Room 101, for many people, would doubtless contain a drawer dedicated to one particular practice: cold calling and hard sell techniques, particularly in the form of visits to the home. Historically it is a reputation well earned.
Consumer protection has improved immeasurably and, in particular, in Europe, Council Directive 85/577/EEC (now repealed) introduced a mandatory requirement to provide a 'cooling off' cancellation notice by which any consumer could cancel a contract entered into at their home. In the UK, this requirement is currently implemented for most contracts (over £35 in value) by the Cancellation of Contracts Made in a Consumer’s Home or Place of Work etc Regulations 2008. Any failure to include such a notice would render the contract unenforceable.
On 20 November 2013, the Court of Appeal has, in the case of Salat v Barutis confirmed the potentially surprising consequences of a strict application of these Regulations.
The case involved the familiar scenario of credit hire following a road traffic accident. Mr Salat was deprived of the use of his motorbike after an accident and referred to a credit hire organisation, BLD, by his own insurers. He arranged to hire a replacement from BLD on credit terms; that is to say, on deferred payment terms allowing BLD to seek recovery of the hire charges on his behalf and with a back to back insurance policy in respect of those hire charges if not recovered within a certain period of time.
The defendant refused to pay those outstanding hire charges on the basis that the credit hire agreement did not contain a cancellation notice. It was therefore in breach of the Regulations and unenforceable against Mr Salat. Mr Salat therefore had suffered no recoverable loss. In effect, it was suggested that Mr Salat had been gratuitously provided with a replacement motorbike by BLD.
Applying the Regulations, the Court of Appeal agreed. It found on the facts that the Regulations required such a contract to include a cancellation clause and consequently, without one, it was unenforceable.
It appears to have been irrelevant that:
- prior discussions and arrangements were made on the telephone and that paperwork was brought along with the vehicle itself
- it was a service solicited by the customer who had no complaints himself about the service, the motorbike or the absence of a cancellation clause.
In short, the Regulation has been used as a technical device for a motor insurer to avoid charges otherwise recoverable by a victim of their insured's negligence who needed, requested and obtained the benefit of a replacement vehicle from a commercial third party. That is a long way away from the purpose of the original Council Directive to prevent cold calling and pressurised doorstep selling by rogue traders.
Businesses and traders should be aware that the requirements of the Regulations extend beyond what might have conventionally been understood to be cold calling and doorstep selling. If there are any circumstances in which representatives attend the home of a customer, even at the invitation of the customer, prior to the execution of a contract for goods or services, arrangements should be vetted against the requirements of the Regulations.
In taking the approach it did, the Court of Appeal seemed to be acknowledge the risk that, every day, many smaller traders visiting homes in good faith at the request of customers could be caught out by the Regulations. However, having satisfied itself that the current circumstances did not appear to fall into that category, the Court was content to leave that particular door closed.