When A Deal Makes You A Trader

There are considerable differences between the protection offered to buyers of goods who are end-users and those buying for the purposes of trade.

One of the biggest differences applies under the Hire Purchase Act 1964, which gives good title to the buyer of goods bought in good faith but which are still subject to a hire purchase (HP) agreement. This protection only applies where the buyer is not a trader. The most common circumstance where this protection is of benefit is when a car is bought on which it turns out that there is money still owing to the HP company.

Recently, a case arose which, although the circumstances were rather complicated, turned on whether the buyer of seven cars was a trader or not. The cars were bought from a car dealer who was in financial difficulties. The dealer sold the cars on to him at a substantial discount to their open market values. The cars were subject to outstanding liabilities under HP agreements. The buyer was not in the motor trade, but reckoning he knew a bargain when he saw one, thought he could, as a ‘one-off’ transaction, sell the cars on and make a profit.

In the view of the Court of Appeal, the intention to sell them on at a profit was sufficient to mark the man as a trade purchaser within the meaning of the 1964 Act. He did not therefore acquire a good title to the cars, which remained the property of the HP company.

It is important to realise that for some purposes, the phrase ‘carrying on a business’ can apply to a single transaction. If you are buying goods with the intention of reselling them, not only may there be VAT and tax consequences which should not be ignored, but also your legal protection on the transaction may be limited in the absence of a proper contract. Take advice before you act.