Consumers tend to adopt a “laissez-faire” approach to reading the small print when purchasing cars, so a vast amount of legislation has been adopted for their protection. Accordingly, as a seller, you must carefully consider any standard terms that you require a consumer to sign up to, for risk that any such terms may be held unenforceable if challenged.
1. Are you being reasonable?
Trap: There is a myriad of legislation in place that protects consumers when purchasing cars on a supplier’s standard terms. In particular, the Unfair Contract Terms Act 1977 applies, broadly, to provisions that attempt either to exclude or limit the liability of one of the parties to a contract, imposing a “reasonable” test on such clauses. The Unfair Terms in Consumer Contracts Regulations 1999 apply to all standard (i.e. not individual negotiated) terms relating to consumer sales. A term which is unfair is not binding on a consumer.
Tip: When drafting your standard terms, you should always consider whether a term is fair and reasonable in light of the relevant legislation.
2. Cancellation rights:
Trap: Under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the “2013 Regulations”) a consumer has a right to cancel a distance (i.e. online or on the phone) or off-premises contract at any time during the cancellation period for no reason (which normally expires 14 days after the delivery of the car). A full refund must be given (including the costs of standard delivery), although the consumer may be liable for certain costs of return.
Tip: You must be aware of the consumers’ right to cancel. When drafting your terms you should set out when the right to cancel applies; how to exercise it; and the consequences of exercise as contractual terms.
3. Are you dealing at a distance?
Trap: If you are selling cars at a distance or face-to-face but away from your business premises, you must provide certain information to a consumer. If you do not provide the required information, then the consumer’s cancellation rights (explained above) can be extended by up to 12 months.
Tip: Set out the necessary information in your terms, even if you only sometimes sell cars at a distance. The necessary information is set out in the 2013 Regulations and includes items such as details of the consumer’s right to cancel and how to exercise it; the total price of the car; information about you as the supplier; and a description of the car.
4. Delivery obstacles:
Trap: The 2013 Regulations provide for a default delivery deadline of within 30 days after the day on which the contract is made. You may want to avoid setting a specific deadline for delivery; as if this is missed it will trigger remedies for the consumer under its common law rights and the 2013 Regulations.
Tip: A provision can be included within your terms of business that this delivery deadline is only estimated. However, such a provision will be subject to challenge under the reasonableness and fairness tests under the relevant legislation. Additionally, you should try to provide an indication of average delivery times, a tracking application and/or different postage options.
5. Limiting your liability
Trap: Of course, every business would like to limit their liability to a consumer if possible. However, certain types of liability including death, personal injury and fraud cannot be excluded in any circumstances. Correspondence with description, satisfactory quality, fitness for purpose and correspondence with sample; and damage caused by defective products can also not be excluded. Other types of loss may be able to be limited but limiting your liability in a consumer contract is heavily regulated. It cannot be guaranteed that this will be enforceable if challenged, as the courts will consider what is reasonable in the circumstances.
Tip: A broad brush approach should not be taken when excluding/limiting your liability. Those liabilities which cannot be excluded/ limited pursuant to the relevant legislation should not be excluded/limited in your terms. It is advisable to liaise with your insurer to make sure you are adequately protected.
6. Beware legal jargon
Trap: Boilerplate terms are often included in the small print of a seller’s terms of business. Boilerplate terms include, for example, terms that give exclusive jurisdiction to the English courts; terms that provide that the contract is governed by English law; and terms which attempt to give the supplier the unilateral right to vary the terms of the contract. There is a tendency to adopt a “kitchen sink” approach with these terms, despite a seller not knowing the meaning and effect of such terms. In fact, these boilerplate terms are often open to legal challenge.
Tip: You should check to see if your terms use these and be aware that they may be unenforceable. If you are unsure of the effect of any term in your standard terms of business you should take advice as to the meaning and necessity of the term.
The key to dealing with consumers on your standard terms of business is to try to be as reasonable as possible whilst remaining commercial. If you are uncertain of any aspects of your terms, it is prudent to seek legal advice to avoid any detrimental effects to your business.