The Consumer Rights Act (the “CRA”) received Royal Assent on 26 March 2015 and is expected to, for the most part, come into force on 1 October 2015. As a result, consumers will have enhanced rights and businesses will need to comply with a new statutory remedies regime.
We set out below a summary of certain important changes which will likely affect the TMT sector.
The CRA applies to contracts and notices between a trader and a consumer. It sets out a framework that consolidates in one place key consumer rights covering contracts for the supply of goods, services and digital content (e.g. online films, games, e-books) and the law relating to unfair terms in consumer contracts.
The CRA is in three Parts and deals with:
- Consumer contracts for goods, digital content and services;
- Unfair terms; and
- Miscellaneous and general, including investigatory powers.
For the purposes of this briefing we will focus on Part 1 and the treatment of pre-contractual information.
Generally, the law encapsulated in the CRA is similar to existing UK laws, although there have been some changes particularly in relation to the remedies which consumers will be entitled to for defective goods, digital content and services. In terms of the remedies, please note that the new statutory remedies are in addition to the common law remedies so consumers are not prohibited 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.
In terms of quality, goods are, for the most part, treated as they were treated under the Sales of Goods Act (i.e they must be of satisfactory quality, fit for purpose, and conform with the description provided by the trader). However, the remedies which apply in respect of defective goods have changed. Under the CRA:
- consumers will have 30 days within which to reject substandard goods and be entitled to a full refund;
- after the expiry of those 30 days, the trader will have a right to (at the consumer’s option) repair or replace the goods; and
finally, the consumer will have a right to a price reduction or a final right to reject (with the right to obtain a refund/price reduction) if the consumer has not received adequate redress by way of either a repair or replacement.
The CRA is the first piece of legislation to regulate the supply of digital content (ie. data which are produced and supplied in digital form). It applies to digital content that is (1) paid for; or (2) supplied free with other paid for items.
The CRA introduces tailored quality rights for digital content and tailored remedies if the digital content rights are not met. Under the CRA, if digital content does not conform to the relevant contract, the consumer will have a right to a repair or replacement of the digital content or a price reduction.
Similar to goods, the standards to which services are to be performed will remain substantially the same as before. However, as for goods and digital content, the CRA introduces the following “tiered” statutory remedies:
- Tier 1 remedy – the trader should either redo the element of the service which is inadequate or perform the whole service again; or
- Tier 2 remedy – the trader provides a reduction in the charge to cover the element that has not been provided with reasonable care and skill
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.
The effect of pre-contractual information
You may recall that under The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 certain information about digital content, goods and services must be provided to consumers prior to the consumer entering into the contract. Under the CRA any such information will become a contractual term.
In addition, the CRA introduces a new statutory right that if a trader provides pre-contract information in relation to a service, and the consumer takes this information into account, the service must comply with that information.
The CRA 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 CRA will have on their business.
To ensure that you comply with the CRA, before 1 October 2015, you will need to think about reviewing your processes and consumer-facing documentation, including:
- sales processes;
- cancellation and returns policies; and
- consumer supply terms (including app supply terms).
Essentially, businesses will 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.