Consumer Rights Act – Unfair Contract Terms

The Consumer Rights Act 2015 introduces new rights for consumers and our previous articles have dealt with how the Act affects sale of goods, services and digital products.

Kawarau Bridge - Bungee dipping photo

You can’t escape your responsibilities by writing them away in a contract

The Act also re-states and expands the existing law concerning unfair terms in consumer contracts.

The basic requirements are that contract terms must be fair.

The law says that a term is unfair if “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

This fairness test applies not only to terms in the contract but also to consumer notices – e.g. notices in car parks, as well as notices appearing online on a website.

All written terms in a consumer contract or in a consumer notice must be transparent – i.e. expressed in plain and intelligible language.

Any term in a consumer contract or a consumer notice attempting to limit or exclude the trader’s liability for death or personal injury resulting from negligence is unlawful and not enforceable. (So a bungee jumping company can’t get you to sign away your rights – if the bungee fails, that will still be their fault.)

Similarly any term attempting to limit or exclude the various terms implied by the Act (satisfactory quality etc.) are unfair and unenforceable.

What Is ‘Unfair’?

Schedule 2 of the Act contains 20 examples of terms that may be regarded as unfair. These include:

  • Disproportionately high charges when a consumer decides not to carry on with a contract or with services which have not been supplied
  • Terms that allow the trader to decide the subject matter after the consumer is bound by the contract
  • A term allowing the trader to fix the price after the consumer is already bound by the contract
  • A term designed to limit the trader’s liability in the event of death or personal injury of the consumer that results from some act or omission of the trader
  • A term designed to exclude or limit the consumer’s rights if the trader does not perform his obligations adequately
  • A term that allows the trader to bring the contract to an end without reasonable notice unless there are serious grounds for doing so
  • A term which has the effect of binding the consumer to terms which he has had no real opportunity of becoming acquainted with before the conclusion of the contract.

Fairness Exemption

the fairness test in consumer rights

Notices to the public such as clamping warnings are also subject to the ‘fairness test’

The test of fairness will not apply to a term in a contract that specifies the subject matter of the contract, nor will the price be subjected to a fairness test. But for the exemption to apply, the subject matter and the price must be prominent and transparent – i.e. in plain English and intelligible.

What You Need To Do

All businesses need to review their contract terms at this stage to see that they do not fall foul of the Consumer Rights Act and the updated Unfair Terms requirements incorporated in it. Although much of the existing legislation is retained, there are new provisions as well.

Resources

Consumer Rights Act: Digital Products

Digital products are now a fact of life, and new legislation is catching up

Digital products are now a fact of life, and new legislation is catching up

The new Consumer Rights law coming into force on 1st October 2015 is significant: it introduces new rights for consumers as well as consolidating a lot of existing legislation, and it applies to almost all contracts between traders and consumers. And for the first time, digital products are included specifically in the law.

These new provisions will affect everything from smartphone apps to streamed songs, movies, e-books, games, and business products such as design templates and even our own editable ready-made contracts.

Definitions

A ‘consumer’ is an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

A ‘trader’ is a person acting for purposes relating to that person’s trade, business, craft or profession and it includes public sector authorities and government departments.

Digital Content – A New Type of Product

This is the first legislation to establish standards for the supply of digital content which is defined as: “data which are produced and supplied in digital form”. (A somewhat circuitous definition, with questionable use of the word ‘data’ as a plural noun).

The law applies whether the digital content is paid for or is supplied free of charge with other goods and services which are paid for by the consumer.

Every contract for supply of digital content will now be treated as including a term that the digital content:

  • is of satisfactory quality,
  • matches its description and
  • matches any trial version that has been supplied and
  • complies with other information supplied by the trader – e,g. with regard to main characteristics, functionality and compatibility and
  • the trader has the right to supply it.

“Satisfactory quality” is the standard that a reasonable person would consider satisfactory taking account of the description, price and ‘all other relevant circumstances’ (which include any advert, labelling or public statement made by the trader, his representatives or the original producer of the digital content). The quality includes:

  • its state and condition
  • fitness for the purposes for which that kind of digital content is usually supplied
  • freedom from minor defects
  • safety
  • durability

If, before the contract is made, a consumer makes known to the trader a particular purpose for which the digital content is required, then it has to be fit for that purpose even if it is not usually supplied for that reason.

If the trader has the right to modify the digital content, then the satisfactory quality and other standards mentioned above apply also to the modifications.

Traders are required to provide a lot of pre-contract information to consumers – including price, payment, delivery, performance etc. under The Consumer Contracts (Information etc.) Regulations. All that information is now treated as a term of the contract. (See our previous article on those regulations)

Remedies where Digital Content does not Comply with these Terms

If digital content does not meet these standards, a consumer has a number of potential remedies:

  • Repair or replacement (unless this is not possible or is disproportionate compared to other remedies
  • A price reduction if (a) the trader has been asked for repair or replacement and failed to comply or (b) repair or replacement is not possible or is disproportionate. The reduction could amount to a full refund where appropriate.
  • A refund if the trader did not have the right to supply the digital content
  • A right to recover costs (up to the purchase price) incurred by the consumer as a result of the trader failing to supply all the pre-contract information required by the law
  • If the digital content causes damage to a device of the consumer or to other digital content of the consumer, the trader either has to repair the damage or pay compensation

These remedies do not prevent a consumer from claiming damages or some other remedy in court such as an order for specific performance of the contract. But recovering twice for the same loss is not allowed.

Links

  • The Consumer Rights Act can be found here.

ContractStore offers ready-made contract terms for digital products here:

 

 

Consumer Rights Act: Goods

Goods trade is subject to new legislation in the UK coming into force on 1 October 2015

New rights for consumers in the UK will apply from 1 October 2015

The new Consumer Rights law coming into force on 1st October 2015 is significant: it introduces new rights for consumers as well as consolidating a lot of existing legislation, and it applies to almost all contracts between traders and consumers.

Definitions

A ‘consumer’ is an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.

A ‘trader’ is a person acting for purposes relating to that person’s trade, business, craft or profession and it includes public sector authorities and government departments.

‘Goods’ are ‘tangible moveable items’  – in other words, things you can handle – so they do not include software or buildings.

Selling Goods – What the Law Says

It is a legal requirement that all goods sold to a consumer are:

  • of satisfactory quality
  • match their description
  • match any sample that has been supplied
  • match any model which has been seen by the consumer (unless differences have been pointed out)

“Satisfactory quality” is the standard that a reasonable person would consider satisfactory taking account of the description, price and other relevant circumstances. The quality includes:

  • fitness for the purposes for which those goods are usually supplied
  • appearance and finish
  • freedom from minor defects
  • Safety
  • Durability

If the sale includes installation by the trader and the goods are installed incorrectly, then they do not conform to the contract.

If, before the contract is made, a consumer specifies a particular purpose for which the goods are required, then they have to be fit for that purpose even if they’re not usually supplied for that reason.

Traders are required to provide a lot of pre-contract information to consumers – including price, payment, delivery, performance etc. under The Consumer Contracts (Information etc.) Regulations. All that of information is now treated as a term of the contract. (See our previous guidance article on those regulations)

Remedies for Defective Goods

If goods do not meet these standards, a consumer has a number of potential remedies:

  • Within 30 days from delivery (or installation if this is included), reject the substandard goods and claim a full refund
  • after the 30 days the consumer can require the repair or replacement of defective goods
  • if the trader does not replace or repair defective goods at all or does so but the goods are still defective, the consumer can require either a price reduction or a final right to reject the non-conforming goods and get a refund.

Consumers should normally raise any claim within six months from delivery.

A refund must be made within 14 days of the trader agreeing that a refund is due and no fee for arranging the refund is allowed.

Whether or not the contract requires the consumer to return rejected goods, the reasonable costs of return must be borne by the trader. But there is an exception if the consumer returns them from a different place than that where they were delivered. So, for example, if a trader in London supplies goods to a consumer in Brighton and the consumer then moves to Paris, the trader only has to pay the cost of return from Brighton, not the cost from Paris.

If a consumer rejects goods more than six months after delivery, the trader is allowed to deduct from the refund an amount to take account of the time the consumer had use of the goods. (But no deduction is allowed if the goods are a motor vehicle)

The remedies do not prevent the right of a consumer to claim damages or seek some other remedy in the courts. However, the law does say that the consumer cannot make a double recovery for the same loss.

Delivery of Goods

The law (Section 28) requires a trader to deliver goods within 30 days unless another period is agreed. If delivery is not within this period the consumer can treat the contract as at an end if the consumer made it clear that delivery within that period was essential. Otherwise the consumer can demand delivery within ‘an appropriate’ period and if the trader does not meet this, the consumer can cancel.

Risk

Risk of loss or damage passes to the consumer when the goods come into his possession or they are delivered to a carrier commissioned by the consumer.

Your Terms

Using a good standard set of terms and conditions, and getting legal advice if there is anything aren’t sure about, is always good practice regardless of changes in the law. ContractStore have a range of ready made T&Cs and other documents for selling goods that are specifically designed for businesses trading goods. For example: