The Consumer Rights Act 2015 comes into force today which will affect traders across the UK when supplying goods, services and digital content. The Act makes significant changes to the rights and remedies available to consumers and consolidates the law by bringing together eight pieces of legislation into one single act.
The changes should make it easier for traders to comply with the law, but first they must ensure that terms and conditions, complaints procedures and website content are updated.
To whom does the Act apply?
The Act applies only to contracts between traders and consumers. A consumer is defined as someone acting “wholly or mainly” outside of their business. This definition is wider than the EU definition which refers to an individual acting “for purposes outside his business” and has the potential to include a mixture of business and personal use for natural persons.
Supply of Services
The Act consolidates existing legislation in respect of supplying services and retains some familiar obligations. Services must be performed with reasonable care and skill, in a reasonable amount of time and at a reasonable price if it has not been agreed in advance.
If a service is not provided with reasonable care and skill customers will be entitled to a new remedy of repeat performance. A reduction in price will be available if the trader fails to supply the service within a reasonable time. These additional remedies do not prevent the consumer from claiming damages or specific performance provided that they are not recovering the same loss twice.
Voluntary statements will form part of the contract
Pre-contract information about a trader or service which it provides may now form part of the contract. A voluntary statement made by the trader will be a contractually binding term if the consumer takes it into account when deciding whether or not to use that trader, or when making any decision about the service after entering into the contract.
This means that any misleading statements made by a trader in advertising or on their websites could be deemed part of the contract. Previously, if a supplier made a misleading statement the only remedy available to the customer was a claim for misrepresentation. Under the new Act a consumer may be able to bring a claim for breach of contract which is usually easier to establish.
Supply of Goods
The Act keeps the existing obligations in respect of goods, namely that they are of satisfactory quality, fit their description and are fit for purpose. A new provision under the Act is that the goods must match the model seen or examined by the consumer, other than where the trader has brought differences to the consumer’s attention.
A new range of tiered remedies have been introduced and will need to be reflected in complaints procedures post 1 October 2015:
• If goods do not conform to the contract then the consumer has a short-term right to reject within 30 days and receive a full refund. Alternatively, the consumer can ask for a repair at the trader’s cost.
• Once 30 days has passed, the trader has one opportunity to repair the defective goods or offer a replacement.
• If repair or replacement are impossible, or the trader’s one attempt at repair fails, or the first replacement is also defective, the consumer has the right to a price reduction or a final right to reject.
Consumer rights in relation to digital content have been crying out for reform for some time. The sales of goods and services legislation was drafted in a pre-digital age and consequently did not include protection for consumers when purchasing digital content such as downloaded music, apps, computer games and software.
The 2015 Act gives consumers similar rights to those conferred when buying goods from a shop. Content must be of satisfactory quality, fit for purpose and match the advertised description. The rights arise automatically, provided that the consumer has paid for the digital content or it has been supplied free with goods or services or other digital content which has been paid for.
Despite recognition of digital content under the Act, the remedies available to consumers in the event of breach are significantly different. Unlike with goods, there is no right to reject a digital product. The only available remedies are repair, replace or a reduction in price. For a closer look at the law applicable to digital content click here.
The law relating to unfair contract terms has become increasingly complex. Since 1977, consumers have benefitted from the Unfair Contract Terms Act 1977 (UCTA) which recognises that consumers need more protection from unfair terms than do businesses. However, UCTA was considered difficult to follow because business to business and business to consumer transactions are rolled into one statute. The water was muddied further in 1994 when the Government opted to implement the Unfair Terms in Consumer Contract Regulations, resulting in two overlapping structures on unfair contracts. This muddled legislative structure has been clarified and consolidated in the 2015 Act.
Test for Unfair Terms
This test is the same as that under the 1977 Act, a term will be deemed unfair if it is “contrary to the requirements of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer”. A significant change under the 2015 Act is the requirement that the terms in question must be both transparent and prominent. However, the prominence provision is new. Traders must make sure that relevant terms are clearly brought to the consumer’s attention. Failure to do so could open them up to a claim that the term is unfair and therefore unenforceable.
Shades of Grey
The Act contains an indicative ‘grey list’ of terms which may be regarded as being unfair.
Three additional grey terms have been included in the 2015 Act:
1. Disproportionately high charges or requiring the consumer to pay for services which have not been supplied when the consumer decides not to conclude the contract.
2. Terms which allow the trader to change the goods, services or digital content after the consumer has purchased them.
3. Terms which allow the trader to decide on the price after the consumer is bound to the contract.
It is important to note a term included on the list is not automatically deemed to be unfair. Fairness depends upon the context of the term in the contract as a whole. However, traders should be aware of the relevant terms and ensure that their Terms and Conditions are drafted in a manner which does not open them up to a potential claim under this section of the Act.
The 2015 Act should make consumer law clear and easier to follow for both traders and consumers. The provisions will affect any business across the UK which supplies goods or provides a service to the public. Traders who are affected must:
1. Ensure that Terms & Conditions include the new remedies introduced under the Act.
2. Update complaints procedures to allow for the system of tiered remedies and train employees that deal with customer service in the new statutory procedure.
3. Review the information contained on website and sales materials. Such information must be accurate and reliable, particularly if it is likely to persuade a customer to use the service.