The Consumer Rights Act 2015 received royal assent on 26 March 2015. The majority of provisions in the Act will come into effect on 1 October 2015, subject to confirmation by Parliament.
For the first time, contracts for “digital content” (defined as data which is produced and supplied in digital form, including software, music, computer games and applications), as distinct from contracts for goods or services, will be subject to a set of terms which provide consumers with rights that apply automatically, regardless of the express terms of the contract. Historically, there have been difficulties identifying statutory rights and remedies for defective digital content, as often the content can neither be described as a good or a service, particularly when not supplied on a physical form, such as a CD.
What are the new rights?
The automatic rights will apply to contracts for digital content between consumers and businesses if that content has been (a) paid for by the consumer; (b) supplied free with goods or services or other digital content that the consumer has paid for (i.e. the consumer must pay something in order to get the digital content); or (c) paid for with any facility for which money has been provided (for example virtual currency or a gift voucher). The automatic rights are:
Digital content must be of satisfactory quality: The Act provides that digital content will be of satisfactory quality if it meets the standard that a reasonable person would expect. Relevant factors in determining satisfactory quality include: (a) any description of the digital content; (b) the price paid for the digital content; and (c) all other relevant circumstances (which include whether any public statement has been made about the characteristics of the digital content by the trader or manufacturer). Relevant aspects of the quality of digital content include: (a) its fitness for purpose; (b) its freedom from minor defects; (c) its safety; and (d) its durability.
Digital content must be fit for a particular purpose: The digital content must be fit for any particular purpose made known by the consumer to the trader before the contract is formed. The business must be aware of the consumer’s intentions; the explanatory notes to the Act state that it is not enough for the consumer to merely fire off an email to a business, for example, before downloading an app. Instead, there would have to be an email discussion between the business and the consumer about the particular purpose.
Digital content must be as described: Any digital content supplied by a business must meet any description given by the business to the consumer. This is not intended to mean that digital content must be exactly the same as described in every respect - it would not, for example, preclude the digital content going beyond the description.
Certain pre-contract information forms part of the contract: Information provided by a business pursuant to the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (including information about the trader and about the digital content (its main characteristics, interoperability and functionality) forms part of the contract.
The business has the right to supply the digital content: Where a consumer has paid for digital content, it is a term of the contract that the business has the right to supply that digital content. If the business does not have the right to supply the digital content, the consumer will be entitled to a refund.
Remedies for breach of the rights
Unlike with goods, there is no right to reject digital content (except where such digital content is included in goods).
For breaches of the requirements that digital content must be of satisfactory quality, fit for purpose and match its description, a consumer is entitled to a repair, replacement or reduction in price. However, a consumer cannot require that a business repairs or replaces the digital content if such a remedy would be impossible or disproportionate compared to the other of such remedies. If a repair or replacement is impossible or not carried out within a reasonable amount of time or without significant inconvenience to the consumer, the consumer has the right to a price reduction.
For breaches of the requirement that a business provides certain pre-contract information, treated as part of the contract, the consumer has the right to recover from the trader the amount of any costs incurred by the consumer as a result of the breach (up to the amount of the price paid for the digital content, or for any facility used as payment for the digital content).
For breaches of the requirement that the business has the right to supply the digital content, the consumer has the right to a refund.
For refunds, the consumer has the right to receive a refund of all money paid for digital content by the consumer. This is qualified by the fact that if only some of the digital content is affected by the breach, such refund shall only apply to the part of the digital content affected.
In addition to the new statutory rights regarding quality of the content, there is also a new protection for consumers who, as a result of purchasing digital content, suffer damage either to their device or to other digital content eg downloading an app containing malware which damages the smartphone and/or corrupts existing software on the phone. Provided the damage suffered is of a kind that would not have occurred if the trader had exercised reasonable care and skill, consumers will have the right to require the digital content provider to either repair the damage and bear all costs of doing so or pay appropriate compensation to the consumer. What is reasonable will be judged by the particular facts and circumstances of each case.
Early drafts of the Act provided that the liability of traders in relation to damage to devices or other digital content could not be excluded or limited. However, this provision was removed from the Act during the report stage. Now any such exclusion or limitation is subject to the general fairness test for excluding liability to consumers (set out in section 62 of the Act). Under the test, a term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations under the contract to the detriment of the consumer.
What should I do?
Businesses that supply digital content to consumers should use the time between now and 1 October to prepare for the impact of the new provisions. This will include:
reviewing terms and conditions of supply, to ensure that the terms are in line with the new regime;
preparing complaints procedures, or reviewing existing procedures, to ensure the correct implementation of the tiered remedies, and dealing with price reductions;
internal training of customer-facing staff; and
considering steps to address the risk arising from the new right to repair or compensation for damage to devices, including reviewing software testing processes and existing insurance cover.