Opinion on Consumer creadit:

Opinion:

Re D and D Dryden

1. I am asked to advise Mr and Mrs Dryden as regards to a credit agreement between themselves and Fanshawe Limited, to finance the purchase of a caravan from Chesterton Caravans Limited. Mr and Mrs Dryden, on the 15th of February 2003 paid a £4,000 deposit and signed the documentation for the loan agreement at the premises of Chesterton Caravans for the sum of £14,010.24. The unexecuted agreement was then sent to Fanshawe Limited. The caravan was delivered on the 19th of February. The Drydens then decided that they wanted to cancel the agreement on the 20th of February due to personal financial circumstances and the size of the caravan. They then called the offices of Chesterton Caravans on the 20th of February to cancel the agreement. The executed agreement, dated the 20th of February and signed by an agent of Fanshawe Limited arrived on the 22nd of February by first class post, with a post date marked the 21st of February. Mr and Mrs Dryden have not paid any of the due instalments, and Fanshawe Limited have terminated the agreement and are seeking full recovery of the money that they allege is due under the agreement. I am asked to advise on liability, and on any counterclaim as well as further procedural steps to be taken.

2. The Dryden's have a strong case here based on the advancement of several arguments. These include the likelihood that a valid withdrawal for the agreement will be held, and if not, the possibility of having the agreement set aside as being one of an extortionate nature. I would therefore expect that the maximum liability the Drydens can expect to be liable for the past instalments, but there is a strong possibility that they will be able to set aside the agreement completely.

Attempted Withdrawal from the Agreement

3. The agreement is covered by the Consumer Credit Act 1974 by way of it been a debtor-creditor-supplier agreement under section 12(a) of the Act. In essence it is been used to finance a transaction for the sale of goods, the caravan, for a sum under £25,000, and it was made by a business with individuals, the Drydens. Accordingly, the agreement must meet certain criteria as stipulated by the Act. With the aforesaid been taken into account the agreement meets the definition provided for under section 12 (a) of the Act of a Debtor-creditor-supplier agreement. In addtion, the sale of the caravan, as per section 19, is a linked transaction.

4. Under the common law, the offerors are the Drydens, and they have aright to withdraw the offer before it is finalised, and accepted by the creditor. This can be done at any time before the offeree, here the creditor - Fanshawe, accept it. This withdrawal can be undertaken either orally or in writing. However, under the common law the dealer - Chesterton - is not usually taken to be the agent of the dealer, as per the case of Branwhire v Worcester Works Finance Ltd. However, The CCA 1974 also adds to this position, making it easier for the Drydens to cancel the agreement. Under this statute, revocation of the offer will be acceptable not just when it is communicated to Fanshawe but also when it is communicated to anyone that is deemed to be his agent under section 57(3)(a). Therefore, on this basis, the communication to Chesterton Caravans may qualify as been a valid withdrawal form the agreement.

5. Under section 56 of the CCA agents are defined as those being involved in antecedent negotiations, which under section 4, are deemed to begin when the negotiator and the debtor first enter into communication. Under section 1 (c) a negotiator can also be the supplier.

5. Therefore, in my opinion, it is very likely that Chesterton Caravans will be held to be the agents of Fanshawe as they have acted in the course of negotiations, especially as there was emphasis placed by them on the speedy delivery date of the caravan, and this was a major clinching factor in securing the deal, ensuring that the finance that was taken out by the Drydens.

6. If this is held by the Court, then the salient question here whether the withdrawal is held to be communicated to Chesterton, as the agreement was executed by Fanshawe Finance on the same day. As per the case of the Leonidas D, acceptance of the offer by the offeree - Fanshawe - will only become effective when it is actually communicated. Thus, there is a high chance that the communication of the revocation of the offer to Chesterton, as an agent, will be successful as a notice of the withdrawal of the offer by the Drydens. Thus, it will follow that the acceptance by Fanshawe, which was received after the attempted revocation, will have come too late, therefore making withdrawal form the agreement by the Drydens complete and valid.

7. The effect of the withdrawal in the same as cancellation by virtue of section 69 of the CCA. Under section 69(4) the agreement, and any linked transaction, will be treated as if it was never entered into in the first place. Thus, if this held to be the case, the Drydens must return the goods to the Creditors/Suppliers, who must return all funds that have been paid thus far, in essence a total sum of £4,000.

Cancellation of the Agreement

6. As regards cancellation, on the current information that is provided, it is submitted that there is no recourse to cancellation. This is because the law deems it a non cancellable agreement. Under section 67, any agreement that is signed on the business premises of the creditor, or someone deemed to be his agreement will not be able to cancel the unexecuted agreement

Termination of the Agreement by The Drydens

7. If it is judged that the agreement came into effect, because Chesterton are not to be deemed as agents, then the option of termination may also be held to have been exercised by the Drydens.

8. The agreement contains an express term that the agreement may be settled by paying off all the sums that are owed under it. However, it is silent as regards to the right to terminate. This is not fatal however as this is as statutory right under section 99 of the CCA. The right to terminate is withstanding before the final payment is due as per the case of Wadham Stringer Finance Ltd v Meaney and must be carried out in writing to the person that it is entitled to receive payment under the agreement - Farneshaw. This was carried out by the Drydens, dated the 22nd of February, and was received by Fanshawe.

9. However the statue does not alter the common law position that the debtor remains liable for any of the debts that accrued prior to the termination. In addtion section 100 of the Act states that the amount to be paid will be the difference between the sum of the payments that were due prior to the date of termination subtracted form one half of the total sum payable under the agreement, or in this case - £5837.60p Therefore, it is perhaps pertinent to rely on the fact that the termination was not accepted, and rely on the termination from the creditor instead. I advise that there is little danger the Creditors will be allowed to go back on their word as under the case of United Dominions Trust (Commercial) Ltd v Ennis the debtor will not be taken to exercise such an option unless he does so consciously, knowing of the consequences that come form the exercise of this option. There is little doubt that The Drydens would be held not to have known the consequences of their termination, especially as the agreement is silent to it. For this reason it is far better to rely on the termination of the creditor.

Termination of the Agreement by the Creditor

10. If withdrawal is not held to have occurred, and the termination of the Drydens held to be invalid, then the failure to meet payments under the agreement can be judged as a breach of a condition under the agreement and amount to a repudiation of the agreement by the debtor, as per the case of Lombard North Central Plc v Butterworth. Here Fanshawe, the Creditor, has complied with the duty under section 87 to issue a default notice, before terminating the agreement. In addtion, the agreement meets the requirements that are set out under section 88 of the CCA 1974.

11. The finance company is the legal supplier of the goods in a section 12(a) agreement, yet the agreement makes no provisions for the repossession of the goods upon termination. Therefore should the creditors attempt to take the goods if they are kept on the Dryden's land they will be committing a trespass. However, if consent is not forthcoming then the creditors can pursue a claim for wrongful interference and seek delivery up of the goods or damages commensurate to the value of them. It is likely that Fanshawe will obtain a Court Order for the goods. Therefore it is strongly advised that the Drydens allow the goods to be taken back to avoid further legal action and costs.

12. Under the formula used in the case of Yeoman Credit Ltd v Waragowski the formula used to calculate the amount is the total price (£10,041) from which is deducted all fees that were due before the termination (£1, 167.52) and the value of the goods (est. £8,000) that were recovered. In addtion a rebate for accelerated payment will be payable and this is at the discretion of the courts as per the case of Lavarck v Woods of Colchester. This can be anywhere from 1% to 8%. If this was held then I would estimate that the Drydens would have to pay in the region of £800. However, the creditors are also likely to pursue acclaim for the other monies that are due, in essence the unpaid instalment, bringing the sum closer to £2,000.

13. However, it is strongly advised that the Drydens do not pay this amount unless compelled by a court to do so, and instead apply for relief from the notice on the grounds that the agreement is extortionate. The procedure is set out below.

Application to Have the Agreement Set aside

14. The Drydens could seek to have the agreement set aside as an extortionate credit bargain by virtue of sections 137 to 140 of the CCA 1974. For this to0 be successful it must be shown that there is evidence that the agreement required the debtor to make repayments that are grossly exorbitant or grossly contravene ordinary principle of fair dealing. It is for the creditor to prove that this is not the case. (Section 171(7)).

15. In order to carry this out the Drydens should make an application to the County Court to reopen the agreement on the basis that it was extortionate. (Section 139(1) (a)). Factors that will be taken into account include the prevailing interest rates at the time that the agreement was made and the degree of risk having regard to the amount of security that was provided. It is very likely that the Courts will hold that the agreement was exorbitant, especially when regard is given to the interest rtes that are prevalent at the moment, which are at a low comparatively speaking to the last 20 years, and the fact that a £4,000 deposit was paid.

16. Should the Court hold that the agreement was extortionate then the Court can, under section 139(2) direct that the agreement bet set aside either in whole or in part, and direct the return of the surety either in whole or in part.

The Damage to the Goods and the Payment of Rent

17. The Drydens should repair the caravan or face another action for damages for the cost of repair of the caravan. As the Drydens were in possession of the caravan and it has been damaged then they accordingly bear the risk. In addtion, as regards to the applying of rent on the caravan, I advise that this is not sought, because as well as been unlikely to be successful, to do so would infer that the termination of the agreement was undertaken by the Drydens, and that the caravan should no longer have been lawfully in their possession. For the reasons that have been set out above this would not be a prudent decision to take.

Next Steps

18. I advise that the Drydens file a counterclaim based upon the points that have been set out in this opinion. I also request that the Drydens send across any further details of communications that took place. In addtion, I advise that they file an application with the County Court to have the agreement set aside as one that was extortionate because of the amount of interest that was sought by the creditor.

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