All that Glitters
Published: 12 December 2014
Christmas can be a bumper time for business but get your consumer contracts wrong and you could pay the price.
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 came into force on 13 June 2014. They introduced many new requirements about the giving of information, cancellation and other consumer rights, as well as regulating the formation of online sales contracts. Non-compliance can lead to fines and failure to get paid. Now is as good a time as any to review your consumer contracts and terms of business so that you do not get caught out.
Is your Business Affected?
Quite possibly, if you sell goods, services or intangible digital content (such as music downloads) to consumers. The Regulations are applicable to most sectors of business. There is, however, a significant list of exempted categories of product and service. Also, a consumer under these Regulations can only be an individual acting personally: i.e. for purposes which are wholly or mainly outside his trade, business, craft or profession. So, it is possible for someone to be treated as a consumer even if they use the supply partly for their business.
Types of Contract
The amount of information required and whether there are statutory cancellation rights depends on whether there is an "on-premises", "off-premises" or "distance contract". This depends on where the contract is made. A contract made at the trader’s business retail premises is usually an on-premises contract. A contract made at the consumer’s home is invariably an off-premises contract. There can also be an off-premises contract if the consumer at home makes an offer to a visiting trader, and the trader later accepts that offer by e.g. telephoning or emailing from his office with an acceptance or written contract. So, estate agents and home improvement suppliers, for instance, need to be especially careful. A website sale will usually be a distance contract.
Information to be Given to the Consumer
There is a list of required information to be given before the contract is made for on-premises contracts and a longer list for off-premises and distance contracts. No such information need be given in the case of an on-premises contract for a day-to-day transaction performed immediately at that time. This would include the usual sales from a shop or hairdresser.
The consumer under an on-premises contract has no cancellation rights, while under an off-premises and a distance contract there is a 14 day post-contract cancellation right, enabling the consumer to cancel and get money back. Many goods and services are, however, exempt from this cancellation right. There is no cancellation right for a contract which includes, for instance, any of the following:-
- goods made to the customer's specification or clearly personalised
- goods liable to deteriorate or expire rapidly – e.g. fresh flowers or meat
- urgent repairs or maintenance specifically requested
If a right of cancellation exists, the consumer must be given notice of information about cancellation rights, and a cancellation form which must be exactly in the form set out in the Regulations, otherwise the notice will not be regarded as having been given at all.
Non-compliance with the Regulations brings many risks, including the following.
- If the required information is not given for some contracts, it can be a criminal offence with a fine of up to £5,000 (not to mention the possible bad publicity).
- Any failure of the contract to comply with the Regulations will mean that the trader is in breach of contract, and liable to a claim from the consumer.
- The consumer will not be bound by the contract at all if it is a contract made electronically, e.g. online sales, if the trader has not ensured that the consumer has explicitly agreed to pay. If this involves the consumer having to press a button or similar, it must be clearly labelled, for example: "order with obligation to pay" or "pay now."
- The consumer will not be liable for certain charges or fees which have not been made clear up front.
- If the consumer is entitled to the statutory cancellation rights. A failure to correctly inform the consumer of the conditions, time limit and procedure of cancellation, means that the cancellation period of 14 days is extended by a further 12 months, unless the consumer is informed properly in the meantime, which will then start the 14 days. This means that a trader might find that the consumer cancels well after the supply, and the trader is not entitled to be paid for the service or the goods enjoyed over that period.
- A consumer does not have to pay for services supplied before the end of the cancellation period if the trader has not provided the required information about cancellation and costs, and if the consumer has not expressly asked in the requisite way for the service to start early.
The above is a brief synopsis of the Regulations which are very detailed. For further assistance and information please contact Tudor Alexander, Solicitor in our Commercial team, who will be pleased to assist and advise on any B2C (business to consumer) contracts and procedures. Email: firstname.lastname@example.org
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.