The rules relating to consumer rights changed on 1 October 2015 for contracts made from that date. The Consumer Rights Act 2015 (CRA) has removed and consolidated consumer law provisions from various existing pieces of legislation, (including the Sale of Goods Act, the Unfair Contract Terms Act (UCTA), Unfair Terms in Consumer Contracts Regulations (UTCCR) and the Supply of Goods and Services Act). The key principles and concepts from previous consumer legislation remain, but the rules have been updated and extended to provide a single set of rules that apply to consumer contracts that supply goods (including sale, hire, hire purchase and transfer of goods), services or digital content. The CRA makes some changes to UK competition law to make it easier for consumers to bring private actions for breaches of competition law and introduces enhanced investigatory powers for enforcers of consumer law (including Trading Standards), which are beyond the scope of this article.
This article looks at the rights and remedies consumers have under the new rules when contracting for the supply of goods, services and digital content under the Act.
The new rules in the CRA apply to supplies between traders and consumers. A “trader” is a person (natural or legal) acting for purposes relating to that person’s trade, business, craft or profession and whether acting personally or through an agent. A “consumer” is defined as an individual (businesses or legally incorporated organisations cannot claim protection) acting for purposes that are wholly or mainly outside his trade, business, craft or profession.
CONSUMER RIGHTS: GOODS
The CRA broadly restates the quality standards applicable under previous consumer legislation, namely that goods must be of satisfactory quality, fit for purpose and as described.
In addition under the CRA goods must:
- Match model previously seen or examined
This requirement will be relevant to companies that have display models on the shop floor. Any model seen or examined by the consumer must match the goods sold. It does not apply to e-commerce.
- Correspond with the pre-contract information
This is the information provided by the trader about the goods as required by the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (CCR) and set out in in Schedule 1 of the CCR (for on-premises contracts) and Schedule 2 (for distance and off-premises contracts). This pre-contract information will form part of the contract and so it is important that it is accurate and up to date.
CONSUMER REMEDIES: GOODS
The CRA 2015 introduces tiered remedies for faulty goods (ie goods that do not meet the statutory quality standards). These tiered remedies are in addition to standard remedies for damages, subject to the general prohibition on double recovery.
- 30 days to reject and obtain a refund
The CRA 2015 gives consumers the right to reject faulty goods within 30 days of delivery (but not digital content except where such digital content is included in goods, see later section on mixed contracts). A shorter period applies to perishable goods, which will be determined by how long it is reasonable to have expected the goods to last. Consumers are not required to give traders the opportunity to repair or replace faulty goods during this 30 day period, but if they do then the consumer’s right to reject is put on hold. The 30 day clock pauses while the consumer is waiting for the goods to be replaced or repaired. The clock continues running when the faulty goods are returned or replaced.
- Repair or replace: Tier 1 remedies
A consumer outside the 30-day right to reject period can, under the CRA, ask the trader to repair or replace faulty goods. This follows previous consumer legislation save that the trader only has one chance to repair or replace the faulty goods. If the attempt at a repair or replacement is unsuccessful, then the consumer is not obliged to accept any further repairs or replacements and can claim a refund (or a price reduction if they wish to keep the product).
- Right to price reduction/rejection and refund: Tier 2 remedies
If goods are not repaired or replaced within a reasonable time or if repair or replacement is not possible then, under the CRA, the consumer has the right to reject the faulty goods and obtain a refund or request a price reduction. This is similar to the Tier 2 rights that existed under the previous consumer legislation, save that under the CRA consumers can exercise their Tier 2 rights after one unsuccessful failed repair or replacement. In addition under the CRA traders will not be able to make a deduction for use where goods are rejected in the first six months following delivery. There is an exception to this rule for motor vehicles where a reasonable reduction may be made for the use the consumer has already had from the vehicle.
CONSUMER RIGHTS: SERVICES
The services provisions in the CRA will apply to most service contracts. The only specific exclusions are for employment contracts and contracts of apprenticeship. Under the CRA statutory rights applicable to service contracts are broadly the same as those set out in earlier consumer legislation and provide that:
- services must be provided with reasonable care and skill
- if the contract does not include an agreed time for performance of the services, then performance must take place within a reasonable time
- if a contract does not include an agreed price for the services then the supplier must charge a reasonable price.
In addition, any pre-contract information provided by the trader to the consumer (including information provided under the CCR) will form part of the contract and bind the trader.
CONSUMER REMEDIES: SERVICES
If a trader does not provide services with reasonable care and skill then the consumer can require the trader to re-perform some or all of the services (whatever is necessary to bring the services up to standard). Re-performance must take place within a reasonable time and without causing the consumer significant inconvenience. All costs involved in re-performing the services to the correct standard must be borne by the trader (cost of labour and materials).
If a trader fails to re-perform services within a reasonable time (and without causing the consumer significant inconvenience) or if it is impossible for the trader to re-perform services (for example if the services were required on a specific date) then the consumer can require the trader to reduce the price of the services (and provide a refund if necessary). The amount of the price reduction must be appropriate, based on the difference between the value of what the consumer paid to receive and what was actually received. It can be up to the full amount of the price. Any refund or price reduction must be provided without undue delay and, in any event, within 14 days of the trader agreeing that the consumer is entitled to the remedy.
If a trader does not provide services in accordance with pre-contractual information relating to the performance of the services provided by the trader to the consumer (whether this is information provided under the CCRs or voluntarily), the same statutory remedies as those set out above in relation to a breach of the obligation to provide services with reasonable care and skill will apply. If a trader does not comply with any other pre-contractual information not relating the performance of the service it has provided, the consumer will be entitled to price reduction only. The amount of the price reduction will need to be negotiated with the consumer.
If a trader is supplying goods together with services and/ or digital content then there are some specific rules in the CRA to note:
- Goods provided with installation services will not conform to the contract if the goods are incorrectly installed
The effect is to provide the consumer with remedies that apply to goods (but no short term right to reject installation) even though the fault was not with the goods themselves. This means that if a trader sold kitchen units with installation services and the units are badly installed then the consumer may be able to demand replacement units.
- Goods that include digital content will not conform to the contract if the digital content does not conform
This provision provides the consumer with the remedies that apply to goods. This means that if a trader provides a consumer with faulty software on a disk then the consumer can reject the disk and claim a full refund, which the consumer would not be able to do if the faulty software had been downloaded (see later section on digital content).
UNFAIR CONTRACT TERMS
The CRA consolidates the relevant consumer provisions of UCTA and the UTCCRs to produce one set of rules. The unfairness test in the CRA is essentially the same as that set out in the UTCCRs. Most consumer contract terms and any notices (including website notices, oral communications and announcements) will be subject to the fairness test. Terms which are unfair will be unenforceable against a consumer.
All written terms must be in plain and intelligible language. Terms that relate to the amount to be paid or which define the subject matter of the contract are only exempt from the fairness test if transparent and prominent. Prominence is a new requirement. The more onerous and unusual a clause, the more prominent it must be.
The CRA incorporates the grey list of potentially unfair terms previously set out in the schedule to the UTCCRs and adds the following two items:
- clauses allowing traders to charge disproportionately high compensation for cancellation; and
- clauses giving the trader discretion to determine the characteristics of the subject matter of the contract or the price payable after the consumer is already bound by the contract.
Under the CRA a term specifically negotiated can be deemed unfair. The CRA also provides that the courts will consider fairness in relation to consumer contract disputes, even if fairness is not raised as an issue by the parties.
The CRA introduces a new right for a consumer to request a copy of any guarantee. Save for that new right, the rules relating to consumer guarantees in the CRA follow those previously set out in the Sale and Supply of Goods to Consumers Regulations 2002.
Prior to the CRA there were no specific statutory provisions applicable to the supply of digital content to consumers. The CRA extends consumer protection to specifically apply when a consumer buys digital content from a trader.
Digital content is defined in the CRA as data produced and supplied in digital form. This would include software, apps, digital music, e-books and cloud computing services. Digital content may be supplied in a tangible form (such as on a disk, or embedded in a product such as a mobile phone) or in an intangible form (eg software on a PC, a music download or streamed content).
The main rights and remedies under the CRA applies to digital content which is either: paid for (with money or a pre-paid facility such as a gift voucher or virtual currency); or supplied free alongside other paid for digital content, goods or services and is not usually made available free of charge.
Digital content supplied by a trader to a consumer will need to comply with statutory quality standards that are similar to those that apply to goods. Digital content must:
- be of satisfactory quality as assessed by a reasonable person taking into account the description of the digital content, the price and other relevant circumstances (including the state and condition of the digital content, general fitness for purpose, durability, safety and freedom from minor defects);
- be fit for any particular purpose that a consumer makes known to the trader before the contract is entered into (unless the trader advises the consumer that the digital content is not suitable for that purpose). The business must be aware of the consumer’s intentions; a consumer cannot merely send an email before downloading an app; an email or other exchange between the business and the consumer discussing the particular purpose would be required;
- match any description of it given by the trader to the consumer. This will include complying with any pre-contract information a trader gives to a consumer about the main characteristics of the digital content, its compatibility with other software or hardware and its functionality under the CCRs.
There is no "must match model or sample" requirement for digital content. If a trial version is supplied, then the digital content usually needs to match the trial version, but any description of the digital content provided by the trader will take precedence.
In addition, 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.
REMEDIES FOR BREACH OF THE DIGITAL CONTENT RIGHTS
Unlike with goods, there is no right to reject faulty digital content (except where such digital content is included in goods, for example on a DVD).
If the digital content breaches the statutory requirements, a consumer is entitled to a repair, replacement or reduction in price. 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.
If the trader fails to provide the required pre-contract information 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.
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, for example downloading an app that contains malware and so damages a smartphone and/or corrupts existing software on the phone. Provided that 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.
The focus of the provisions in the CRA dealing with supply is to provide a consolidated framework that is simpler to refer to than the old law and avoid protracted disputes. We have set out a checklist of next steps to assist compliance.
CHECKLIST: RECOMMENDED STEPS TO COMPLY WITH CRA
Review existing procedures to ensure that they comply with the new regime. In particular, check:
- short term right to reject within 30 days
- if outside 30 days only one repair or replacement attempt required before money back
- no deductions for use of goods within first six month after purchase (unless a car)
- comply with information requirements as required by the CCR
- new requirement to match model previously seen or examined
- 30 day default period for delivery with potential immediate right to terminate if not met
- above goods remedies apply to following types of mixed contract:
- goods supplied with faulty digital content
- goods provided with faulty installation services (but no short term right to reject re: installation)
- right to repair or replacement if digital content is faulty
- if the fault cannot be fixed, within a reasonable time and without significant inconvenience then the consumer has the right to a price reduction
- if the consumer can show the fault damaged the consumer’s device and the trader has not used reasonable care and skill then the consumer may be entitled to a repair or compensation; consider 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.
- right to require the trader to repeat performance of a service not carried out with reasonable care and skill or in accordance with pre-contractual information provided in relation to the performance of the service
- if the trader fails to provide the service in a reasonable time or fails to repeat or fix the service within a reasonable time then the consumer can require the trader to reduce the price
- if trader is in breach of pre-contractual information that does not relate to performance of a service then the consumer can require the trader to reduce the price
Review terms and conditions of supply, to ensure that the terms are in line with the new regime. In particular note that:
- liability for breach of the following cannot be contracted out for:
- implied terms of satisfactory quality, fitness for purpose and correspondence with description
- compliance with pre-contract information
- for digital content the trader’s right to supply the content;
- price/subject matter clauses are only exempt from challenge if transparent and prominent:
- brought to the consumer’s attention in such a way that any average consumer would be aware of it
- must be in plain and intelligible language
- legible, if in writing
- more onerous or unusual a clause, the prominent it must be
- new clauses in the grey list:
- clauses allowing traders to charge disproportionately high compensation where consumer attempts to cancel
- clauses giving trader discretion to decide amount of price or the subject matter after consumer bound
- useful guidance from the Competition and Markets Authority highlighting more examples is available here.