Modernising the Sale of Goods: How UK and Mainland China Models Address Delivery Risk for Consumers
In today’s marketplace, where cross-border e-commerce and online shopping are the norm, consumer protection has become more critical than ever. However, while jurisdictions around the world have updated their laws to reflect these changes, Hong Kong’s legal framework for the sale of goods remains rooted in tradition, leaving consumers potentially vulnerable.
A comparison with the United Kingdom, from which Hong Kong’s common law legal system is derived, shows a stark contrast in consumer safeguards, particularly concerning the passing of risk.
It is time for Hong Kong to consider a serious update to its Sale of Goods Ordinance to bring it in line with modern consumer rights.
A tale of two legal systems
Hong Kong’s legal position on the sale of goods is governed by the Sale of Goods Ordinance (Cap 26). In line with the traditional common law position, Section 22 of the Ordinance establishes a direct link between the passing of property (or ownership) and the passing of risk. This means that, unless otherwise agreed, the risk of damage or loss passes to the buyer the moment ownership transfers, regardless of whether the buyer has taken physical possession of the goods.
This can lead to some counter-intuitive and unfair outcomes for consumers. For example, if a consumer purchases a specific, unique item online and pays for it, ownership may technically pass at the moment the contract is formed. If the item is subsequently damaged in transit, the consumer may find themselves bearing the risk, even though they have never physically seen or touched the goods. Their recourse might be to pursue a claim against the carrier, a process that can be complex, time-consuming, and confusing for an individual.
A more modern consensus: Emphasis on delivery
The UK recognised the inherent unfairness of its traditional approach in the context of business-to-consumer (B2C) sales. This led to the introduction of the Consumer Rights Act 2015, which fundamentally changed the rules. Under Section 29, risk is no longer tied to ownership for consumer contracts. Instead, it remains with the trader until the goods are in the physical possession of the consumer. This simple, clear rule provides a much stronger layer of protection for consumers.
This modern approach to consumer risk is not unique to the UK. The Civil Code of the People’s Republic of China takes a similar stance, prioritising the physical delivery of goods to the consumer. The core principle embedded in the Mainland is that ownership of movable property passes upon delivery. While parties can agree otherwise, in consumer protection matters, the law tends to favour the consumer.
The modern emphasis in both the UK and Mainland China is on a functional and equitable outcome for the consumer, recognising the merchant is in the best position to manage the risks associated with delivery. This alignment between common law and civil law approaches provides a compelling argument for reform in Hong Kong, which benefits from its unique position at the intersection of both legal systems.
It is important to note that while the Consumer Rights Act separates risk from ownership, the transfer of title remains a crucial legal point. For consumers, this distinction provides a powerful layer of protection, particularly in the event of a trader’s insolvency.
If a consumer has paid for goods but the trader goes out of business before delivery, the moment title passes can determine if the consumer is an unsecured creditor (and therefore unlikely to recover their money) or if they own the goods and can claim them. This nuanced approach ensures consumers are shielded from the risks of delivery, while also preserving their ownership rights in more complex situations.
The case for change in Hong Kong
The divergence between Hong Kong’s and its legal counterparts’ approach to consumer risk highlights a significant gap in consumer protection. By continuing to link risk to ownership, Hong Kong’s law places a disproportionate burden on the consumer, a situation that is especially problematic in an age of high-volume, cross-border e-commerce.
Updating Hong Kong’s laws to reflect the principles of the UK’s Consumer Rights Act would bring a number of key benefits:
- Enhanced Consumer Confidence: By providing clearer and more robust protections, Hong Kong would strengthen consumer confidence, encouraging more online and remote purchases.
- Encouragement of Good Business Practices: By placing the burden of risk on traders during delivery, the law incentivises businesses to use reliable shipping methods, package goods appropriately, and resolve issues of loss or damage quickly. This fosters a fairer and more reliable marketplace.
- International Alignment: As Hong Kong increasingly seeks to align with international best practices, updating its consumer sales law would be a logical step. It would bring the jurisdiction in line with a model already proven to be fair and effective in both common law systems like the UK and civil law systems like the Mainland China.
A path forward
The path forward for Hong Kong is clear. By reviewing and updating its Sale of Goods Ordinance, or potentially introducing a separate, modern consumer law, Hong Kong can better serve its citizens and maintain its reputation as a fair and progressive economy. The UK’s experience with the Consumer Rights Act, and the alignment with principles in the China’s Civil Code, demonstrates that a consumer-centric approach to the passing of risk is both achievable and essential for a modern marketplace.
Disclaimer:
The information in this article is for general reference only and does not constitute legal advice. For specific guidance tailored to your circumstances, professional legal advice should be sought.
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