There is a major shake-up happening to consumer rights. Stuart Farr explains the key aspects of the new legislation.
Many retailers struggle to gain a full understanding of their rights and obligations when it comes to consumer contracts. It is not easy to keep track of the key consumer rights laws, which are presently spread out over eight pieces of legislation. Those laws are also not clear and, in part, overlap or are inconsistent with each other. This is unfortunate, as businesses cannot choose to ignore consumer rights; they must be complied with. However, consumer rights are about to be given a major overhaul.
On 1 October 2015 the Consumer Rights Act 2015 will come into force. Described by the government as “the biggest overhaul of consumer law for a generation”, the new act pulls together key consumer rights laws concerning the sale and supply of goods and services, unfair contract terms and distance selling. It seeks to streamline and address the lack of clarity and cohesion in the existing law as well as modernise it. The new act will affect all retailers. Businesses will need to review their contracts, notices, policies and so on, to ensure they accurately reflect the new consumer rights. Staff will also need to be fully aware of the changes so that they can confidently deal with customer queries and complaints.
The sale of goods
When it comes to the sale of goods, traders should first be familiar with the standards which are guaranteed to consumers, their ‘statutory rights’. Both the new and existing laws set out a number of contract terms; goods must be of a satisfactory quality, comply with their description and be fit for purpose. The new act also adds other minimal standards. It requires certain information to be provided pre-contract and a requirement that, unless differences are bought to a customer’s attention pre-contract, goods must match a model seen or examined by the consumer.
Often a consumer will want to return goods and get a refund, or a repair or replacement, when they are unhappy. It is vital to know when a business has to meet these demands. First, the reason for the return, exchange, or repair of the goods needs to be established. The key is whether the goods meet the standards guaranteed by the law; whether the product is of satisfactory quality. If not, the consumer can turn to the remedies set out in the act.
At the moment there is no defined period in which a consumer can reject goods. This is because the existing law simply states that a consumer must reject goods supplied in breach of contract within a “reasonable time”. Unsurprisingly this has been interpreted differently by different retailers and that has led to uncertainty. In an attempt to resolve this confusion the new act provides two express rights to reject goods. There is a short-term right to reject of 30 days (shorter in the case of perishable goods) and a final right to reject, which is not limited to 30 days.
For example, if a consumer buys a MP3 player which fails to play, so it is not of satisfactory quality, the consumer will have a clear right to reject and get a refund if the defect is discovered within 30 days, or the consumer may elect to have a repair or a replacement. In that case the 30 day time period will stop running until that replacement or repair is provided. The customer will then have the remainder of the 30 day period or seven days, whichever is longer, to check whether the repair or replacement has been successful and to decide whether to reject the goods.
If the breach is discovered after the 30 day period has passed, the consumer’s rights will be limited so that the goods should be repaired or replaced. If the first repair or replacement is then defective, or if it is impossible or disproportionate for the trader to provide such a remedy, the consumer can then reject the goods or accept a price reduction. This is significant because, unlike the present situation, a consumer will not need to give a trader multiple opportunities to try to remedy a problem.
Those involved in digital goods will be particularly interested by the new laws. Digital goods, such as music, computer games and films, supplied either in a physical format like a CD or intangible format such as a download, are also covered by the act if the digital content fails to meet the necessary standards.
Contracts relating to the supply of services
Standards are also specified for the supply of services. The new provisions include an implied term that information said or written to the consumer will be binding. At present, representations made by a trader do not form part of the contract. So if a trader said he has twenty years of experience when he does not, such statements will become contractual terms.
Simply, if a consumer is told something about the business or the service, then it should be true. If it is not, under the new act it will give rise to a breach of contract claim. This is significant because breaches of contract claims are usually easier to prove than those based on misrepresentation.
If a trader fails to meet the required standards the consumer will be entitled to a price reduction, or repeat performance of the service, where the work must be done at no cost to the consumer, within a reasonable time and without causing the consumer significant inconvenience. A price reduction can also be claimed if the service is not provided within a reasonable time or where the trader breaches a requirement arising from information they have given about something other than the service itself.
These new statutory remedies do not exclude other remedies such as damages, but a consumer cannot recover twice for the same loss. Previously there were no specific statutory remedies in this area and so this is a significant advance in consumer rights.
Unfair contract terms
The act will also consolidate the existing unfair terms legislation. The law has been extended, now covering notices as well as contract terms. A term or notice will be unfair if, contrary to good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.
For example, a trader cannot seek to exclude the rights that are given to consumers by the new act and cannot seek to exclude liability for death or personal injury resulting from negligence, even if these terms are negotiated with the consumer. The act also sets out a list of the types of terms (a ‘grey list’) that might be regarded as unfair. This list is non-exhaustive and is only indicative of the types of terms which may be found to be unfair.
A major change is that the terms which specify the main subject matter of the contract or set the price are not subject to the ‘fairness’ test. However, they must be transparent and prominent. This means that such terms must be expressed in plain and intelligible language and be legible if in writing, and brought to the consumer’s attention. Presently the law does not have a requirement for ‘prominence’. Therefore, care is needed to ensure that relevant terms are bought to the attention of customers.
Under the new act the courts must consider the fairness of contract terms even if the parties to the proceedings do not raise fairness as an issue.
Distance and off-premises contracts
The new act is not a complete code of all rights and obligations. Other consumer rights laws will continue to remain in force. Importantly, the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 requires certain information to be provided to a consumer. The requirements for contracts which are made at a distance, such as online sales or telephone sales, and contracts made ‘off- premises’, concluded away from the trader’s business premises, are more onerous than contracts made ‘on-premises’, for example, face to face transactions in a shop. Businesses should ensure they are complying with the requirements set out in this regulation.
The act makes some significant changes to consumer protection laws. Compliance is vital and knowing the extent of your obligations will save time and money in resolving disputes. Contractual documents, notices and policies will need reviewing to ensure they are compatible with the new regime. Act now to ensure your business is ready for the changes.