have mandatory return policies, as an almost automatic nature of their trade and dictated by the laws applicable to their jurisdictions by virtue of the Directive 97/7/EC65 and the respective national laws, some others do it out of individual choice and driven by the need to attract customers and not as a need to comply with any particular law. As earlier discussed in chapter two of this thesis, even in the absence of an express legal provision for the use of return policies in Uganda, there still exist other legal avenues through which consumers could enforce and obtain some redress from retailers. Such redress could be through pursuing their statutory rights provided for in the Sale of Goods Act, through the implied terms of the contracts. However despite the existence of such a possibility, pursuing such legal redress may not necessarily be the best and quickest avenue to help engender consumer confidence, as it is costly in terms of both time and money. It is in that regard that retailers return policies become handy in delivering such desired results. Even in places and situations that do not have any legal requirement for the use of return policies, such as Uganda, most retailers have found it increasingly impossible to transact business without such policies to back them up.
65

Distance Selling Directive. A Directive is a legislative act of the European Union, which is binding on the member states to whom it is addressed. A Directive requires member states to achieve a particular result without dictating the means of achieving that result.

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2.9.1 Who benefits?


A return policy enables the consumer to make a fully informed choice before the contract is regarded as completely finalised and binding upon the consumer. It provides the consumer who purchases goods or services at a distance, the same opportunity to inspect what is on offer that a consumer making such a purchase in a traditional shopping environment will have.66 Although consumers will receive prior information, it may not adequately describe a product (does a picture show how well a pair of shoes will fit?). As most return policies in practice, provide for a right to withdraw from a given distance contract, new consumers will be enticed into shopping at a distance. Suppliers stand to benefit as well, as the right of withdrawal should reduce consumer reluctance to buy unfamiliar products or services or use suppliers that might be previously unknown to them.67 Return policies also help retailers in the long run to gain repeat business and customer loyalty.

CHAPTER THREE

3. AN EXAMINATION OF THE LEGAL FRAMEWORK IN THE APPLICATION OF RETURN POLICIES IN UGANDA

66

The Distance selling Directive: Consumer Champion or Complete Irrelevance? Found at http://www.cis.strath.ac.uk/cis/research/publications/papers/strath_cis_publication_126.pdf. Visited on the 20th.06.2010 67 Ibid

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3.1 INTRODUCTION The theme running through this thesis is that return policies could be one route by which to obtain redress informally and the investigation is generally based on examining the extent to which Ugandas legal framework is supportive of such a redress mechanism. To that end, this chapter will try to demonstrate that, there is a fairly complex but nonetheless supportive legal framework for the use of return policies in Uganda. Drawing from the common law principles and doctrines of contract law, the following paragraphs will demonstrate electronic commerce, is nonetheless part and parcel of the law of contract, and as such, the use of refund policies can be strongly supported and backed by the existing principles of contract law. 3.2 INTRODUCTION TO UGANDAS LEGAL SYSTEM Uganda follows or observes what is called the common law system. This is because Uganda having been a British colony, adopted the English common law system. At present the laws applicable in Uganda are; statutory law, common law; doctrines of equity and customary law. These laws apply by virtue of the Judicature Act.68 . However, customary law is in effect only when it does not conflict with statutory law. A "common law system" is a legal system that gives great precedential weight to common law,69 on the principle that it is unfair to treat similar facts differently on different occasions.70 The body of precedent is called "common law" and it binds future decisions.

3.2.1 Interaction of Statutory and Common law


In common law legal systems, the common law is crucial to understanding almost all important areas of law. For example, in England, Wales and in Uganda itself, the basic law of contracts, torts and property do not exist in statute, but only in common law (though there may be isolated modifications enacted by statute). In almost all areas of the law (even those where there is a statutory framework, such as contracts for the sale of goods, 71
68 69

Section 16 of the Judicature Act, Chapter 14 of the Laws of Uganda, 2000 edition Washington Probate, "Estate Planning & Probate Glossary", Washington (State) Probate, "common law", [html], 8 Dec. 2008: <http://www.wa-probate.com/Intro/Estate-Probate-Glossary.htm>, retrieved on 7 October 2010. 70 Charles Arnold-Baker, The Companion to British History, "English Law" (London: Routledge, 2001), 386. 71 The sale of Goods Act; chapter 82 Laws of Uganda 2000 edition

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legislature-enacted statutes generally give only terse statements of general principle, and the fine boundaries and definitions exist only in the common law. To find out what the precise law is that applies to a particular set of facts; one has to locate precedential decisions on the topic, and reason from those decisions by analogy. In common law jurisdictions, legislatures operate under the assumption that statutes will be interpreted against the backdrop of the pre-existing common law and custom. For example, in Uganda, the criminal statutes are primarily codification72 of pre-existing common law. When that pre-existing law is common law, the common law remains relevant to the interpretation of these statutes. In reliance on this assumption, modern statutes often leave a number of terms and fine distinctions unstatedfor example, a statute might be very brief, leaving the precise definition of terms unstated, under the assumption that these fine distinctions will be inherited from pre-existing common law. A classic example of such a statute is the Contract Act73 which provides in section for the application of the common law in relation to contracts. It states that; except as may be provided by any written law for the time being in force and subject to the exception to section 1, the common law of England relating to contracts, as modified by the doctrines of equity; the public general statutes in force in England on the 11th August, 1902; and the Acts of the Parliament of the United Kingdom mentioned in the schedule to this Act, shall extend and apply to Uganda.74 As already mentioned in the introduction, electronic commerce forms a part of the larger contractual regime, as such its legal force and regulation can always be gauged against the backdrop of the law of contract as obtaining in Uganda. Considering that there are no express legal provisions in the Ugandan contractual legal regime as regards refund policies, the legal basis and support for the use of refund policies will be drawn on the common law principles and doctrines as applicable to general contracting practices.

72

Codification is the process of enacting a statute that collects and restates pre-existing law in a single document. 73 Contract Act, Chapter 73, Laws of Uganda, 2000 edition 74 Section 2 of the Contract Act, Chapter 73, Laws of Uganda, 2000 edition

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3.3 RETURN POLICIES

3.3.1The legal genesis of its use


The right of withdrawal may be considered as being one of the central bodies of European consumer law with the European Commission legislation having played a pioneering role in how this particular consumer right has spread and taken shape. The development of the right of withdrawal at community level began in 1985 with the Doorstep Selling Directive75. Subsequent directives providing the consumer with a right of withdrawal gradually emerged thereafter. When it emerged in the European Community, the member states such as the United Kingdom were under a legal obligation to incorporate the new legal redress mechanism into their legal systems. As a result of its legal status in the European community and considering the volume of trade carried out in the European Community, the new consumer protection redress mechanism gained a more prominent role and position in the business practices of most countries and enterprises across the world. In light of the above, it is imperative to note that, return policies originated from a legal system entirely different from the common law system practiced in Uganda. Whereas the common legal system is marked by a very strict following of judicial precedent, a civil law system develops through an existing legislative process. This is a system followed by most countries around the world, especially in Europe, where the European Community has continued to use the civil law system as its default legal system. Over time, most common law practicing countries such as Uganda have taken on an increased level of legal codification, due to sovereignty demands. However despite that, the old body of common law continues to develop from the judgments handed down by the judiciary and coexists with written law, although the written civil law does override the common law when they come in conflict76.

75

Council Directive 85/577/EEC of 20 December 1985 to protect the consumer in respect of contracts negotiated away from business premises; OJ L372/31 76 Section 14 of the Judicature Act, Laws of Uganda 2000 edition

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3.3.2 Return Policies in Uganda; the Old practice in respect of Sale of Goods
The right to reject and possibly return goods has a long history in English law, and was codified in the Sale of Goods Act 1893. Under English common law, the breach of a term classified as a condition allows the buyer to terminate the contract. The domestic law relating to the sale of Goods is set out in the Sale of Goods Act77. Essentially, it allows the consumer to reject faulty goods and claim a full refund. However the right is lost once the consumer is deemed to have accepted them, which may happen after the lapse of a reasonable time78 To that extent it, is right for one to argue that there are enough remedies for consumers if they buy faulty goods. In its very nature, the right to reject faulty goods found in the Ugandan Sale of Goods Act involves the returning and refunding of the purchase price. As Miller points out, the common law assumes that when a contract goes wrong, it should be ended as soon as possible (hence the quick right to reject).79 The Sale of Goods Act, however should be noted, is restrictive as far as it only offers remedies in respect of goods which do not conform to contract. Goods do not conform to contract where the retailer sells or supplies goods in breach of an express or implied contractual term. However, the thesis is not concerned with such rejection rights but rather with the evolving right enshrined in return policies. The focus of the thesis and which is not covered by the Sale of Goods Act are the special rights given to consumers to cancel contracts when they buy through distance selling methods. These rights apply equally to non-faulty goods, so are conceptually distinct from remedies for breach of contract. It is further worth noting

77 78

Sale of Goods Act, chapter 82 Laws of Uganda Section 35 (4) of the Sale of Goods Act 79 Miller L. The common Frame of Reference and the feasibility of a common contract law in Europe (2007) Journal of Business Law 378

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that most of the cancelled contracts or those that can be cancelled under the latter return policy regime, do not have any legal cause of action.

3.3.3 The market place- returns policy practice


The law in general is used for spelling out rights, duties, sanctions and remedies in respect of different subject matters. However, where there is no such express law or where there is a mismatch between lay views of what consumers are entitled to and what the law provides, consumer confidence may suffer. In the absence of any legislation in Uganda providing for return policies, consumers expectations are heavily influenced by retailers returns policies, in particular the voluntary (money-back) policies offered by the high street retailers, which usually allow returns for whatever reason within a month or there about. It would seem that consumers expectations of their rights have been raised by these return policies. In reciprocal fashion, consumers expectations also drive retailers returns policies, as retailers compete for custom and are ware that such policies affect purchasing decisions. A large proportion or returns are dealt with under voluntary policies rather than the strict letter of the law.

3.3.4 Returning consumer purchases


It is not true that consumers have a right to return almost anything they buy in a store. Although there are laws to protect consumers who buy defective products or who are led to make purchases based on misleading advertising, there is generally no rule or law that absolutely requires merchants to offer refunds, exchanges or credits on the items they sell. There are four basic principles customers should know about returning goods they purchase in a store: first, merchants can set their own policies on refunds and exchanges. Generally, are not entitled to either a refund or an exchange. Second, although merchants are not required to do it, many of them will exchange non- sale items whether customers paid for them with cash, cheque or credit. Third, sale items are commonly exempt from merchants

31

refund and exchange policies. Fourth, if customers exchange a product for another one that costs less the store can require the customers to spend the difference in cost in their store Because it makes their stores more attractive to customers, most retailers do offer refunds, exchanges or credits voluntarily although they usually impose a reasonable time condition for these refunds, exchanges or credits. These kinds of policies have become so common that people have come to expect them. In light of the fact that, there is no express legal provision or legislation in respect of return policies and further, in light of the fact, that its use in Uganda is virtually dependent on the good will of the retailers (at least prima facie), it is imperative to probe if the consumers, who may depend and act on such return policies, have any extra back up support in the legal framework in the event that, retailers start imposing unjust limitation, or simply refuse tom honour their promises. 3.4 ENFORCEABILITY OF RETURN POLICIES UNDER UGANDAS LEGAL FRAMEWORK From the preceding discussion, it has already been noted that, there is no distinct and clear cut legislation or legal provision that directly deals with matters of return policies in respect of long distance sales or even ordinary sales which do not fall under the remedial regime under the Sale of Goods Act in respect of faulty goods. Despite the above, the practice of using return policies is taking on an increasingly central role in most electronic commerce transactions in Uganda. Therefore there is need to investigate if the use of such return policies can or is supported by the current state of the legal framework and whether such return policies can be legally enforceable under Ugandan law. 3.5. LEGAL STATUS OF RETURN POLICIES Most if not all return policies often come as part of the overall package of goods. The legal enforceability of a return policy in common law will depend on whether this could be 32

construed as a contract or one of the terms of the contract between the consumer and the retailer under the common law rules of contract formation. If a return policy is to be a contract or one of the terms in respect of the contract of purchase, it must comply with the common law rules on contract formation and incorporation of contractual terms. A number of elements must be present before a legally binding contract is concluded. There has to be an offer by the retailer to provide the consumer with a return option for a particular purchase. The offer must then be accepted by the consumer. In return for that, the consumer will have to provide some form of consideration. The conclusion of the contract of sale may in itself be sufficient consideration. Finally, the retailer must intend to create a legal relationship. The following discussion is going to focus on the two avenues within the framework of the common law contractual principles through which return policies can or could be legally validated and enforced or recognised. These common law avenues are namely, incorporation of terms and collateral contracts.

3.5.1 Incorporation of terms


Incorporation of terms in English common law is the inclusion of terms in contracts formed under common law in such a way that the courts recognise them as valid. For a term to be considered incorporated it must fulfill three requirements. Firstly, notice of the terms should be given before or during the agreement of the contract. Secondly, the terms must be found in a document intended to be contractual. Thirdly, "reasonable steps" must be taken by the party who forms the term to bring it to the attention of the other party80. The rules on incorporating terms in English law are almost all at a common law level. 3.5.1.1 Notice For a term to be considered incorporated into a contract, notice of that term must be given before or during the time of contracting, something established by Olley Vs Marlborough Court Hotel.81 The claimant booked a room in a hotel owned by the defendant. Inside the door of her room was a notice stating that the hotel was not liable for anything lost or
80 81

McKendrick, Ewan (2007) Contract Law, 7th Edition. Palgrave Macmillan


(1949) 1 KB 532

33

stolen unless the item had been given to the management to look after. When the fur coat of the claimant was stolen from her room, she sued the defendant for damages. It was held that because the contract had been made at the reception desk before the parties got to the room, and because notice of the term was only given after the formation of the contract, it was not an incorporated term and the claimant could sue the defendant for damages.82 An exception to the rule on notice is past dealings. If the parties have had similar dealings in the past, the courts have previously found that notice is not necessarily required if their past dealings represent a "consistent course of action"83 In McCutcheon Vs David MacBrayne Ltd,84the House of Lords said that the course of dealing must be both "regular and consistent". This has never been more closely defined, however - in Henry Kendall Vs William Lillico Ltd85 the House of Lords held that 100 similar contracts over three years were a "regular and consistent" course of dealing, but in Hollier V Rambler Motors (AMC) Ltd86 the Court of Appeal held that four contracts over five years was not a course of dealing.87 The online contractual world provides a particularly difficult situation for the implementation of the notice requirement. It is common knowledge that in todays click wrap world, consumers rarely (if ever) actually read online terms and conditions, in as much as they may be presented to them by the retailers. Courts nevertheless continued to apply the objective test for standard form contracts on the premise that a reasonable person ought to have read the online terms.88 Although it is tempting to argue that, such an objective test would be in the consumers benefit (as they would not need to prove that they actually read the terms, as at the time of
82

Furmston, Michael (2007), Cheshire, Fifoot & Furmstons Law of Contract (15th Edition) Oxford University Press. Pg 205 83 Turner, Chris (2007). Jacqueline Martin. Ed. Unlocking Contract Law, (2nd Ed.) Pg. 169 84 (1964) 1 WLR 125 85 (1969) 2 AC 31 86 (1972) 2 QB 71 87 McKendrick op.cit. at page 194 88 Orpwood R. Electronic Contracts: Where weve come from, where we are, and where we should be Going (2008) International In-house Counsel Journal, Vol. 1, No. 3, Spring 2008, 455-466, available at http://www.iicj.net/sampleruthorpwood.pdf (last viewed on the 14th October 2010)

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entering the contracts), it completely disregards actual practices and the pace at which transactions are concluded.89 One solution would be to create a standard layout for abridged B2C Internet contract terms. The summary would be made available at the same time, place and form as the full contract terms, but would be a quick readable version of the full terms. This would increase the likelihood and reasonableness of consumers being aware of the agreement they are entering into.90 With a quick glance, a consumer would be able to determine whether they were receiving the benefit of any return rights, or whether they would be bound to future payment obligations. The summary would be hyperlinked to the full terms where they could get more information if interested.91 3.5.1.2 Contractual document The second rule required for clauses to be considered incorporated is that they must be found in a document intended to be contractually binding92 In Chapelton V Barry Urban District Council93 the claimant hired a deckchair from Barry Urban District Council to use on a beach in Cold Knap. The claimant took two receipts from the beach attendant, on the back of which were the words "the council will not be liable for any accident or damage arising from the hire of the chair".94 The chair was defective and broke, injuring the claimant. He sued the council, who relied on the clause on the receipts to protect them from liability. The Court of Appeal held that the clause could not protect the council, as the receipt was not a document that one would expect to contain contractual terms.95 If one signs a contractual document it is automatically considered to be binding, even if the party has not read the terms.96 In LEstrange v F. Graucob97 the Court of Appeal held that a
89 90

Ibid. Ibid 91 Ibid 92 McKendrick Op.cit. at page 191 93 (1940) 1 KB 532 94 Turner Op.cit at page 171 95 Peel, Edwin (2007) Treitel- The Law of Contract (12th Ed.) Sweet & Maxwell 96 Supra footnote number 18 at page 168 97 (1934) 2 KB 394

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written document was contractually binding even though the claimant had not read the document and the clause was in "regrettably small print".98 The online world is particularly well suited to the practice of incorporating terms by reference, as it is quick and easy to insert hyperlinks and links into texts. 99 The Supreme Court of Canada recently contemplated the validity of introducing terms via hyperlink in the case of Dell Computer Corp. Vs Union des consommateurs 100. In upholding the validity of the practice the court concluded that contractual terms and conditions can be enforceable even if the consumer is required to click on a hyperlink to access them (that is to say, the terms are not found on the ordering page itself). It further emphasized that the terms and conditions must be reasonably accessible and was of the opinion that a hyperlinked document meets that standard.101 Although, the above case(s) are not binding in Uganda, they clear provide a highly persuasive and instructive value in respect of the matter at hand. It would seem highly likely that faced with similar facts, Ugandan courts of law, would uphold and follow the same pattern and uphold the validity of such terms found in websites by way of hyperlinks, advertisements among others. 3.5.1.3 Attention of the other party The third rule required for clauses to be considered incorporated is that "reasonable steps" must be taken by the party who forms the term to bring it to the attention of the other party.102 This is demonstrated by Parker v South Eastern Railway Co.103 where it was established that it does not matter if one party actually reads a set of terms, only that the other party takes "reasonable steps" to bring them to their attention.104
98 99

McKendrick op.cit. at page 186 Andrew D. Murray, Entering into Contracts Electronically: The Real W.W.W., in Edwards and Waelde (eds) , Law and the Internet: A Framework for Electronic Commerce (2000), Oxford: Hart publishing 100 2007 SCC 34 101 Geist M. Dell case sets standard for online Contracts Posted Monday July 30, 2007, available at http://www.michaelgeist.ca/content/view/2141/135 (last viewed on the 14th October 2010) 102 McKendrick op.cit 103 (1877)2 CPD 416 104 Supra footnote number 26

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If a notice of the term is displayed on the contractual document, this is normally sufficient. In Thompson V London, Midland and Scottish Railway Co. Ltd105 the claimant asked her niece to buy a railway ticket for her. The ticket said "see back" on it, with the back of the ticket informing the reader that the full terms and conditions could be found in the company timetables. Even though the claimant was illiterate and could not read the ticket, the Court of Appeal held that the clause was still valid because "reasonable steps" had been taken to bring it to the claimant's attention. A rule is that the more exceptional or unusual a term is, the more that must be done to bring it to the attention of the other party. In J. Spurling Ltd V Bradshaw106 Lord Denning said that "the more unreasonable a clause is, the greater the notice which must be given of it. Some clauses which I have seen would need to be printed in red ink on the face of the document with a red hand pointing to it before the notice could be held to be sufficient" establishing the "red hand rule".

3.5.2 Collateral Contracts


A collateral contract is usually a single term contract, made in consideration of the party for whose benefit the contract operates agreeing to enter into the principle or main contract, which sets out additional terms relating to the same subject matter as the main contract.107 Three requirements must be fulfilled to establish the existence of a valid and binding collateral contract: first the representor must have brought the promise to the attention of the representee or promise. Second, the representor must have intended the promise to be legally binding (This merely fulfils the general requirement for legal intention to establish a contract in any case.) Third, the representee must have entered into the main contract on the basis of the statement and in reliance upon it. (Without that, the entering into the main contract would not be good consideration.)

105 106

(1930) 1 KB 41 (1956) 1 WLR 461 107 Graw S. An Introduction to the Law of Contract (1998), 3rd Ed, Lawbook Company Information Services, North Ryde, pg 162

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In respect of the first requirement, it is a general principle that a person can only accept an offer if he was aware of this before providing his consideration108. If a consumer only discovered the return policy after the purchase, and if the only consideration he might have provided is entering into the contract for the sale of the product itself, it is unlikely that this would be sufficient for the return policy to be legally enforceable.109 However, that may not present much of a problem, as in many cases, a consumer will have been aware of the return policy before he decided on a purchase. The retailer may have mentioned it before the consumer completed his purchase. Also the return policy is often mentioned in advertisements and promotional material. It is arguable that this may be sufficient in order to constitute an offer that a return will be accepted if the consumer subsequently buys the product110. However, the retailer may dispute the extent to which a particular statement, for example, in an advertisement, was intended to constitute a term of the contract, although this seems highly unlikely in practice, as most retailers use such return policies in order to boost their custom. It is therefore atleast arguable that a return policy would, in some circumstances, be enforceable as a contract between a retailer and a consumer and that this is collateral to the main contract of sale. Although there are no cases specifically on return policies, there is a reasonable body of case law on collateral warranties generally. It will be useful to review this to appreciate the difficulties of establishing collateral contracts in this context. The legal standard for establishing collateral contracts is high. In Heilbut, Symons & Co. V Buckleton (1913), Lord Moulton stated that: Collateral contracts...must be proved strictly. Not only the terms of such contracts but the existence of an animus contrahendi on the part of all the parties to them must be clearly shown... 111 The difficulty therefore is whether a particular statement was intended to give rise to a legally binding obligation. Most retailers, who use return policies as part and parcel of
108 109

Williams Vs Carwardine (1833) 4 B & Ad. 621; E. R. 590 Twigg-Flesner C. Consumer product Guarantees (2003) Ashgate 110 Ibid 111 Heilbut, Symons & Co. V Buckleton (1913) AC 30

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their trade practice, often advertise about the possibility of consumers exercising their right to return goods within a specified time frame if they are not satisfied with the purchase. Such information is often found in their websites, online advertisements among other sources and among the normal brick and mortar retailers, on their shop window displays, counters among other noticeable areas. There have been cases in the recent past, that seem to suggest or support the argument that statements found in adverts, publicity material and offers can generally be construed to mean an intention on enter into legally enforceable contracts (collateral contracts). Although the case originates from the United Kingdom, the principles of common law make it applicable in Uganda, although just for persuasive purposes. The Court of Appeal in Bowerman V Association of British Travel Agents (ABTA)112 held that publicity material could give rise to a legally enforceable obligation. ABTAs travel agents displayed a notice in their offices describing ABTAs scheme of protection against financial failure of ABTA members. Ms Bowerman claimed that this notice constituted a contractual offer by ABTA to those who booked their holidays through an ABTA agent to protect them financially should the agent go out of business. The majority found that the wording of the notice was precise enough and provided sufficient evidence of an intention to create legal relations. Hobhouse LJ observed that rather than engaging in a fine analysis of the language used, the document as a whole and its impact on the general public should be considered. As such, it would reasonably be read by a member of the public as containing an offer of a promise. The notice satisfied the requirements for a collateral contract113. The decision is of considerable value beyond the holiday industry and in relation to shop displays generally.114 It would seem to me, that the decision can support my argument that, the collateral contract device can confer direct rights upon consumers as against retailers who offer inducements to the public to purchase their goods. If it can reasonably be expected that a consumer will rely on a retailers statement regarding returns and refunds, the return policy should be binding on the retailer.

112 113

Bowerman V Association of British Travel Agents Ltd (1995) 145 New Law Journal 1815 Supra footnote number 16 114 Whincup M. (1996). Comment on Bowerman Vs ABTA, 4, Consumer Law Journal, CS6

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If these requirements are met, the courts may hold that a collateral contract has come into existence and may enforce the promise, not as part of the main contract but as the substance of a quite separate (but related), collateral contract.115 Despite the close association between a collateral contract and the principal contract to which it relates, both are contracts in their own right and therefore enforceable as such unless the obligations set out in either contract are expressed to be dependent or contingent on the performance of a corresponding obligation in the other contract.116 It seems, therefore that the common law of contract could recognise the enforceability of return policies. 3.5 ADVANTAGES OF RETURN POLICIES OVER STATUTORY RIGHTS FOR INFORMAL REDRESS Considering that at present return policies in Uganda, are basically used at the retailers total discretion but not as a legal requirement, it is instructive to look into the advantages such an informal redress mechanism offers to the consumers over say the statutory rights. The use of return policies is meant to offer consumers an informal mechanism for redress against the retailers, because it ordinarily ought to be far cheaper and readily available means of providing consumer redress as compared to litigation. Return policies inherently operates like it is a self-enforcing remedy, without any need for protracted and costly litigation. It would be wrong to deny that there are clear advantages to the statutory rights. In contrast to return policies, the statutory rights of consumers are mandatory and cannot be limited or excluded in any way. They provide an objective standard which cannot be deviated from by the seller.117

115

Graw S. An Introduction to the Law of Contract (1998) 3rd edition, Lawbook Company Information Services, North Ryde page 162 116 Ibid 117 Twigg- Flesner C. Consumer Product Guarantees. (2003) Ashgate

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3.6 CHALLENGES OF THE CURRENT LEGAL FRAMEWORK ON CONSUMER REDRESS Although the preceding paragraphs suggest that return policies could have a very useful role to play in the informal resolution of consumer disputes, there are a number of potential difficulties. A fundamental problem is that a return policy is drafted by the retailer and it is the retailer who will determine the extent of his liabilities and the exact scope of remedies available to the consumer upon exercising the right to return any purchased product for any reason or for no reason at all. It is therefore subjective. Such a weakness is a problem that is encountered in the context of informal redress mechanisms generally. As ably observed by Ramsay in informal consumer retailer dispute resolution discussions: Many retailers perceived themselves as exercising a discretionary power, applying reasonable standards of the market place for the privilege of reasonable consumers ...consumers rights at this level of two party negotiation are therefore dependent on norms generated by sellers partly in response to market forces rather than a response to legal rules.118 This built in discretion would clearly need to be controlled by a legal framework for return policies. However, there will be non-legal constraints on the ability of the retailer to exercise his discretion arbitrarily.119 Braucher (1985)120 notes that concerns over business reputation will encourage retailers to honour their policies. The fear of negative reputation will ensure that the retailers stick to their promises and will not seek to take advantage of the discretion given to him by the return policy to refuse and perform his obligations. Further, that the statutory rights of consumers, often phrased in legal language, do not encourage consumers to complain and may, in fact, result in them not obtaining any redress at all. She adds that litigation needs to be available as a back-up plan to informal dispute resolution-but consumer protection law will not work if it only becomes accessible through the involvement of lawyers.121
118

Ramsay I. Consumer Redress mechanism for poor Quality and defective products, (1981) 31, University of Toronto Law Journal, 117-152 119 Ibid foot note number 21 120 Braucher J. An informal resolution model of consumer product warranty law,(1985) Wisconsin Law Review, 1405-1480 121 Ibid, at page 87

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It has furthermore been demonstrated that strict legal entitlements are often insignificant, and the preservation of good business relations and trust may be much more important.122 Compared to other jurisdictions where return policies are being used in distance sales contracts, Uganda at present does not have any legislation that directly provides for return policies. Despite the fact that its being used on an increasing scale, its legal status is at best supported by the common law contractual principles. That means that in the event of any problem, such as where a retailer denies the validity of the policy, or incorporates very unreasonable exceptions to the policy, the enforcement will not be as informal and fast as it ought to be. In such a case recourse will be to the common law contractual principles, which by necessity will call for litigation and as a result, defeating the very purpose of the return policy. Private law as a means of delivering access to justice has in many cases failed to deliver the much desired results. In respect to consumer protection, its most damning criticism relates to the inability of legal institutions to deal with consumer complaints. 123 Critics claim that, even if the substantive law were framed in the most pro-consumer terms, the rights granted to consumers would not be effective because the amounts of money involved are generally too small to be worth litigating; because the legal system and lawyers appear alien to the average consumer and only the more educated consumers are aware of and can articulate their complaints in terms which allow them to take advantage of the law. These criticisms have been well made and have encouraged responses seeking to question the way legal services are delivered to consumers and to re-examine dispute resolution procedures.124Moreover, they should cause us to question the way we structure substantive rules if they rely on enforcement that is unlikely to be practical either by individuals or public agencies.125
122 123 124 125

Collins H. Regulating Contracts. (1999) Oxford, Oxford University Press Peel Op.cit.

Ramsay I. Consumer Redress Mechanisms for poor Quality and Defective Products (1998) 31 UTLJ 117 Peel Op.cit

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The more difficult challenge to private law is to deal with situations where the amount of harm to individual consumers is small. Few rational individuals will litigate such claims, 126 unless they suffer from super-spite.127 Where the harm to the collective is great it is important that mechanisms are found to litigate such issues. Even where small amounts are involved these may be significant to the individuals concerned and procedures need to be in place to address their concerns. Unless the full range of consumer concerns are taken on board, consumer law will continue to be viewed as middle class law, for it will only be worth litigating disputes involving high cost goods and services.128 To that end therefore, it would be prudent for substantive law to be drafted in such a way as to make enforcement easier for consumers, by for instance, favouring techniques such as cancellation rights that are easier for consumers to invoke. Equally, in developing responses to the law it may be useful to look at ways of promoting informal dispute resolution between the parties. This might in practice be even more fruitful than granting ever greater substantive rights, which consumers do not in practice invoke.

126 127

Olsen M. The Logic of Collective Action (1965) (Harvard UP, 1965) Leff A. A. Injury, Ignorance and spite (1970) 80 Yale LJ 1 at 21 128 Geraint, Op.cit.

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CHAPTER FOUR

4. CONCLUSION AND RECOMMENDATIONS


Consumer protection law discourse has in the recent past been involved with the issue of return policies in electronic commerce. As the right was evolving and increasingly being adopted in many jurisdictions across the world through legislative measures and enactments, some other countries such as Uganda, have been slow to follow the trend and still find themselves without legislation providing for such a right. However, the right is being used in practice through voluntary arrangements by retailers The thesis is an endeavour at analysing how supportive Ugandas legal framework is in the use of return policies and the present chapter four is specifically aimed at summarising the previous chapters and giving a concluding remark in respect of the main thesis goal. 4.1 RESEARCH FINDINGS For as long as there have been traders there have been those who would exploit their customers129. As such there has always been some consumer protection in various forms. Laws concerning basic necessities date back centuries, and much of Ugandas current legislation such as food safety and weights and measures130 have their origins way back before the idea of consumerism was even thought of. In the recent years there has been a
129

Angela Yeoman- Clark; The Imperative for a strong Regulatory Approach to Consumer Protection. In the yearbook of Consumer law: Geraint et al (eds). Aldershot; Ashgate Publishing Ltd, 2007 p 277 of 449 130 Weights and Measures Act, 1965 chapter 103 Laws of Uganda 2000 edition.

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veritable explosion of consumer legislation and consumer protection has been a recognised as a worthy aim by the EU,131leading to many novel consumer directives such as those on distance selling132. Within Uganda, like many other jurisdictions, a new dimension has been added to the problem of consumer protection by the growth and success of the internet which has led to an increase in distance sales, often involving cross-border relationships. This has led to calls for various legal and regulatory measures in an attempt to tackle the problem. As was earlier on discussed in chapter one of this thesis, various commentators have suggested different approaches in response to recent and anticipated future growth in longdistance commerce using electronic media such as the Internet.133 Whereas some commentators have suggested that legal and economic institutions will have to change substantially in response to new technologies of trade, in the same way that they did in response to the major technological and organizational innovations of the 18th and 19th centuries.134 Others have taken a more skeptical position, arguing that recent developments are better viewed as changes of degree rather than of kind, and that they can be accommodated by extending and modifying existing arrangements in a more evolutionary fashion.135 Whether by default of design, Ugandas legal framework seems to conform to the latter school of thought mentioned above. By not having an express or specifically dedicated statute to deal with issues raised by the emergence of electronic commerce or in the current case return policies, an analysis of Ugandas legal framework was therefore based on the existing general legal framework and drawing from such a general framework, ways through which return policies can be legally supported in Uganda through the extension of existing legal principles especially in the area of contract law.

131 132

Article 153 Treaty of Rome Directive 97/7/EC 133 Avery Weiner Katz: Is Electronic Contracting Different? Contract Law in the Information Age. 134 See e.g., David R. Johnson & David G. Post, Law & Borders- The Rise of Law in Cyberspace, 48 Stan. L. Rev. 1367 (1996) 135 See e.g., Frank H. Easterbrook, Cyberspace & the Law of the Horse, 1996, University of Chicago, legal F. 207

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4.1.1 Is Ugandas legal framework supportive to the use of return policies?


In chapters two and three of the thesis, it was mentioned that, the use of return policies in electronic commerce, is one that is carried out voluntarily by the retailers with an aim of gaining consumer trust and therefore not rooted in any mandatory legal provision or requirement. That sort of voluntary return policy is often laid down in the general public conditions of the retailer. Such a contractual right stipulated by some retailers136 has on occasion misled the general public into thinking that there is a general right to return goods even in respect of shop sales.137 Although, little if any, empirical material exists to test how widespread these return policies really are in Uganda, the thesis is an attempt at investigating how the use of return policies through voluntary schemes plays out in the general legal arena. Considering that a return policy has one principle aim as far as consumer protection is concerned, namely to offer consumers a post contractual remedy for reasons already discussed in chapter two of this thesis, it is my primary concern to see how such a voluntary right can be legally enforced by an aggrieved consumer. The discussion in chapter three shows some of the ways through which return policies can be legally supported and therefore enforced by aggrieved consumers as against retailers through the extension and modification of contract law doctrines and principles in a revolutionary way suitable for the needs of electronic commerce. From a legal point of view, it is therefore arguable that, Ugandas legal framework is supportive of the use of return policies in two respects. First, is that the law does not prohibit retailers and consumers from entering voluntary arrangements for the use of return policies and as long as consumers needs are satisfied through such a scheme, a voluntary return policy can be as good as a mandatory one. Secondly, if and when such voluntary return policies are not respected by the retailers, the consumers can still have recourse to a legal remedy through the exploitation of contractual legal doctrines such discussed in chapter three.

136

Some large supermarkets, electronic appliances shops and a few small online retailers provide for such policies 137 Some online and offline retailers therefore explicitly indicate in their websites and sale receipts that such a general right to return goods does not exist.

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4.1.2 Limitations of the legal framework


Legislative adjustment of what might be termed the common law of consumer protection improves the position of the consumer and, in perhaps a rather imprecise way, helps to make more effective the market mechanism based on consumer/ supplier dialogue138. It helps to prevent the trader from escaping the brutal consequences of failing to satisfy the consumer. Yet there are gaps in that control.139 In the preceding paragraphs and chapter 3, the thesis discussed ways through which voluntary return policies can be enforced by aggrieved consumers, but such may prove to be an illusion if account is taken of the practical difficulties which confront consumers seeking to enforce such legal rights, however generous those rights may appear on paper. Such difficulties range from ignorance of the law to the highly restrictive cost of enforcing legal rights in the private law manifestations. Even where the consumer is aware, however dimly, that a legal point has arisen, it is a practical truth that literally the last thing that the typical disgruntled consumer will do is to initiate litigation against a trader. Court proceedings take time and cost money, even if they are ultimately successful. In practice therefore, the cost of formal resort to law typically excludes the middle class as much as poorer members of society.140

4.2 RECOMMENDATIONS In light of the above research findings, the thesis suggests some possible recommendations so as to improve the legal position of electronic commerce consumers as far as obtaining tangible remedies are concerned.

4.2.1 Enforcement
Whereas the attainment of uniform substantive rules to regulate electronic commerce is essential to the realisation of the full potential of electronic commerce, providing effective enforcement of those rules is also as important. Unified laws for protecting consumers
138 139

Geraint, Op.cit page 46 Ibid, page 46 140 Ibid, page 47

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when buying online would offer a lot to consumers in their purchases abroad, however, as regards accessing rights in case of a problem, enforceability of such rules across borders is more important for the consumers141. As a matter of fact, the non enforceable rules are equivalent to those non-exist.142 Ordinarily, increasing consumer access to courts would be the first point of call, however considering the value of the goods and services mostly purchased by consumers as compared to the actual cost of court litigation, most consumers often do not take any action despite the justiciable nature of the disputes. Frequently consumers write off loss to experience.143 When consumers fail to invoke the law by pursuing their individual remedies, they paint a false and misleading picture of a functional and an effective market which is not subject to effective correction. This ultimately hides the large problem which ought to concern policy makers. The government, instead of passively supporting the unjust benefits of the businesses by overlooking, should actively maintain protection of consumers by providing them with easy to access to legal remedies for consumers. Out of court redress mechanisms can be a viable alternative.

4.2.2 Consumer protection bodies


There is need to establish and promote consumer protection bodies and associations to facilitate the resolution of disputes and enforcement of remedies. Such bodies could be of a private or public nature. They ought to be mandated to take actions on behalf of consumers who may be individually limited in their means to enforce their rights. As such, such organisations will provide some sort of social state to enable all the consumers including the low income ones to benefit from the services offered. In this regard, section 27 of the Consumer Protection Bill144 goes a long in trying to provide for exactly such a solution. It particularly provides for the defence, promotion, and enforcement of consumer rights through individual or collective, mediation, negotiation, arbitration or litigation.

141 142

Deniz, loc.cit Ibid 143 Geraint, Op.cit 144 The Consumer Protection Bill 2004

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4.2.3 Capacity building


The citizens in developing countries face a number of challenges in harmonising the benefits in the area of e-commerce. If e-commerce is to succeed in raising incomes and trade flows in the developing world and Uganda in particular, a range of technical and legal considerations need to be addressed. Beyond providing for access, Uganda needs to focus its efforts on capacity building. In addition to a communications infrastructure, successful e-commerce relies on a variety of other public sector inputs. Legal systems must adapt to a new range of contract and liability issues, educational systems must produce a technically competent work force and banks must be able to accept electronic payments. These factors are critical components for successful e-commerce development.145 E-commerce requires a supportive legal framework in the banking and educational sectors, as well as legal and juridical changes in response to challenges that have emerged in tandem with the new technologies. These include standards and protection of digital signatures, data protection among others. Further, the financial systems in Uganda will require significant upgrading and regulatory changes in order to meet the demands of ecommerce. Consumer and business trust in electronic forms of payment need to be enhanced through effective supervision and technical capacity. In particular national banking systems will need to upgrade their infrastructure to accommodate electronic payments and settlements. In addition, due to cultural constraints, inadequate financial infrastructure and low incomes, most countries lack a critical mass of credit card equipped consumers who can buy goods over the internet. As electronic forms of payment are critical to business to consumer (B2C) electronic commerce improvements in either credit card penetration or other forms of in line cash will need to be developed.146

145

Prof. Rama Rao T.P. E-Commerce and Digital Divide: Impact on Consumers: Presented at the Regional Meeting for the Asia-Pacific; New Dimensions of Consumer Protection in the Era of Globalisation, Goa, India, 10-11 September 2001 146 Ibid

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4.3 CONCLUSION Although initiatives such as the use of return policies can and might indeed strengthen consumer trust and confidence in electronic commerce, there is not one single solution, either for attracting more consumers to engage in electronic commerce or for solving the problem of lack of trust. Establishing and maintaining consumer trust and confidence involves a complex inter-play of multiple factors. That notwithstanding, one cannot under rate the potential that return policies can have in making some headway in that direction. To that end this thesis has endeavoured to establish the existence of a supportive legal framework for the use of return policies in Uganda, which in essence is reliant on individual enforcement of rights. Because consumer rights are only as effective as their enforcement, there are doubts cast on the efficacy of the current legal regime on return policies in Uganda. The use of return policies based on self regulation by the retailers, is bound to fail the consumers, as such is premised on the assumption that consumers can make informed choices and that consumers can get effective redress if for example the retailer fail or refuse to honour the contractual arrangement. However because of the problems associated with private enforcement of claims by aggrieved consumers, the current legal structure potentially becomes less supportive to the consumers, as far as exercising a full range of legal courses of action that could be available to them. The current legal framework by default places too great an emphasis on self regulation and the market, and too little on public enforcement. In most cases consumers still lack the requisite knowledge to be able to enforce their rights effectively for themselves. It is therefore submitted that a successful consumer protection regime contains all three regulatory elements: self regulation, access to effective civil redress and public enforcement147

147

Geraint Howell...(et al); The yearbook of Consumer Law, Aldershot, Ashgate Publishing Ltd, 2007, at page 291

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References
List of Judgements/Decisions Treaties/Statutes Secondary Literature

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Annex (optional)