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

What You Need to Know About Selling Online

Retail online is continuing to increase: with low setup costs and the potential to reach niche and mass markets worldwide it’s an attractive proposition. But if you are selling online there are some important rules you need to know about to protect your business – and your customers.

Your terms and conditions of sale must be displayed on your website where the goods are being sold and they must comply with the various regulations that apply.

The key features of the ‘Distance Selling’ regulations in the UK are:

  • you must give consumers clear information including:
    • details of the goods or services offered
    • delivery arrangements and payment
    • seller details including geographical address
    • the consumer’s cancellation right before they buy (known as prior information)
  • you must also provide this information in writing
  •  goods must be delivered within 30 days unless agreed otherwise
  • the consumer has a cooling-off period of seven working days. The cooling off period begins as soon as the order has been made. In the case of goods, it ends seven working days after the day of receipt of the goods. In the case of services, it ends seven working days after the day the order was made but if the consumer agrees to the service beginning within the seven days, the right to cancel ends when the service starts
  • where consumers notify the supplier in writing or another durable medium that they wish to cancel the contract, they must be refunded all money paid within 30 days.

So your Terms and Conditions need to cover all these points and useful clauses can also include:

  • Price – the price of goods must be shown clearly to the customer and make it clear whether VAT is included. If packing and postage is extra, this also needs to be shown.
  • Payment – it is usual to make it clear that payment must be made in full before the goods are dispatched. Sometimes a credit card transaction comes with a warning for the merchant that there is a doubt about the validity of the buyer, so you can do further checks before sending the goods if there is a potential problem
  • Force Majeure – If you are unable to deliver due to some unforeseeable event such as a fire at the warehouse or a hurricane, you can reserve the right to cancel or suspend the contract
  • Warranties – you have a legal obligation to deliver goods that meet the description on your website and are of satisfactory quality so why not say this in your T&Cs as it can give the customers some comfort.

In addition, a customer who wishes to purchase goods online, using a credit card or some other payment method, should be required to confirm that he/she has read the terms and conditions and accepted them before proceeding to the checkout. In order to have evidence that the customer is aware of the terms on which goods are sold, the usual system is to have a ‘tick box’ which must be ticked by the customer confirming that the terms and conditions have been read before the sale process can be concluded.

For more information on legislation and regulations governing the sale of goods and services and consumer protection, there are various Government and other websites that provide useful information including DirectGov – http://www.direct.gov.uk – and the Office of Fair Trading – http://www.oft.gov.uk/. There is also useful guidance in more detail at http://www.which.co.uk/consumer-rights/regulation/distance-selling-regulations/

ContractStore has created some ready-made documents for online retailers: