The Consumer Rights Act 2015 is now in full force. What does it mean for you, your customers and your contracts?
Over the last year, there has been a significant change in the legislative landscape surrounding consumer protection. This has been brought about mainly by the Consumer Rights Act 2015 (CRA), which came into force on 1 October 2015. Apart from consolidating the existing legislation, its aim is to bring in more protection for consumers and provide increased clarity for businesses. It is broadly accepted that this has been achieved, although increased clarity does not necessarily equate to favourable terms for businesses.
The CRA categorises a consumer’s rights based on whether the contract is one for goods, the supply of services of the supply of digital content. In this article we’ll be concentrating on contracts for the supply of services, which includes delivery and installation.
The new legislation affects how businesses must treat their customers in terms of the contracts they enter into, and so you should think about whether anything in your contracts needs to be updated or if your practices need to be amended.
Unfair terms in a contract
Following the new legislation, what is considered an unfair term in a consumer contract has changed and there has been a simplification of the rules around what is seen as unfair.
There are a number of contract terms that are now automatically unfair, and it is now illegal to exclude or restrict liability in relation to failure to perform a service with reasonable care and skill, and failure to perform a service in accordance with information provided by the trader about the trader or the service. Also, the level of a trader’s liability cannot be less than the price paid.
Conversely, there are terms which cannot be deemed to be unfair as long as certain criteria are met. A term relating to the key characteristics of a contract (which includes price, fees and charges) cannot be unfair, provided it is transparent and prominent. If it is not transparent and prominent, then the term can be assessed for fairness - previously such terms could not be deemed to be unfair provided they were written in plain language. It is now key, therefore, that all terms relating to price are prominent and clear, and not ‘hidden’.
It’s probably a good time to review your terms and conditions to ensure they meet the new rules on fairness.
Key things to consider:
Standard terms and conditions of the contract can be challenged for fairness; individually negotiated terms cannot.
The new rules apply to contract terms as well as consumer notices (which could include signs in a shop and statements on a website).
If a court decides a contract term is unfair, then it will not be binding on customers.
A claim that a term is unfair can be made by a consumer when making a claim against a trader, or a consumer might make a complaint to a regulator who then investigates matters. However, the court also has a duty to consider the fairness of contract terms in any proceedings which relate to a contract term, even if the consumer bringing the case has not questioned its fairness.
Redress for consumers
Traditionally, the only redress available in respect of consumer law was through criminal prosecution. The CRA 2015 now gives additional civil law powers to enforcement bodies. These enhanced measures offer the possibility of compensation or other redress to consumers who have suffered as a result of an unfair term. In other words the consumer now has redress available which will directly benefit them. There is flexibility in terms of how enforcement bodies can use the measures available to them, which does not provide much certainty for businesses.
The intention here is for businesses and enforcers to work together when an infringement has been identified, and for the business to reassure the enforcer that the unfair term will no longer be used. However, if a business is unwilling to cooperate, the enforcement body can go through the courts to stop the use of the term.
Marketing and advertising materials
Traders will now need to consider their marketing and advertising materials carefully and review them particularly in respect of information provided to customers prior to conclusion of a contract.
This is because under the CRA, it is now implied into all contracts that information given prior to the conclusion of a contract will be complied with, and a claim for breach of contract can be made if not.
Relevant information includes not only details about performance of services, but also claims about the trader or the service. This means traders will need to consider the accuracy of any statement which promotes either themselves as a trader (e.g. ‘Bob is always on time’) or the service provided (e.g. ‘we will fully finish the window frames’).
Commentators have noted that due to the act being so new, there is little by way of guidance on the extent to which the trader has to be aware of the statement, and also whether any test of reasonableness needs to be done to measure the consumer’s reliance on the statement.
In the case of a breach the trader has to either:
- re-do the inadequate service at no extra cost, without causing the customer significant inconvenience and within a reasonable time; or
- where it is impossible to repeat the performance (or where it can’t be done within reasonable time or without causing significant inconvenience to the customer) then the customer is entitled to a reduction in price. This could include a refund of any sums already paid – up to 100% depending on the severity of the breach.
These remedies are in addition to any other remedies which might be available under the circumstances, although the customer is not entitled to a double recovery.
A trader has the right to repeat the performance before being asked for a price reduction. If the customer does not want the original trader to perform the work, they will have to seek contractual damages in order to have another trader complete the job.
If the breach is in relation to information provided about the trader rather than the service (say if Bob was late) then the customer is entitled to a price reduction, but not to repeat performance.
The above remedies are also available to a customer where a service has not been performed with reasonable case and skill.
Importantly, these new provisions cannot be contracted out of. Giving consumers significant additional protection, their introduction is a huge departure from the previous legal position. Prior to the CRA there was no remedy available by way of legislation to consumers if the service was of poor quality or defective. The only option was to raise a claim for damages, which is far more difficult to prove than a claim provided for in legislation.
Advertising and promotions can also be caught under another set of rules, which have also recently been amended .
Although certain commercial practices have been deemed to be unfair since the introduction in 2008 of the Consumer Protection from Unfair Trading Regulations, these have recently been amended to give customers new rights of redress.
There is now a list of blacklisted practices, and to be involved in these to any extent is a criminal offence carrying sanctions.
There are also potentially ‘misleading and aggressive’ practices, to be assessed based on the potential impact on the average consumer.
The right to redress for unfair practice is limited as the consumer must be able to prove that the unfair practice was a significant factor in their decision to enter the contract. Also, the redress is only available if the misleading practice in question was a misleading action, and not a misleading omission.
There are three elements to the redress:
- a right to undo the contract and get a refund within 90 days;
- a right to get a discount on the price paid (but the consumer cannot cancel the contract and also get a refund);
- a right to seek damages.
Even where the potential customer did not actually enter into a contract, a practice can still be deemed to have been unfair. As long as the consumer can show that the practice influenced a decision they made – for example that an advert in the window made them go into the shop - then it could be deemed to be unfair and the trader can still be subject to civil enforcement action.
It is important for traders to take reasonable precautions and exercise all due diligence, as demonstrating that the practice was outside their control can be a defence to a claim of unfair practices.
Concluding a contract in a consumer’s home
It is worth reiterating here that a customer has a right to cancel the contract if you conclude a contract in a consumer’s home.
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 came into force in summer 2014 giving consumers the right to cancel a contract within 14 days of making it, when the contract is concluded at a premises other than the trader’s business address (such as in the consumer’s home).
It is not a get-out for the trader to take the contract away and sign it when back at their premises or to conclude it later via email or similar, as these situations still give rise to the right to cancel.
Not advising a customer of their right to cancel is a criminal offence, and enforcement procedures under the Enterprise Act 2002 apply to breaches of the 2014 regulations. However, the provisions in these regulations are complicated. For example, there are certain circumstances in which the right to cancel does not exist, which will likely be relevant to some contracts with your customers. There are also a number of extensions to the customer’s right to cancel.
If the customer has a right to cancel, then work should ordinarily not be commenced within the 14-day period following the conclusion of the contract. Work can however start before the end of the 14 days as long as the customer is told about the right to cancel, and then waives their right to cancel expressly and in writing.
The regulations also provide that urgent repairs or maintenance can start immediately, and the customer needs to identify the necessary work as urgent.
All in all, there are clearly a number of significant new changes that will develop as they are tested in court. We will keep you posted on any developments, but if you need any further advice at this stage then feel free to get in touch.