“Know Your Rights” – The Consumer Rights Act 2015
The majority of the Consumer Rights Act 2015 (the “Act”) is expected to come into force in October this year. Consumer law has developed piecemeal over the last few decades, and the Act is an attempt to modernise, reform and consolidate the existing law relating to the supply of goods, services and digital content by businesses to consumers.
For the purposes of the Act, consumers are those acting “wholly or mainly” outside of their business, so businesses should beware of being caught by the Act without realising, particularly when dealing with small businesses or micro-enterprises. This articles sets out a few key areas of change, and what they mean for businesses.
Guarantees and Remedies
The Act protects consumers partly by way of statutory guarantees, which set quality standards for products, and provide remedies if those standards are not met. Consumers now have tiered remedies for breach, allowing them to reject goods (in certain circumstances) or require a repair, replacement, reduction in price or re-performance (of services). These remedies cannot be excluded and so T&Cs should be reviewed to ensure they are not misrepresenting a customer’s rights.
Recent requirements regarding the provision of pre-contractual information (such as costs, additional charges, and certain rights to cancel) contained in previous legislation are made into implied contractual terms. Breach of those requirements makes it easier for a consumer to recover costs incurred as a result of that breach, up to the price paid by them. Providing the required information is now even more crucial, as failure to do so is more likely to result in consumer action.
As part of its modernisation, the Act has a specific section for digital content, which applies to both paid for and free content. Terms are implied into consumer contracts regarding quality, fitness for purpose, meeting descriptions, and the business’ right to supply the content, with (more limited) consumer rights for breach. Remedies are also available for consumers whose device or other content is damaged by the business’ content (such as through a virus) if the business was negligent in allowing it to happen.
The Act consolidates various legislation regarding unfair or unreasonable terms in consumer contracts. To recap, a business’ T&Cs must not cause a significant imbalance in the rights and obligations of the business and consumer, to the detriment of the consumer and contrary to the requirement of good faith. The previous exception to this rule, that provisions in plain and intelligible language which set out the main subject of the contract or the adequacy of the price against the product, was designed to prevent consumers claiming that a contract was unenforceable simply because it was a bad bargain. The Act keeps this exception, but in addition to being in plain and intelligible language, the provisions must also be prominent. The government intends to issue guidance on what it means by “prominent” but businesses must ensure that the key provisions of their T&Cs are made obvious to consumers (for example by being at the beginning, highlighted, enlarged or otherwise flagged up).
If the fairness test sounds vague, that’s because it is. The test relies upon context, and it’s difficult to pin down a precise definition of “fairness”. The Act does however incorporate previous “grey list” terms which may (but will not always) be unfair. Added to the list are terms requiring disproportionately high exit fees, or allowing the subject matter or price of a contract to be determined after the agreement. Businesses should ensure that they clearly set out their products and prices in advance of agreement, and avoid generic T&Cs which allow for them to be determined at some future point.
While T&Cs are the most common type of consumer contract, the Act now covers individually negotiated terms (which were previously not assessed). High net worth individuals and professional clients who the Act considers consumers may have the power to negotiate terms with businesses, but still have the protection of the fairness test.
As well as consumer contracts, the Act expands the fairness test (and some other statutory requirements) to notices provided to consumers in connection with a contract. So wording displayed on a website, on premises, in marketing materials, or on bills will be subject to the test of fairness. Content which businesses may have taken for granted, or not considered in a legal context, could now land them in trouble.
The powers and jurisdiction of the Competition Appeals Tribunal (CAT) have been considerably expanded, to encourage consumers to enforce their rights, and simplify the process for doing so. The CAT can also hear collective actions, in which groups of consumers (often under the umbrella of a consumer body such as “Which?”) jointly bring a claim against a business. Other sectoral and national regulators have also been given increased powers and flexibility. This may lead to greater scrutiny, and practices which are non-compliant, but went unpunished under the old regime, could now result in enforcement action. The Act may also apply to consumer contracts already in existence at the time it comes into force.
With the increased scope, strength and enforcement of consumer rights, there’s no time like the present to review your T&Cs, procedures and other content to ensure they are, and will be, compliant.