The second sitting of the House of Lords’ Committee took place on 15 October 2014 to consider the new UK Consumer Rights Bill (the Bill). The government expects the Bill to become law on 1st October 2015, with a six month transition period likely to be put in place.

The intention of the Bill is to reform and consolidate the vast majority of UK consumer law, including provisions relating to the supply of goods, the supply of services, unfair contract terms, defective digital content and enforcement powers.

Whilst in no way an exhaustive list of the provisions contained in the current draft of the Bill, set out below are the four key areas which we believe are likely to impact the TMT sector to the greatest extent.

What?

The effect of pre-contractual information

Businesses in the TMT sector need to be aware of the inclusion of provisions in the Bill which relate to pre-contractual information provided to consumers by businesses and their agents.

Under the Bill, every services contract will be treated as including, as a term of the contract, anything said or written to a consumer, where: (i) it is taken into account by the consumer when deciding whether to enter into the contract; or (ii) it is taken into account by the consumer when making a decision about the service, after entering into the contract.

Businesses will therefore need to carefully consider the extent to which communications made to consumers will incorporate additional terms into their contracts. This may require them to undertake a whole scale critical review of, for example, marketing materials, telephone scripts, websites and other pre-contractual documentation and processes.

Fairness of terms in consumer contracts and notices

A key change to unfair terms legislation for businesses in the TMT sector is the change in the assessment of fairness. Under current legislation, a term in a contract will not be assessed for fairness to the extent that it specifies the main subject matter of the contract, or the assessment of the appropriateness of the price payable.

However, to benefit from this exclusion, a business in the TMT sector will now be required to ensure that the term is “transparent and prominent”. A term will be considered transparent if it is in plain and intelligible language and is legible (if in writing). A term will be considered prominent if it is brought to the consumer’s attention in such a way that an average consumer would be aware of it.

This is a fundamental change, which will require businesses to review how they present and emphasise to consumers key provisions and pricing terms in contractual documentation and notices.

Contracts for digital content

The Bill introduces a number of additional terms that will apply to any contracts under which a business supplies “digital content” (defined as “any data produced and supplied in digital form”) to a consumer.

With limited exceptions, every contract to supply digital content (which includes modifications made by the supplier to digital content) is to be treated as including a term that:

  • the quality of the digital content is satisfactory (except where the defects have been drawn to the consumer’s attention before the contract is made or the consumer has examined the digital content, including a trial version, in a way which ought to have revealed the defects);
  • the digital content is reasonably fit for purpose (except where the consumer has not relied, or it would be unreasonable for the consumer to rely, on the skill or judgment of the supplier). When determining the relevant purpose(s) against which the digital content should be measured, it need not be a purpose for which the relevant digital content is usually supplied;
  • the digital content will match any description of it given by the supplier to the consumer;
  • the supplier has the right to supply the digital content to the consumer.

If digital content does not conform to the relevant contract, the consumer will have a right to (i) a repair or replacement of the digital content; (ii) a price reduction; or (iii) where the supplier did not have a right to supply the content, a refund.  These remedies are in addition to any remedies that would otherwise be available to the consumer.

A supplier cannot exclude the application of these statutory implied terms or remedies in its contracts and any attempts to do so will be not be binding on consumers. It is however important to emphasise that the provisions included in the Bill in relation to digital content only apply to the extend that digital content has been supplied for a price.

Statutory remedies – Service contracts

The Bill introduces the following “tiered” statutory remedies in respect of services contracts with consumers:

  • Tier 1 - Re-performance: a right to require a business to perform defective services again, to the extent necessary to complete its performance in conformity with the contract.
  • Tier 2 - Reduction in price: a right to a “reduction in price of an appropriate amount” (i.e. the price is reduced by the difference between what consideration was paid for the service, and the value of the service actually provided).

This is the first time statutory remedies have been introduced for services and apply generically. For example, they would apply equally to the services of a plumber and to a telecoms service.

A consumer cannot require re-performance if it is not possible, for example, if the service was time specific. As a result, due to the nature of some technology contracts (e.g. a telecoms company connecting a mobile phone), it may be that re-performance is not possible. A consumer is therefore likely to be able to rely upon the “tier 2” reduction in price remedy. However, it will not always be clear how this will be applied by the courts.

Please note that these statutory remedies do not prohibit a consumer from seeking other remedies for a breach of a contractual term. Such additional remedies include damages, seeking specific performance and a right to treat the contract as terminated.

So what?

The Bill will have a significant impact on the TMT sector, specifically impacting businesses across the sector which deal directly with consumers in many guises; for example, in relation to home computing, mobile and landline telecoms services and digital media services. It is therefore essential that businesses in the sector fully appreciate the impact the Bill will have on their business.

It is clear that businesses will need to consider what steps are needed to ensure their business is compliant with the new provisions. The clock is ticking, and plans needs to be put in place now to ensure future compliance.