29 September 2015

Paul Motion of BTO Solicitors LLP consider what is being called “the biggest shake up of consumer law in a generation”.

On 1 October 2015 the Consumer Rights Act comes in to force. The Act consolidates much of the legislation relating to consumer rights and obligations and presents it in a simplified way that is easy to understand for traders and consumers alike. Although many of the rights that consumers have available to them remain the same under the Act (for example, the right to have services provided with reasonable skill and care), the Act makes significant additions and improvements to the rights and remedies available to consumers.

Traders must therefore be aware of the extra obligations that they may be subject to after 1 October 2015 when supplying goods, services or digital content to consumers. The Act also consolidates and simplifies the law relating to unfair contract terms and attacks bad or misleading contracts.

Goods

The Act will govern any contract between a trader and consumer in which the trader is supplying goods to the consumer. This may be by way of sale, hire or hire-purchase. Under the Act, every contract will contain implied terms relating to the goods being of a satisfactory quality, conforming to any sample or model shown to the consumer and being fit for purpose. Furthermore, some new implied terms have been brought in by the Act such as (i) where goods require to be installed, if the trader does not install them correctly, then the goods will not confirm to contract, and (iii) if the goods include digital content which is non-conforming, then the goods themselves will be non-conforming.

However, the most significant change made by the Act will be to the remedies which are available to consumers if the supplied goods are defective or do not confirm to the contract. Under the Act, if the goods are non-conforming, a consumer now has 30 days in which to request a repair or replacement of the goods or to reject them (at its option). If rejected, the trader must refund the price of the goods within 14 days. In the case of repair or replacement, the trader must repair or replace the goods at its own costs within a reasonable time. If after repair or replacement the goods are still defective, the consumer may ask for a reduction in price or reject the goods and will be entitled to receive a refund of the price.

If a consumer does not exercise any remedy within 30 days, it will still have those remedies, but they will be significantly qualified. After the 30 days period, the consumer must first allow the trader an opportunity to repair or replace the goods. Only if after the repair or replacement, the goods are still non-conforming, the consumer may require the trader to grant a reduction in price, or the consumer may reject the goods in which case the trader must refund the whole price paid by the consumer without deduction (if the goods have been rejected within 6 months of delivery or installation).

Services

In the relation to the provision of services, the Act does not substantially alter the rights available to a consumer. Under the Act, all contracts for services include implied terms that the services provided by the trader must be performed with reasonable skill and care, be rendered for a reasonable price (if the price has not been fixed already) and be rendered within a reasonable time (if time has not already been fixed). Additionally, the Act provides that any information given by the trader to the consumer about the services being offered or the trader itself will also form part of the terms of the contract. Traders must therefore be careful about the information that they are including in publicity and advertising materials as this will be held to be binding on the services that they provide.

If the services provided by the trader do not conform to the contract then the consumer has the right to require the trader to repeat performance of the services to the extent necessary to make the services conform to the contract. If it is impossible for the trader to repeat performance or the trader does not repeat performance within a reasonable time or causes inconvenience to the consumer in re-performing, the consumer has the right to require the trader to reduce the price payable for the services to reflect the extent of their non-conformity to the contract.

Traders should also be aware that they will no longer be able to exclude their liability in relation to the services being performed with reasonable care and skill. The Act requires that all services are provided with reasonable care and skill by traders and any contract term excluding such liability will be invalid.

Digital Content

When the Sale of Goods Act 1979 was enacted, “digital content” was the stuff of science fiction. For the first time therefore, the Act provides clear guidelines on what rights and remedies a consumer has when supplied with digital content.

Any contract for the supply of digital content will contain implied terms that the digital content provided by the trader is of satisfactory quality, is of the description given by the trader and is fit for any particular purpose intimated by the consumer to the trader. If the digital content does not conform to the contract, a consumer has the right to ask for the content to be repaired or replaced by the trader within a reasonable time and at the traders expense. If the trader is unable to repair or replace the digital content, then the consumer may exercise its “secondary” right to ask for a reduction in price. If the price is reduced, the trader must refund any pre-paid amount to the consumer within 14 days. If the trader does not supply the digital content to the consumer, or does not supply it on the agreed time, the consumer may opt to require the trader to refund the price of the digital content.

Traders should also be aware that the rules relating to digital content only relate to content which has been paid for by the consumer. Therefore, software and other digital content which is available for free will not be subject to the implied terms, rights and remedies provided for in the Act. However, if after downloading the free digital content, the consumer subsequently pays for anything (e.g. paying to unlock a new character in a game that was originally downloaded for free), the digital content provisions of the Act will apply giving the consumer the right to repair or replacement if the digital content stops working or is non-conforming.

Unfair Contract Terms

The Act also consolidates the rules relating to unfair contract terms which were previously contained in the Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contracts Regulations 1999. Under the Act, a consumer will not be bound by any contractual term that is unfair. A term will be unfair if, in bad faith, it causes a significant imbalance in the rights and obligations of the trader and consumer in a contract to the detriment of the consumer.

The Act also contains an indicative list of contractual terms which “may be considered unfair”. Traders should therefore go through their consumer contracts with a fine tooth comb to exclude or amend any terms which could be deemed to be unfair.

Obscure or ambiguous wordings will also be outlawed – the terms of contracts and of notices given to consumers must be “transparent”. Further, if a consumer contract could mean different things, the Act sweeps away existing case law and states (s.69(1)) that the court must choose the interpretation that is most favourable to the consumer.

Summary

This is a major and fundamental shift in bargaining power, towards consumers. All business dealing with consumers should be taking a long and hard look at all their consumer contracts, to avoid being caught out.

Paul Motion, partner is part of the Commercial Disputes Resolution Team of BTO Solicitors LLP, Edinburgh & Glasgow.  Contact prm@bto.co.uk T. 0131 222 2939