This briefing is relevant if your business provides goods or services to consumers and is therefore particularly significant for retailers.

Department for Business Innovation and Skills launches consultation to clarify consumer law

In July 2012, the Department for Business Innovation & Skills (BIS) published a proposal on the reform of consumer law, with the aim of simplifying and clarifying the law surrounding the supply of goods, services and digital content supplied under a contract.

BIS argues that consumer law, as it stands, is overly complex and difficult for businesses and consumers alike to understand. With this in mind BIS has put forward the proposals set out below, with such reforms intended to be catered for in the proposed Consumer Rights Bill.

Goods

In respect of sub-standard goods, BIS’ key proposals are:

  • the replacement of the ‘implied terms’ system with a clear set of statutory guarantees;
  • the creation of a set, clear time limit of 30 days for the rejection of goods with a concurrent full refund;
  • to add clarity regarding the number of times a retailer can repair and/or replace  goods before the obligation to offer a refund applies; and
  • the limitation of the extent to which retailers can reduce the amount of a refund.

Services

With regard to ‘faulty’ services, BIS are proposing:

  • the replacement of ‘implied terms’, as set out above;
  • the creation of basic statutory remedies when services are defective; and
  • in line with the goods regime, the possible introduction of a “satisfactory quality” standard for certain types of service.

Digital Content

For digital content, BIS’ proposals are as follows:-

  • the provision of implied terms, based on those provided within the Sale Of Goods Act, regarding the quality of digital content;the provision of statutory remedies for the breach of the above mentioned quality standards, including the right to reject with a full refund where the digital content has not been accepted; and
  • the adoption of provisions within the Consumer Rights Directive (approved in October 2011), including the requirement to provide certain pre-contractual information, in relation to the digital content and supplier, to the consumer, and the requirement to allow consumers a 14-day cooling off period to cancel a transaction.

The proposals will have a significant effect in modernising consumer law, much of which was written around thirty years ago, particularly in relation to digital content which is not catered for in the current regime. BIS also believes that the recommendations, in simplifying the law, will save businesses money by reducing the need for legal or dispute resolution costs. Retailers should be prepared to review and update their sales practices, both online and offline, in order to comply with the new changes when these come into force. Particular attention will need to be given to website terms of sale and returns policies, which will need to be updated to ensure compliance with the new legislation.

The consultation ends on 5 October 2012 and to read it in full, please click below:-

http://www.bis.gov.uk/assets/biscore/consumer-issues/docs/e/12-937-enhancing-consumer-consultation-supply-of-goods-services-digital

Law Commissions launch consultation on the reform of consumer law in relation to unfair terms

In July 2012, the Law Commissions (the Law Commission and the Scottish Law Commission) published a consultation proposing the reform of consumer law in relation to unfair terms. The consultation details the Law Commissions’ general recommendations on unfair terms for the proposed Consumer Rights Bill, and their proposals regarding terms which are currently exempt from review under the Unfair Terms in Consumer Contracts Regulations 1999 (“UTCCRs”).

The key proposals made by the Law Commissions are:

  • a shift in the burden of proof, regarding fairness, to the party claiming a term is fair, i.e. businesses;
  • the combining of the UTCCRs and the consumer elements of the Unfair Contract Terms Act 1977 (“UCTA”) within one act – the proposed Consumer Rights Act, and the redrafting, in order to make them clearer, of the UTCCRs to be inserted into the Consumer Rights Bill;
  • the expansion of the grey list of potentially unfair terms, including:
    • the addition of a statement that terms on the grey list are not exempt;
    • the regulation of terms committing consumers to pay for services for unreasonably long periods of time; and
    • the regulation of terms which permit businesses to retain or claim payments for services which have not been supplied, once a consumer has cancelled the contract;
  • the Law Commissions argue that the law relating to price terms, as it stands, is uncertain. The Law Commissions propose, therefore, that price terms should only be exempt from review if such terms are transparent and prominent. The proposed test for whether a term is ‘prominent’, is objective, and so provided a specific term is not included on the grey list, a business wishing to adopt such a term may be able, by ensuring its prominence, to ensure a term is exempt from review;
  • in relation to the price terms attracting the most complaint – escalation terms, default charges and termination charges – the Law Commissions propose including a statement to the effect that the exemption from review does not apply to such terms; and
  • in relation to terms attempting to give businesses discretion to change the subject matter of a contract after a consumer is bound, the Law Commissions propose the inclusion of a statement to the effect that the exemption does not apply to such terms. Additionally, the Law Commissions propose that the main subject matter terms of a consumer contract must also be transparent and prominent to be exempt from review.

Except for in relation to the above changes to exempt terms, the consultation broadly mirrors the Law Commissions’ 2005 proposals, with the main intention of clarifying consumer law in relation to consumer contracts. The recommendations in relation to exempt terms, however, are far reaching and would result in the most contentious consumer contract terms, for example terms imposing termination and default charges, no longer being exempt from review (though such terms would not be automatically unfair). Retailers should be prepared to review and update the terms on which they contract with consumers, both online and offline, in light of the new proposals. Retailers should take note of the proposed changes, bearing in mind the effect that the proposed expansion of the grey list of potentially unfair terms may have on current sales practices.

The consultation ends on 25 October 2012 and to read it in full, please click below:-

http://lawcommission.justice.gov.uk/docs/unfair_terms_in_consumer_contracts_issues.pdf