29th May, 2014
Consumer Contracts Regulations 2013
If you are a trader (a business or an individual) selling goods, services or digital content to consumers, then you should be aware that new regulations are due to come into force on 13 June 2014.
The Consumer Contracts Regulations (Regulations) will replace the Distance Selling Regulations and the Doorstep Selling Regulations and will apply to contracts entered into by traders with consumers on or after 13 June 2014.
The key changes introduced by the Regulations relate to:
• the provision of additional information to the consumer both before and after the contract has been concluded;
• an extension to the period during which the consumer can cancel a contract; and
• new requirements in respect of additional payments and charges for customer telephone help-lines.
Certain contracts are excluded from the scope of the Regulations such as, for example, residential lettings; household goods delivered by roundsmen; and certain financial services contracts. However the Regulations will apply to most contracts entered into between traders and consumers.
It is important that traders who contract with consumers are aware of their obligations under the Regulations. A failure to comply with the relevant obligations will entitle the consumer to bring a claim for breach of contract, whilst there may be other consequences for a trader for non-compliance.
Compliance Check Offer
We have summarised some of the key changes to be introduced by the Regulations below. Please note that the changes introduced by the Regulations will almost certainly require traders to amend their terms and conditions and also their sales processes in order to comply with the Regulations.
The Commercial Team at Aaron & Partners can review your terms and conditions to highlight any provisions that need to be amended to ensure that your terms are compliant with the Regulations. We can also provide details of the information that will need to be provided by you to consumers under the Regulations. For all enquiries received before 1 October 2014, we will undertake a review and provide the information for a fixed price of £195 plus VAT.
Please contact Jamie Hawley on 01244 405594 or [email protected] to take advantage of this offer or with any questions about the Consumer Contracts Regulations generally.
Information Provision Requirements
The Regulations set out the information that a trader must give to a consumer before and after entering into a contract and how that information should be given.
Traders are already under an obligation to provide certain of this information under existing legislation (such as the Distance Selling Regulations and the Doorstep Selling Regulations). However, the Regulations have included additional obligations. For example, where a cancellation right exists for the consumer under the Regulations, the trader will need to provide the consumer with a model cancellation form in the form set out in the Regulations.
Another example is the requirement for an online trader to ensure that the consumer, when placing his order, expressly acknowledges that the order implies an obligation to pay. One way of achieving this is to include a labelled “pay now” button where there is an obligation to pay.
In the event that a trader does not comply with its obligation to provide the relevant information, the consumer may bring a claim for breach of contract. There are additional specific consequences for failure to comply with certain rules such as:
• where a right to cancel exists and the trader does not provide to the consumer the correct information in relation to that right and the procedures for exercising it, the cancellation period could be extended up to a period of 12 months;
• if the trader does not obtain the consumer’s acknowledgement that placing the order implies an obligation to pay, the consumer will not be bound by the contract or order.
The cancellation rights under the Regulations only apply to distance contracts (e.g. a contract via a website or telephone) and off-premises contracts (e.g. a contract concluded between a trader and a consumer in a place which is not the business premises of the trader).
Although a consumer may already have a right to cancel a distance contract (under the Distance Selling Regulations) and an off-premises contract (under the Doorstep Selling Regulations), the Regulations extend the cancellation period from the current 7 calendar days (for off-premises contracts) and 7 working days (for distance contracts) to 14 calendar days for both.
However, the cancellation period may be extended up to period of 12 months in the event that the trader has not complied with its information provision obligations (it is currently 3 months for distance contracts under the Distance Selling Regulations).
The last day of the cancellation period will depend on whether the contract is a sales contract, a service contract or a contract to supply digital content (such as downloads) and, in the case of sales contracts, whether the contract is for multiple goods delivered on different days.
The Regulations set out certain types of contract under which a consumer will not have any cancellation rights. Many of these were also included in the Distance Selling Regulations (such as, for example, contracts for the supply of goods that are made to the consumer’s specifications or are clearly personalised).
Under current legislation, a trader that enters into a distance contract that is cancelled by the consumer must refund the full amount (including the delivery costs) as soon as possible after the contract is cancelled and in any event within 30 days. The trader is not able to insist on the goods being received back by it before making the refund.
The position is similar under the Regulations save that the refund must be made within 14 calendar days of:
• receipt of the goods (or receipt of evidence that the consumer has returned them) in the case of a contract for the sale of goods where the trader has not offered to collect the goods; and
• the day on which the trader is informed of the consumer’s decision to cancel the contract, in the case of a contract for the sale of goods where the trader has offered to collect the goods or a contract for services or digital content.
Additionally, where the consumer has chosen an enhanced delivery service, the trader will only be required to refund such part of the deliver charges that is equal to the least expensive delivery option offered by the trader.
Deduction for use
Under the Regulations, the consumer will be responsible for the amount by which the value of the goods is diminished as a result of the consumer handling the goods beyond what is necessary to establish their nature, characteristics and functioning (i.e. the kind of handling that might reasonably be allowed in a shop).
The trader may deduct the loss in value from the sums that it is obliged to repay to the consumer. However, the right to deduct for use will be lost if the consumer is not informed of its right to cancel in accordance with the Regulations.
In the event that a consumer exercises his right to cancel a contract under the Regulations, any ancillary contract (such as a warranty or credit agreement) will be automatically cancelled. In such circumstances, the trader will be obliged to notify any third party to the ancillary contract.
Although not expressly set out in the Regulations, guidance from the Department of Business Innovation & Skills (BIS) states that the responsibility for refunding the customer any amounts paid under the ancillary contract will follow the original payment of funds, i.e. the party to which payment was made under the ancillary contract must make the refund to the consumer.
The Regulations introduce specific rules for the supply of “downloads” or “streaming” (i.e. digital content not on a tangible medium).
Such transactions are concluded very quickly in practice given that the download will usually take place very soon after the contract is formed and payment processed. Despite the speed of such transactions, a consumer will have the right to cancel. However, a consumer can give up his right to cancel provided that the trader complies with certain rules.
The basic rule is that a trader must not begin the supply of the download/stream before the end of the cancellation period unless the consumer has consented to this and has acknowledged that he will lose his cancellation right and the trader has confirmed this consent and acknowledgment to the consumer. If the trader complies with these obligations before the beginning of the supply, the consumer will have no right to cancel.
It is important that the trader confirms the consumer’s consent and acknowledgement back to him when providing confirmation of the contract (in the case of distance contracts) or a copy of the confirmation (in the case of off-premises contracts) to ensure that the consumer must pay for the digital content.
If the trader does not comply with the above obligations, the consumer will effectively be allowed to benefit from the digital contract provided in the cancellation period without cost.
Additional payments and customer telephone help-lines
The rules relating to additional payments and customer telephone help-lines will apply to all contracts entered into between a trader and consumer unless the contract is specifically excluded under the Regulations.
Under a contract between a trader and a consumer, no payment is payable in addition to the price agreed for the trader’s main obligation unless the trader obtains the consumer’s express consent prior to the contract being formed. Examples include additional charges for gift wrapping or additional insurance.
This means that traders will no longer be able to rely on the consumer not changing a default option such as a pre-ticked box on a website.
If any additional payments are received by the trader in breach of these rules, the trader will be obliged to reimburse such amounts to the consumer.
Where a trader operates a telephone line so that a consumer can contact the trader about a contract entered into with the trader, the consumer cannot be made to pay more than the basic rate for that call. There is no definition of “basic rate” included in the Regulations; however, BIS guidance states that the basic rate is no more than a geographic or mobile rate.
The rule only applies where the consumer contacts the trader in relation to an existing contract and, as such, will not apply to sales telephone lines for the purposes of placing orders.
If the consumer pays more than the basic rate in breach of these rules, the trader will be obliged to reimburse to the consumer any excess over the basic rate paid by the consumer.
If you have any questions regarding the Consumer Contracts Regulations please contact Jamie Hawley on 01244 405594 or [email protected].
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