Nov 2015
BACKGROUND
The Consumer Rights Act 2015 (the Act) came into force on 1 October 2015, marking the most significant overhaul to UK consumer law since the Unfair Contract Terms Act 1977. Prior to the Act most UK consumer legislation dated back 30 years - a time when online retailers were yet to exist and digital content was a far cry from the multimedia hypermarket that we have at our fingertips today. In addition, consumer law was overly complex and ambiguous with much overlap between the various pieces of relevant legislation. Indeed, inconsistencies emerged in some cases where UK consumer law was found to conflict with EU law.
ALL CHANGE
The new legislation aims to streamline, clarify and modernise existing consumer rights legislation into one comprehensive source whilst also implementing specific aspects of the EU Consumer Rights Directive. The Act replaces previous consumer legislation, including the Sale of Goods Act 1979, the Supply of Goods and Services Act 1982, the Unfair Terms in Consumer Contracts Regulations 1999 and the Unfair Contract Terms Act 1977.
All businesses that supply tangible (i.e. ‘physical’) goods, (intangible) digital content, or services are bound by the Act and its extensive obligations to consumers. As such, these types of businesses are urged to take the time to understand the new rules in order to make sensible modifications to the running of their businesses, thereby mitigating the numerous risks posed to them by the Act and, in doing so, save a considerable amount of time and money.
NEW RIGHTS AND RESPONSIBILITIES
Goods
Any pre-contractual information provided by way of advertising, marketing or in the lead up to a sale now qualifies as an implied term of the contract. In addition, goods must be of the same quality and type as a model seen or examined by a consumer, excluding any differences that have been pointed out to the consumer prior to the sale.
The consumer is now equipped with a ‘short term right to reject’ of 30 days (can be extended by agreement with the consumer, but not shortened) which, if not used, leaves the consumer with the option to exercise their right to repair or replacement. Following one failed repair or one faulty replacement, the consumer is entitled to use their ‘final right to reject’ and claim back some money.
Digital Content
The Act introduces rights and responsibilities regarding digital content for the very first time. Consumer protection rights for digital content are now largely reflective of those for tangible goods, the only difference being that a consumer lacks a right to reject digital content as they can with tangible goods. Therefore, digital media such as online film, games, music downloads and e-books cannot be returned (which makes sense, as the consumer will have actually used it when it is downloaded). Nevertheless, consumers of digital content do possess a right to a refund if a seller is in breach of the right to supply and furthermore, there is a consumer right to repair or replacement in respect of other breaches. If a repair or replacement is not possible, consumers are entitled to a price reduction of up to the full price. Additionally, they may claim compensation for damage caused to the device or other digital material.
Services
As with the supply of goods, any pre-contract statements that entice a customer into a contract amount to terms of that contract. Clear rules have been established on how to proceed when a service is not provided with reasonable care and skill or as agreed or within a reasonable time. The business providing the service is required to raise it to the standard agreed with the customer, and if this is not practical or possible, the client may exercise their right to a reduction in price.
Unfair Terms
The Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999 no longer apply to ‘Business to Consumer’ contracts so when considering whether the terms of a consumer contract are fair, businesses need only consult the Consumer Rights Act 2015 with its new set of rules on fairness.
Traders must ensure that all written terms of a consumer contract and all written consumer notices are transparent, i.e. they must be in plain language and legible. Consumers have the right to challenge terms and conditions of a contract that they believe to be unfair or hidden and where a term may have two interpretations, the meaning that is in the consumer’s favour will take precedence.
WHAT DOES THIS MEAN FOR BUSINESSES?
The Consumer Rights Act 2015 appears to provide a firm consolidation of previous law, removing ambiguity and providing one central legal reference point for businesses and consumers. However, despite the much-welcomed rejuvenation and much-needed simplification of the law in this area, businesses must not overlook the significant increase in rights and powers afforded to consumers and enforcement authorities respectively. The Act has clear ramifications on any business that supplies goods, services and/or digital content so understanding exactly what consumers are entitled to and how far your duties to consumers extend will help your business to run more efficiently.
With such substantial changes to the law, business owners, directors and management staff are well advised to reconsider their standard terms and conditions of business (those for ‘business to business’ and ‘business to consumer’) and make appropriate changes to ensure maximum protection from a law that leaves businesses far more vulnerable to consumer law claims than ever before. Equally, consumer contracts and notices should be scrutinised for compliance with the parts of the Act covering unfair terms and the new rules for providing digital content should be incorporated into your terms of business if this is something you supply. Sales and marketing strategies are another important area requiring careful review since pre-contractual communications are now considered contractual. Finally, rest assured in the knowledge that as soon as you take the types of precautions suggested here and make appropriate adjustments to your business regime, you will significantly reduce your exposure to legal and regulatory risk and liability.
If you have any questions regarding the above, please contact Neil Pfister either by telephone on 01483 411538 or by email: [email protected] or speak to another member of our Corporate and Commercial Team.
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