Contracts with consumers14 May, 2010
The law imposes a number of obligations on businesses that trade with consumers. These obligations are not contained in a single source and the obligations which are applicable will depend on the circumstances.
There is no single definition of consumer but it is generally accepted that a consumer is someone who buys goods and/or services for purposes not related to their trade, business or profession.
This briefing note summarises some of the key obligations which businesses should be aware of when entering into contracts with consumers.
1 Unfair Contract Terms
In consumer contracts it is very important that the terms are fair and reasonable. Two key pieces of legislation govern this area; the Unfair Contract Terms Act 1977 and the Unfair Terms in Consumer Contracts Regulations 1999.
An unfair term is generally considered to be one that has not been significantly negotiated and which causes a significant imbalance between the parties. Contracts should be written in a way that is clear and can be understood by the consumer. Legal phases such as ‘force majeure’ and ‘indirect and consequential loss’ should be avoided and any clause which seeks to limit or exclude a businesses liability to the consumer should be carefully drafted to ensure that it is reasonable taking into account the circumstances.
It is also important to ensure that the terms of the contract are not too burdensome for the consumer. As a result of this, unnecessary or unduly complicated restrictions should not be avoided.
Certain exclusion clauses will always be prohibited, for example, clauses which seek to exclude liability for death or personal injury caused by negligence.
It is important to note that if a term is deemed to be unfair it will not be enforceable.
2 Implied Terms
In contracts for the sale of goods or supply of services there are certain terms which are implied into the contract and which cannot be excluded. The following are examples of such implied terms:
– All goods will be supplied with good unencumbered title.
– Subject to certain exceptions, any lack of conformity of the goods with their description in the contract, which becomes apparent within six months of delivery, will be presumed to have existed at the time of delivery.
– All goods will be of satisfactory quality and fit for the purpose for which they are supplied.
– Where goods are supplied based on a sample item, all goods will correspond with the sample.
3 Distance Selling
If a contract is entered into with a consumer by distance means, such as over the internet or by phone, the Consumer Protection (Distance Selling) Regulations 2000 will likely apply. These give the consumer cancellation rights and also provide that the business must provide certain information about itself, such as its name and address prior to the contract being made.
The cancellation right means that a consumer may cancel a contract that is entered into by distance means within 7 working days (excluding weekends and bank holidays) starting on the day after delivery and the consumer should be made aware of this right in the contract.
The consumer will also have the right to cancel the contract if the business cannot supply the goods or services order within 30 days.
4 Door Stop Selling
The Cancellation of Contracts Made in a Consumers Home or Place of Work etc Regulations 2008 apply where a contract with a consumer has been negotiated away from the company’s place of business. An example of this would be where a salesperson enters into a contract whilst at a consumer’s house. If this occurs the consumer has a right to cancel the contract within 7 days starting on the date of receipt by the consumer of a notice of their right to cancel. In this context the 7 days are not working days and therefore do include weekends and bank holidays.
The business must give the consumer a notice of the right to cancel and, subject to limited exceptions, this notice must be given at the same time the contract is entered into. This notice must be given in a specific format and must contain certain information including details about the business and an explanation of the consumer’s cancellation rights.
If the business and the consumer want the performance of the contract to begin within 7 days of the contract being formed then the business must get the consumers consent to this in writing. If this is not obtained then the consumer can cancel the contract within 7 days and will not be obliged to pay for any services provided.
5 Unfair Commercial Practices
The Consumer Protection from Unfair Trading Regulations 2008 makes it a criminal offence for a business to commit unfair commercial practices. The Regulations apply to virtually all interactions that a business has with consumers, whether before, after or at the point of sale. The key is to avoid unfair commercial practices. Examples of these are:
• practices that contravene the requirements of “professional diligence” in a particular field of activity. All businesses are expected to live up to the “standard of special skill and care” applicable to their field, having regard to “honest market practice” and the “general principle of good faith” for that field;
• misleading actions which includes given false information or giving information in a deceptive manner;
• misleading omissions;
• aggressive commercial practices. This applies to businesses that use harassment, coercion or undue influence to obtain contracts; and
• inherently unfair practices such as stating a fake time frame, such as ‘this offer must end on Wednesday’.
Failure to comply with consumer contract law can result in the terms of the contract being unenforceable. The business can also face action from the Office of Fair Trading and in certain circumstances criminal liability punishable by heavy fines.
Reviewed in 2015