Legal and regulatory update – Consumer Rights Bill
Implementing the Consumer Rights Bill
The Consumer Rights Bill received Royal Assent on 26 March 2015 and is expected to enter into force on 1 October 2015, subject to Parliament’s approval. The Bill overhauls consumer protection legislation in the UK, consolidating consumer law found in different pieces of legislation (including the Unfair Contract Terms Act 1977) and defining key terms such as “trader” and “consumer”, to ensure a consistent approach going forwards.
The Bill applies to trader to consumer contracts (referred to as consumer contracts). This update highlights the key changes. It does not summarise existing consumer protection law where this has been re-enacted by the new Bill, nor does it deal with the Miscellaneous and General section of the Bill (Part 3) on enforcement of consumer protection and competition law, and secondary ticketing platforms. Please contact us if you would like further information about these provisions, or would like to discuss in more detail any of the provisions below.
Incorporation of pre-contractual information
Businesses (traders) are already required to provide consumers with certain pre-contractual information, including information about the trader, total cost of the products/services and the arrangements for payment and delivery. The Bill provides that such information will now form part of the contract with the consumer and that it will not be possible for the trader to change this information without the consumer’s express consent. The requirement that pre-contractual information is binding applies to goods, services and digital content.
New statutory rights under goods contracts
A supplier of goods will be in breach of contract where:
- the goods supplied do not match a model seen by the consumer, unless the trader highlights any existing differences before the consumer enters into the contract;
- the goods are incorrectly installed as part of the contract by the trader or under the trader’s responsibility; or
- the goods include digital content (for example, where digital content is supplied on a disk) and the digital content does not conform to the contract.
New statutory rights under services contracts
A new statutory right exists in relation to information provided, orally or in writing, by (or on behalf of) a trader to the consumer. That information (about the trader or the services offered) must be included as a term of the contract where the consumer has taken it into account when making any decision about the service, including whether to enter into the contract. This does not, however, prevent the trader from qualifying that information when giving it to the consumer, or the trader and the consumer agreeing changes to the information.
Specific provision for digital content
The Bill sets out for the first time separate statutory rights and remedies in relation to digital content contracts. Digital content is data which is produced and supplied in digital form and includes software, music, computer games and “apps”. Paid-for digital content is covered by the new provisions, as well as free digital content where this is supplied with paid-for goods or services and is not generally available to consumers unless they have paid a price for it or for goods/services/other digital content.
Digital content must comply with certain standards, which are similar to those that apply to the sale of goods (and also now services). Broadly speaking, such content must be of satisfactory quality, be fit for purpose and comply with its description. As mentioned above, pre-contractual information forms part of the contract. There is an implied term that the trader has the right to supply (not sell) the content.
Provided the contract states that updates will be supplied, the express consent of the consumer will not be required for updates. Following any modification, the digital content must still meet relevant quality standards. Where a trader transmits digital content through an intermediary server (for example, a trader using a third party service for delivering streamed movies), the trader is responsible for ensuring the data transmitted reaches the consumer and meets the quality standards. Similarly, where digital content is transferred via the internet between the consumer and the server (such as a subscription service for online gaming), the consumer must be able to use the content for a reasonable period of time (or the specific period stated in the contract) and such content must comply with the requisite quality standards.
For goods, services and digital content, there are tiered remedies for breach of a term in the contract. Availability of a particular remedy will depend on the statutory right that has been breached and the existence of other remedies which may need to be exhausted first. In addition, or as an alternative, to the statutory remedies provided for by the Bill, it may be possible for the consumer to pursue other remedies for breach of contract, such as claiming damages. The remedies generally available for different types of contract are shown in the following diagram.
Click here to view table.
Note that the repair/compensation remedy is for damage to a device or other digital content (for example, from software that contains a virus). It applies to all digital content supplied under contract, including where no money is paid. See the definition of “digital content” above for other remedies. For “mixed contracts” involving goods and/or services and/or digital content, it will be necessary to look at the rights and remedies for each element of the contract.
Unfair contract terms
The Bill replaces and adds to the current rules on unfair terms in consumer contracts. The assessment of whether a term is unfair will continue to be based on whether the term causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer. As far as the so-called “fairness test” is concerned:
- it will apply to both consumer contracts and consumer notices (whether contractual/non-contractual, oral or written). It will also apply to a secondary contract to a main contract;
- it will apply to the contract price and subject matter only to the extent that such terms are not transparent and prominent (as defined for example, if they are in the “small print”); and
- the courts will have a duty to consider the fairness of terms even if the parties do not ask the court to specifically do so. The list of terms which may be regarded as unfair (the so-called “grey list”) will be expanded to include the following three new terms:
- disproportionally high charges where the consumer decides not to follow through with the contract if no goods or services have been provided (including a “termination fee” for cancellation of a contract);
- terms allowing the trader to determine characteristics of the subject matter after the consumer is bound; and
- terms allowing the trader to determine the price after the consumer is bound. Terms on the “grey list” are assessable for fairness even if they are “transparent” and “prominent”.