Legal Issues In the News

‘Tis the Season of Returns


The glow of the holidays is behind us. It was very thoughtful of your aunt to give you that plaid scarf, and your in-laws really shouldn’t have gone to all the trouble to give you that sweater that lights up. I mean they really shouldn’t have.It seemed like it might be a good time of year to review the law governing merchandise returns. We all know that most stores will accept returns. The reason they do so is rarely because of any legal obligation but because people are more likely to shop at a store that accepts returns.

Consider a hypothetical case involving two big corporations with a contract where one promises to buy and the other promises to sell $10 million worth of steel. After the steel is delivered and paid for, could the buyer return the steel and demand return of the purchase price? Your instinct should be that it depends on what the contract says. Unless the contract allows the return, the buyer is out of luck.

The law treats a consumer’s purchase as just another contract. Thus, the law generally imposes no limits on what conditions stores can set for the return of merchandise. It is true that the recipient of a gift did not enter into the contract; the gift giver did. But, the law would allow the recipient to enforce the contract as an intended beneficiary.

Contracts do not have to be in writing, and not every term of a contract has to be expressly stated. If I have been buying goods from a store for ten years and occasionally returning some, our course of dealing has established an implied term of our contract that I can return items.

In actual practice, most stores have clearly stated return policies that will defeat any argument about an implied contractual term. I can hardly argue that our agreement implicitly allowed returns if I was expressly told the opposite.

If the reason you want to return a gift is that it is defective, then you are in luck. Every contract for the sale of goods carries an implied warranty of merchantability, which is just the law’s way of saying the contract carries an implied promise that the goods work. Words like “sold as is” can override this implied promise, but for new goods bought at a store the warranty of merchantability almost always will apply.

If I buy a computer monitor, the store has promised me that the monitor works even if the store did not expressly say so. When the monitor stops working the next day, the store has broken that promise, and I have a claim for breach of contract.

If these legal principles seem overly convoluted in how they deal with the return of an unwanted or defective item bought at a store, it is because they are. The law calls both the $10 million steel purchase and the consumer’s moment in the checkout lane a contract. We can probably think of ways they are the same and ways they are different. The consumer’s purchase seems contract-like but not quite a contract.

A good change in the law would be to give consumer transactions their own category of rules, and the law is moving slowly in that direction. For example, Illinois joins many states in having three-day “cooling off periods” that allow the cancellation of certain contracts such as for door-to-door sales. Other states recognize that limits on returns can frustrate consumer expectations and require stores to notify shoppers of their return policies by posting a sign. As these examples show, legislatures and law reform groups are slowly changing traditional contract law to meet the needs of today’s consumers.

Have a great new year with many happy returns