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The Consumer Rights Act 2015: Legal Changes For Businesses Entering Into Contracts With (Or Providing Notices To) Consumers

If, as part of your business, you enter into contracts (whether in writing or otherwise) with consumers or even put up consumer notices, you need to know about The Consumer Rights Act 2015 (the “Act”) before 1 October 2015 – the date most provisions are expected to come into effect..

The Act will provide a new consolidated framework governing the relationship between businesses and consumers. In summary the Act will:

  • develop the law relating to “unfair terms” in consumer contracts and consumer notices (whether, for example, interactive voice response statements made over the telephone, on-line notices or hard copy notices in public places such as shops and car parks);
  • provide consumers with enhanced rights in respect of the sale and supply of goods, services and digital content; and
  • consolidate the investigatory powers of enforcers and the operation of trading standard bodies.

While a “consumer” only covers an individual, a business (which is referred to as a “trader” under the Act) covers both an individual and a company.

In this article we explain the first two bullet points above before setting out some practical action points for you to consider.

Unfair Terms & Transparency

Central to the Act are the requirements for terms in consumer contracts and provisions of consumer notices to be fair and transparent. The requirements of each are covered in the Act. The key points to note are that:

  • fairness focuses upon where there is significant imbalance between the parties’ rights and obligations which is to the detriment of the consumer and good faith; and
  • transparency focuses upon whether terms/provisions are written in plain and intelligible language.

The test for “fairness” will take account of the subject to the contract, the circumstances which exist when the terms are agreed, and all other terms of the contract. Unfair provisions will not be legally binding on consumers. The Act provides a so-called “grey list” of categories of terms which may be regarded as unfair. The Act also blacklists certain provisions which will be automatically unfair. Examples include:

  • terms or notices which exclude or restrict liability for death or personal injury caused by negligence; and
  • contract terms which seek to exclude or restrict a consumer’s statutory rights and remedies.

A lack of transparency will not, alone, render a term or provision unenforceable. However, where lack of transparency results in ambiguity, the court is required to provide the interpretation which is most favourable to the consumer.

In practice the above means that consumer contracts and notices must be fair and expressed clearly, concisely, and in good, plain English which are easy to understand. Potentially disadvantageous clauses should be both explained and drawn to the consumer’s attention. Unfair provisions should be avoided. Clauses seeking to limit or exclude trader liability are particularly at risk of being unfair and treated as not legally binding so extra care should be taken in drafting such clauses.

Providing Goods

When providing goods under the Act the trader will need to meet (as under the current law) the requirements of providing goods which are of satisfactory quality, fit for purpose and conform to the description given by the trader.

When providing a contract for the sale and supply of goods, the goods will have to match a model of those goods seen or examined by the consumer unless the extent of any differences between the model and the goods to be provided is drawn specifically to the consumer’s attention before the contract is formed. Furthermore, pre-contract information supplied to a consumer about the main characteristics of the goods (as set out in the Consumer Contracts Regulations 2013) will form part of the description of the goods supplied, enabling the consumer to have specific statutory rights if that information is breached or found to be inaccurate.

The remedies applicable in respect of defective/mis-described goods will change:

  • consumers will be able to reject substandard or mis-described goods within 30 days following delivery and be entitled to a full refund within 14 days;
  • if the 30 day period has expired, the trader has one opportunity to repair or replace the faulty goods; if a fault reoccurs or a new fault arises, the consumer will be entitled to reject the goods, seeking a refund or require a price reduction.
  • Unless the parties agree otherwise at the time of entering into the contract, goods will have to be delivered without due delay and in any event no later than 30 days from the date of the contract. Further remedies will be available to the consumer for late delivery.

Supply Of Digital content

For the first time legislation will regulate the supply of digital content, providing appropriate remedies. Digital content is defined as “data which is produced and supplied in digital form, including software, music, computer games and applications.” The Act covers the quality, purpose and description of the digital content and will apply where such digital content is either (i) paid for by the consumer; or (ii) supplied free with goods, services or other digital content that the consumer has paid for.

The consumer will only be able to reject defective digital content where that digital content is included in goods (e.g. a laptop). The key remedy for defective digital content will be repair, replacement or reduction in price. However, repair or reduction may not be sought where it would be impossible or would be disproportionate to other available remedies.

New consumer remedies will be available to the consumer where defective digital content causes damage to their device, software or other digital content. The consumer may, where the damage would not have occurred if the trader had exercised reasonable care and skill, have a right to require the trader pays for the cost of repair, undertakes the repair or pays appropriate compensation.

Supply of Services

Where a specific service contract is governed by other legislation this will take priority over the provisions of the Act. Under the Act the trader will have an obligation to supply services with reasonable care and skill.

The trader will also have a new obligation to ensure that the service he provides complies with any information the trader has voluntarily supplied (whether verbally or in writing) where the consumer takes this information into account when either making a decision about the service and/or whether to enter into the contract. This new obligation is additional to the existing requirements relating to pre-contract information under the Consumer Contracts Regulations 2013.

Where a service is not provided with such reasonable care and skill or in accordance with the information provided, the service will not have been provided in accordance with the contract. The consumer will be able to require the service (or relevant part of it) is re-performed properly. An alternative remedy will be for the trader to provide a reduction in the charge to cover the part or parts of the service not provided with such reasonable care and skill. This alternative remedy might be appropriate where it is not possible to re-perform the service (e.g. it was time specific) or it cannot be re-provided within a reasonable time.

Other remedies available to consumers

In addition to any remedies available under the Act, consumers will also be able to seek any available at common law. These include, for example, damages, specific performance, and the right to treat a contract as terminated.

If your business engages or contracts with consumers, what should you do before 1 October 2015?

  • Consider how you communicate and contract with consumers. Different legal obligations remain between contracts entered into face to face, on-line and over the phone – for example in respect of a consumer changing their mind and choosing to cancel the contract.
  • Review all existing notices, communications, promotions, terms and conditions of business/contracts:
    • check you will be providing appropriate pre-contract information (remembering this may become a term of the contract as described above);
    • ensure all terms and provisions are transparent and fair, watching out for limitations and exclusions to liability as well as other provisions which may appear onerous for the consumer; and
    • check your contracts and consumer notices meet the statutory minimum in terms of consumer rights and remedies and then weigh up whether you wish, for marketing reasons, to offer a more favourable position;
    • check warranties and guarantees in particular will be compliant with the Act’s requirements.
  • Produce Act compliant scripts for staff, update procedures for handling complaints and train all staff dealing with consumers.
  • Identify any regulators and/or trading organisations engaged with your particular business. Build rapport with them and also see whether they have issued any appropriate guidance.
  • Check your business to business contracts: while these are not covered by the Act, what happens when any goods, services or digital content you supply to another business is ultimately traded with a consumer further down the line? You may wish to consider whether your business to business contracts provide you with sufficient protection in such circumstances.

Sykes Anderson Perry Limited has an experienced commercial law team who can provide advice in this area.

This article is intended to provide general information about pending changes to English Law, which may be of interest to the reader. It is not intended to constitute legal advice or to provide a comprehensive analysis of the pending changes to the Law. The reader is advised to seek independent legal advice in respect of their particular circumstances before taking any action.